As you will soon see, the answer is not simple. The reasons are many and varied. There is one reason, however, that strikes a real chord with me: the way in which our Federal Government buys equipment and supplies.
The $800 hammer (and the $800 toilet seat) used to be the poster child of the waste that occurs in Federal Government purchasing. Today we long for the days when our government could purchase hammers for such a reasonable amount. I will explain with a personal story.
thanks to ips-dc.org
My company manufactures concrete mixers and batch plants. The ones we make are small, mobile, and produce quality concrete at very reasonable costs. We recently had the opportunity to make a proposal to the U.S. Army to build about 250 small (2 cubic yard capacity) concrete mixers. We were pretty excited. At somewhere between $35,000 to $50,000 each (pending the bells and whistles that the Army will want in the final accepted version of the unit), this contact could be worth between $8,000,000 and $12,500,000 over a five year period. That would be huge for our small company.
In the real world, it would be our job to either convince the Army that we have a concrete batching and mixing system that fills the Army’s needs, or that we can build exactly what they now purchase but to a level of quality equal to or better than their current supplier and at a price and delivery that are better than the supplier of record. That is the reason that the Army goes out to bid: to take advantage of the free market to find the best product for the best price. Or is it?
In my view, the current request for proposal is designed to allow the Army to purchase from their current supplier (the easiest thing for them to do) while giving the appearance of offering the opportunity to others. Let me explain.
Congress has written laws and the GSA (Government Services Administration) among others, have written administrative rules to ensure (the public) that everything the government buys is purchased at the lowest price for that item. Sellers to the Government are required to show that they are selling at a price lower than they would to any commercial customer (for the identical unit with the same terms and conditions). In other words, the Government will get the best deal on everything they buy. That’s the theory and the appearance of the purchasing system.
The reality could not be more different. Rather than getting the best deal, they typically get the worst deal. Why? First, vendors must comply with hundreds of pages of written requirements to be considered for the bid. That sounds like an exaggeration. The fact is that for this simple purchase of a single machine in a quantity of about 250 units, the “provisioning requirements” or rules and specifications that must be followed add up to 515 pages. The description of the unit runs 41 pages. The actual solicitation to vendors to offer product runs 112 pages. The Solicitation has some 22 attachments, like, for example, the “General Publications Requirements For Page Based Technical Manuals.” It runs only 5 pages, but, requires that your manual must conform to very strict requirements for both style and content. That style and content is further described in at least 72 other different referenced Federal Government Regulations and International Organization Standards, Specifications, and Regulations, most of which are tens, if not hundreds, of pages long.
Fortunately, Congress passed the Paperwork Reduction Act of 1995 to help reduce the amount of paperwork required by the Federal Government of Private Citizens who wish to work with the Federal Government. One requirement is that the Agency asking for information from the public (like the Army asking for a complete competitive proposal for concrete mixers) must estimate how much time will be involved in the preparation of the required paperwork. In this case, the Army estimates that there will be 220 hours of paperwork required to bid on this solicitation. I estimated that for a first time proposer, like we would be, the number is closer to 1,000 hours.
So, I was discouraged but still saw the benefit of going ahead and bidding on the 250 concrete mixers. I just had to find a professional proposal writer to do the paperwork. We were competent to design, engineer, build, and test the equipment. We just needed help with the paperwork. Thankfully, online with the Army solicitation is a list of “interested parties” who have asked the Army to keep them informed about anything new with the solicitation – date changes, new or changed requirements, etc. On the list of interested parties were 5 parties who listed their interest as professional proposal writers with government solicitation experience. As a side note, 4 of the 5 were minority women owned businesses, but that is a different topic for another time. I contacted one after checking her references. She was in Atlanta and claimed to have written over a Billion Dollars worth of proposals. Her bid to us was 2% of the total contract value with $40,000 up front. Assuming the total value of the proposal was $10,000,000, that would be a $200,000 fee to write the proposal for us. If we assume that the Army’s statement (that it would require 220 hours to complete the required paperwork) that means the consultant charges over $900 per hour for her services. By the way, we decided not to bid on this opportunity. The paperwork, etc. has effectively weeded out the competition.
Who is to blame? It is a long list. Start with Congress. Often with the best of intentions, Congress will pass a law which turns over administration to a bureaucratic agency. The Agency wants to cover its butt and writes rules and regulations to implement the new law but which leave no chance for the Agency to ever fail to meet the requirements of the law. It doesn’t hurt the Agency when it can show the GSA or Congress that it requires more personnel to write all these detailed rules. More people means more power in Washington, D. C. Is it no wonder that by the time we get the opportunity to bid on 250 concrete mixers, one requirement is that we write at least 5 different manuals for the equipment: safety manual, safety training manual, parts manual, field maintenance manual, maintenance training manual? Is it a shock to you: That there is a “Publications Style Guide” developed by the Army which controls the exact requirements for these manuals? That every manual requires a 12 digit alpha-numeric Technical Manual Designation? Did I mention that this style manual is 252 pages long?
I’m sure all this waste does many things: It probably makes the concrete mixer easier for the troops to repair and maintain without too much experience; It likely makes very safe and secure the jobs of the bureaucrats who write and update the manuals, the rules, the regulations, and who do the purchasing and accepting of government goods and services; It makes the heads of the Agencies and Departments who do all the bureaucratic work more powerful as they have more people working for them. It gives the Congressmen and Congresswomen the ability to tell their constituents that they have written a new law the rids the government of some evil, like paperwork, or failed purchases of concrete mixers.
Even the largest, most bureaucratic, and least efficient companies can’t waste anywhere near the time and money that our government does. No wonder we have a huge debt. No wonder our government can pay $800 for a toilet seat that you and I can purchase for $40.