| CPO Statement on Term Contracts
From: Gragan, David (OCP)
Sent: Monday, August 03, 2009 6:00 PM
To: Gray, Vincent (COUNCIL)
Cc: Catania, David A. (COUNCIL); Bowser, Muriel (COUNCIL); 'Jim@grahamwone.com'; Graham, Jim (COUNCIL); Mendelson, Phil (COUNCIL); Brown, Kwame (COUNCIL); Brown, Michael (Council); Evans, Jack (COUNCIL); Cheh, Mary (COUNCIL); Thomas, Harry (COUNCIL); Wells, Thomas (COUNCIL); Alexander, Yvette (COUNCIL); Barry, Marion (COUNCIL); Sumpter, Charles (Council); Kershbaum, Sharon (OCP); Wade, Shomari (EOM); Davis, Bridget (EOM)
Subject: Response to Vendor Inquiries on DC Supply Schedule and Term Contracts
Dear Chairman Gray:
I understand that Councilmembers have been receiving a number of inquiries over the past few months regarding potential policy changes by the Office of Contracting and Procurement (OCP) and the potential impact of such changes on the District's small business community. I am writing to clarify my office's intentions and to correct the inaccuracies that have been circulating.
Term Contracts
As you know from our discussions, OCP is committed to adopting best practices, balancing the cost savings and business development goals of our government, and ultimately creating the model municipal procurement organization.
We recently provided a fact sheet to Councilmembers about the value of term contracts and the false assumption that certified business enterprises (CBEs) will not be able to compete in such District procurements (see attached). The majority of our existing term contracts are with CBEs. Further, CBEs who compete for term contracts have the benefit of existing preference laws that allow them to offer higher prices than non-CBEs and still be considered the lowest responsive bidder.
When we establish a term contract that is redundant with a specific schedule on the DCSS, then that schedule (or related portion of that schedule) is eliminated. For example, when the Information Technology (IT) Staff Augmentation contract was established, we eliminated the IT temporary staff services schedule.
Importantly, I intend to work closely with the head of the Department of Small and Local Business Development (DSLBD) to identify the segments of the CBE community where there is sufficient competition and capacity available to meet the District's contracting and procurement needs and I will set aside term contracts in those market segments or require a percentage of those contracts be subcontracted to CBEs.
District of Columbia Supply Schedule (DCSS)
Again, these concerns are unfounded. The DCSS is not the structure that ensures small businesses can access District procurement dollars. It is actually section 2344 of the Small, Local, and Disadvantaged Development and Assistance Act (D.C. Official Code § 2-218.44), which requires set-asides of small contracts (under $100,000) for small business enterprises, that guarantees SBEs have this access. This provision will continue to guide our procurement procedures and it - not the DCSS - will ensure that SBEs continue to have strong access to the District's procurements.
We have concerns with the current structure of the DCSS and are regularly exploring how to improve it. If we ever see the need to make significant changes to the DCSS, it will be based on a collaborative effort with the right stakeholders to ensure that all parties benefit from those changes.
Some of the key problems with the DCSS:
1. DCSS is overly bureaucratic and cumbersome:
- DCSS requires a separate contract for each vendor, for each schedule they are on. This results in an extensive workload for OCP and vendors, as well as for the Council since nearly every supply schedule contract requires Council approval.
- Even with a schedule, individual solicitations are still required to form a purchase order. (DCSS contracts only have a not to exceed rate). The schedule does not streamline the procurement process for vendors or for OCP, nor does a schedule guarantee any business for the vendor.
- I know of no other state or local jurisdiction that uses this sort of multiple award schedule, presumably for reasons highlighted above.
2. DCSS results in higher costs to the District:
DCSS curbs competition since CBEs that are not on a schedule cannot respond to solicitations. Also, it forces the District to buy in small quantities and prevents us from maximizing the purchasing power of the District government (as ordered in the District's procurement law). Ensuring the judicious use of taxpayer dollars is one of my most important charges as a chief procurement officer, particularly now when our resources are severely constrained.
3. DCSS is not key to ensuring local businesses get government business:
Again, it is the provision in current law that requires that purchases under $100,000 go to a SBE (except in limited circumstances), not the DCSS, that ensures District contracting opportunities for SBEs. We are not proposing any change to this set-aside requirement. In fact, the elimination of the DCSS would open up additional opportunities for the existing 1200 or so SBEs who are not on the DCSS (far more vendors than the existing 142 DCSS vendor pool).
The Procurement Efficiency Act of 2009
Concerns have also been expressed about the potential impact of section 2(c) of the Procurement Efficiency Act of 2009, which exempts certain procurements from the requirement of a competitive acquisition process. This provision, however, merely exempt items such as postage, WMATA fare cards, expert witnesses, and reservation of special event venues from the competitive process. Currently, buyers have to complete a Determinations and Findings memo before receiving "approval" of a sole source procurement for these types of purchases. This procedure creates a valueless bureaucratic step for items that must be "sole sourced" since there is no available competition.
For the reasons explained above, I feel that the concerns raised by the vendor community are largely unfounded. I would also like to emphasize that my office has been proactive in reaching out to the CBE community about these changes. I personally invited the apparent spokesperson for the group of vendors who have been most aggressive in expressing concerns - concerns which I believe are based on inaccurate information and misunderstandings about OCP's intentions - to meet with me to discuss the legislation and explain the implications. I made that invitation verbally at a roundtable on July 15 in front of about 70 other businesspeople and subsequently in two emails to her. My assistant also made numerous calls to her office, and although we finally heard from her last Thursday, the meeting has yet to be scheduled. I hope that meeting will help alleviate any remaining concerns.
I hope this letter addresses the concerns you may be hearing and allows you address such concerns when they are raised.
Please do not hesitate to contact me if you would like additional information.
Fact Sheet on Term Contracting: Basics and Benefits*
Dave
David P. Gragan, CPPO
Chief Procurement Officer
District of Columbia
441 4th Street NW, Suite 700S
Washington, DC 20001 (202)
724-4242
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