Army tries to improve and cut back on service contracting

Friday - 5/4/2012, 1:45pm EDT

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Army commanders across the globe will soon see guidance telling them to scale back their spending on service contracts, the Army's top procurement official said.

While local commands will have discretion as to what specific services to scale back on, the Army will tell its requirements community that they will have to identify how they will cut 5 percent of the dollars in their service contracting portfolios before their acquisition strategies can be approved, Kim Denver, the Army's deputy assistant secretary for procurement told Federal News Radio during an appearance on On DoD.

Kim Denver, the Army's deputy assistant secretary for procurement (Photo from Army.mil)

An Armywide strategy for reporting those savings will be finalized and issued to commanders in the third quarter of this year. The 5 percent cutback is part of the Army's plan to eliminate $4.3 billion in service contracting between 2012 and 2016 and improve its management and oversight of spending on services, Denver said.

"Services across DoD have not been managed with the same level of oversight as programs, and when they have, it's been the exception," he said. "When you're out working with a contractor to build an MRAP, you've got program managers that oversee it. But when it came to service contracting, traditionally somebody had a requirement for that contract, but once it was in place it wasn't necessarily being managed other than by that contracting office."

With services now making up around 60 percent of the Army's overall contracting budget, the Army has now taken steps to add rigor and oversight to the way that spending is managed, Denver said.

Within the last year, officials established the position of Senior Services Manager at Army headquarters to oversee and create governance for all services spending. Also, commanders are now responsible for all service contracting that happens within their commands and a senior official in the command — a general officer or a senior executive — must sign off on all contracts that exceed $10 million. If a contract is worth more than $250 million, Denver's office must approve the contract and the strategy behind it.

And the Army has organized its service contract spending into six separate portfolios. Each is overseen by a portfolio manager with responsibility for overseeing all Army contract spending within that category of services. With the spending reductions, Denver said the Army is not targeting any particular category of services, but is telling commands to pay close attention to whether the level of service they're asking for is truly necessary.

"Ultimately, we're looking at savings, and we want people to look at their requirements and challenge their requirements," he said. "For example, if you have janitorial service for someone to come in and vacuum your office, do they need to do that every day, or can you have them do it every two or three days? We don't have a budget that is endless, so we've got to make decisions that are reasonable."

He said contracting officers are also being told to think carefully about the types of contracts they use to procure services.

"I will tell you, there were a lot of services out there that were being contracted for with time and materials," he said. "There's one contracting organization I was working with, and they saw at least a ten percent savings just going from T&M to a fixed-price contract or something in between. Usually services are more conducive to fixed-price contracting, especially when they're over long periods. One has to ask themselves why they would do service contracting with T&M over a five year period."

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