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Government of the District of Columbia Testimony of Oscar S. Rodriguez, Interim Chief Procurement Officer "Office of Contracting and Procurement Fiscal Year 2008 Budget Request" Committee Workforce Development and Government Operations Wednesday, March 28, 2007 INTRODUCTIONGood morning Chairperson Schwartz and members of the Committee on Workforce Development and Government Operations. I am Oscar S. Rodriguez, interim Chief Procurement Officer (CPO). I am very happy to be here today to discuss the Mayor's Fiscal Year (FY) 2008 budget request. Let me begin by thanking the employees in the Office of Contracting and Procurement (OCP) for their hard work and dedication to the District government. I am truly thankful for the support they have given me as interim CPO. In FY 2006, OCP acquired roughly $1.2 billion in goods and services. Today, we are well on track to exceed that figure. We could not have achieved this milestone without OCP's employees. Despite public criticism and unrealistic expectations, they remain true to the mission of the agency. With the help of our process partners, this Committee, and our vendor community, we have improved over the years. I am confident that with their continued support we will continue to enhance the way we do business. FY 2008 BudgetThe FY 2008 budget for OCP is notably different from that of previous years. It reflects our desire to improve efficiency and increase accountability in the District's procurement process. In FY 2008, OCP has $0 allocated to its local budget. We have proposed to obtain our funding through intra-District funds collected from the agencies we support in the form of annual assessments. As in past years, we are depending on revenue from two 0-type funds to cover operating costs in DC Supply Schedule and Personal Property Disposal. The proposed FY 2008 budget request is $13,796,792. It is a bare bones budget. Personnel services are budgeted at the same FTE level of as FY 2007, to be exact, 152. The overall level of funding represents a decrease of $207,083 or 1.5%, as required to meet the overall budget reduction target. The 0-type budget is $780,127, a decrease of $103,630 or 11.7%, primarily as a result of anticipated lower personal property sales. Capital BudgetFor the last four years, we have requested funds for the completion of our automated purchasing system known as PASS. I am pleased to report that this year $6 million has been put into the Office of the Chief Technology Officer's FY 2008 capital budget for the installation of the Contracts Administration and Sourcing modules in PASS, the two pieces that had been missing. With the completion of this vital technology, contracting in the District will be on par with our counterparts in other state and local government organizations. Agency Assessments
Starting in FY 2008, the agencies will be assessed a fee for services provided by OCP. This is not a new concept in the public
procurement industry. Many jurisdictions have been using it for some time. In Virginia, for example, the Division of Purchases and
Supply has been charging such a fee, known as the eVA fee, for several years. The revenue generated by this fee has made the eVA system
financially self-sufficient -- a requirement imposed on it by the state legislature. Partly as a result of this
arrangement, Virginia's Madam Chair, we are making this proposal to you based on our research of best practices. Virginia, Colorado, Utah, Texas, Kansas, Pennsylvania, and California adopted this concept of self-sufficiency years ago, and they all enjoy very successful procurement systems. In Virginia, the model has proven so efficient and effective, that the system is made available to municipal and county governments in the state, who gladly pay the assessment so they can have access to the savings and efficiencies the system offers. The funding mechanism we are proposing is essentially tied to the new way we want to provide procurement services. We believe that by making it clear to the agencies, as well as OCP, what it costs to provide proper procurement, we can best hold all parties accountable for their part in the procurement process. Our proposal is that agencies be assed a fee commensurate with the level of service they require from OCP. This assessment will be based on the total dollars procured by OCP in the previous fiscal year, which is a fair reflection of the level of services OCP provides for that agency. This new way of doing business will allow OCP to reallocate its resources in support of its new role. It will also encourage the agencies to assume a greater part in meeting their procurement needs. In layman's terms, the more self-sufficient an agency becomes in procuring the goods and services it needs, the less it will pay for support from OCP. In the meantime, OCP will be freed to focus more on oversight, rule-making, technical assistance and complex procurements the agencies cannot do for themselves. FY 2008 GoalsThe FY 2008 budget provides us with adequate resources to achieve our mission of serving the District agencies and increasing contracting opportunities for Local, Small and Disadvantaged Business Enterprises (LSDBE). In FY 2008, OCP will pursue I following strategic goals:
FY 2008 BSA AmendmentsOCP has included one subtitle to the FY 2008 Budget Support Act (BSA) of 2007 entitled "Office of Contracting and Procurement Operating Fund Amendment Act 2007". The proposed legislation will establish a revolving fund that OCP receives from assessments to independent agencies. Funds that carry over from the fiscal year will be used to reduce the assessment of agencies in the following year. All of the funds collected under this legislation will be used to cover OCP budget related expenses. OCP will submit additional legislation to the Council in the next few months that will impact our FY 07 and FY 08 Budget. The legislation, entitled: Consolidated Acquisition Management Program (CAMP) Operating Fund Amendment Act of 2007, will allow OCP to use the revenue we have collected through an existing fee originating in the Department of Energy. We have negotiated with the Department of Energy and the Office of Property Management and have agreed that OCP will share the fees collected in the fund. The purpose of the fee is to charge vendors who do business with the District through Blanket Purchase Agreements and Indefinite Quantity contracts and placed the revenue into a revolving 0-type fund. There are not many vendors in this category today, however, with OCP's increased effort, this program will be expanded and additional revenue will be collected. Our aim is to do more of this type of contracting and increase the revenue flowing from this source. We are convinced it will allow us to be more efficient as well as self-sufficient. This revenue will cover our training and certification programs in FY 2007 and eventually grow to the point that it will offset a substantial part of the annual fee for service to the agencies. The theory behind the CAMP is simple: the more goods and services OCP purchases in bulk, the better the price will be for the District. Additionally, the CAMP will allow us to be more efficient in procuring goods and services and, most importantly, we will be a self-sufficient agency. ConclusionMadame Chairperson and members of this Committee, I thank you for the support and interest you have shown in OCP. I look forward to working with you to make the District's procurement system one of the best in the country. I am available to answer any questions you may have. GOVERNMENT OF THE DISTRICT OF COLUMBIA Director March 15, 2007 Councilmember Carol Schwartz Dear Councilmember Schwartz: Thanks for the opportunity to appear before your committee a few .weeks ago to discuss the Office of Contracting and Procurement's (OCP) FY 2006 and FY 20007 Budget and explain our plans for reforming the agency. At that hearing and in a later communication, you asked OCP to provide you with a response to a list of questions. Attached is a package with that information. I want to add to it a summary of our approach to reforming the procurement system. We want to follow through with the Government Accountability Office's recommendation that the District operate a procurement system along the lines called for by the National Association of State Procurement Officers (NASPO):
We believe that the best way to achieve this is by introducing the practice preferred by the municipal and state governments that operate the most efficient contracting and procurement systems in the country. Known as shared services, it is a way of doing business that puts the agencies in charge of meeting a substantial part of their procurement needs yet coordinates their actions and holds them accountable through a strong central oversight office led by a Chief Procurement Officer (CPO) that looks after the entire procurement system. In this way, the procurement function is operated in a shared fashion by the agencies and the central office, with the roles and responsibilities for each clearly defined. The central office provides rule-making, oversight and technical support to a common procurement system that consists of clearly articulated uniform rules and procedures, as well as technology. It also handles procurements that the agencies cannot do for themselves on account of their complexity or cross-cutting nature. The agencies use the system on a self-serve basis to procure routine and planned goods and services under the oversight of the central office. Everyone is held directly and immediately accountable for their respective part in operating this system. Today, the procurement function in the District is occurs in a piece-meal fashion with some agencies operating on their own under legislated independent procurement authority, and the rest depending on the OCP to purchase everything from the pencils to the multimillion dollar good or service. While this is certainly an improvement over the days when procurement was completely decentralized to the agencies and there was virtually no effective central procurement office controlling the process, the current system makes the central office function more as a concierge chasing after 21,000 transactions a year and less as an oversight and rule-making entity focused on safeguarding the integrity and efficiency of the procurement process itself. For the sake of operational efficiency and transparency in all the agencies, we plan to immediately begin moving towards the shared service model. We recognize, of course, that the District cannot shift too quickly to this new way of doing business. We have to proceed cautiously to not put at risk the control-such as it is-we have over the system today. We cannot delegate procurement authority without taking into account the agencies' ability to handle it. Performance and institutional capacity in the agencies varies. While some agencies are able to assume greater delegated authority, others can be counted on to take over only rudimentary procurement chores. We propose a gradual, differentiated approach where the agencies have delegated procurement authority commensurate with their track record and institutional capacity. Our plan is to offer six levels of delegated authority:
Movement up and down the scale will be controlled by OCP according to a set of transparent, objective performance indicators. As a given agency demonstrates an improvement in its performance and capacity, it will be offered greater procurement authority. Likewise, a drop in performance and capacity will cause a downgrade in its delegated powers by OCP. Each agency will know where it stands on that scale and what it will take to increase their procurement authority. This does not represent a drastic change from how business is already done. OCP has delegated varying degrees of contracting authority to staff in the agencies including the District's Office of the Chief Technology Officer, Office of Property Management, Department of Transportation, University of the District of Columbia, and Department of Public Works. Our aim with shared services, is to make this practice perfectly transparent and more accountable. I look forward to a continued dialogue on ways to improve contracting and procurement in the District. If you have any questions about the shared service model, or any of our responses to your questions, please do not hesitate to contact me at (202) 727-0252. Sincerely, Enclosures GOVERNMENT OF THE DISTRICT OF COLUMBIA
Fiscal Year 2006 Oversight and Performance Hearing Committee on Workforce Development and Government
Operations March 15, 2007 Questions 1. If the modernization (decentralization) plan goes through and more agencies become responsible for their own procurement needs, will those agencies be responsible for hiring additional staff for procurement needs? Yes. OCP will work with the agencies to help them establish their staffing needs. Depending on the agency, however, additional staff may not be needed. Many agencies already have staffs that handle procurement, except that they depend on their OCP contract officer to sign. For many other agencies, the assumption of greater procurement responsibility will only mean adding extra duties for an internal business manager or administrative assistant. 2. Does decentralizing the procurement process mean the Office of Contracting and Procurement will require a smaller number of FTEs? Yes. As the agencies assume greater responsibility for meeting their procurement needs, the FTE count in OCP should decline. We anticipate that this movement will span several years, allowing us to reduce our FTE count through normal attrition and reassignment of staff to the agencies. OCP is not advocating greater decentralization of the procurement process. For the most part, procurement is already highly decentralized in both law and practice. Nearly 50% of the District's annual spend legally flows through agencies that operate independently of OCP. The Council also occasionally exempts specific procurements from OCP's standard processes. Even the Chief Procurement Officer's (CPO) authority to debar rouge vendors has been legislated to a committee of officials. Moreover, some agencies that do not have independent procurement authority have come to handle their procurements on their own as a result of the CPO having delegated his authority to them years ago. Our plan is simply to standardize and document how the existing procurement operates and make more transparent how and why the CPO delegates his/her authority to the agencies. This responds to GAO's findings and recommendations. 3. Since procurement staff will not be responsible for such a high volume of requisition if this plan takes effect, how do you see this affecting OCP's budget? The impact on our budget will be gradual. As the agencies assume responsibility for more of their procurement needs, OCP's total budget figure will decrease, but a greater amount of it will go to cover needs that have been neglected for years: training and certification, technology and keeping our policies and procedures relevant and Dated 4. If an agency decides they want to control their procurement process and they have the proven record to do so, will they have the opportunity to later change their minds if they find the process is more complex than anticipated? Explain the flexibility of this plan? Yes. However, it will not be up the agencies to decide if or how much they will control of their procurements. Only OCP will decide this. That is, we will delegate procurement authority to them commensurate with their demonstrated performance and institutional capacity, as well as their willingness to assume it. They will not be required to assume more authority than they want. If, at a later time, an agency decides to give up that authority, they will be allowed to do so. Likewise, if OCP finds a given agency cannot handle its new authority properly, that authority will be rescinded or reduced. 5. Have you reviewed the advantages and disadvantages to a decentralized system? What are the national best practices and what are surrounding jurisdictions doing? Yes. We have found that the District's current procurement process is not centralized. To centralize it will take a major legislative initiative followed by a long campaign to reorient how we currently do business. The current configuration of the procurement system in the District can at best be characterized as mixed-centralized in aspects and areas and not in others. We believe the shared service model, where a central procurement office oversees a process that delegates basic decision-making authority to the end users in a controlled environment, will fit well within the current reality of how procurement is done in the District. Shared services is the preferred practice among the top performing local and state governments, including Phoenix, Austin, New York City, and the states of Virginia, Maryland, Florida, New York, Connecticut, Texas, Arizona, Colorado, Oregon, Oklahoma, Ohio, Illinois, Utah, Georgia, California, Washington and Iowa. Shared service is also widely embraced by local and provincial jurisdictions with similar governance structures in Canada, the United Kingdom and Australia. 6. What effect will a decentralized OCP have on accountability? Will OCP be accountable or the agency heads? Accountability will improve under shared services. Under the current arrangement where OCP seen to-but actually does not-control all of the procurement process, program managers evade accountability when they submit requisitions too late to meet their deadlines or are unclear about what they actually need to procure. They simply say the problem lies completely with OCP. While we are not proposing to decentralize the procurement process, we do want to clarify the role of all the parties that are part of it. OCP's role will be clearer, as will that of the agencies. This new approach will also free up OCP's staff to focus more on oversight, coordination and technical assistance to make sure the agencies stay within the prescribed process and are made accountable for their performance. 7. What procurement and contracting associations does OCP use to draw key principles from regarding the practices of the office? Shared Services is based on the practices and principles recommended by all the national procurement associations: National Institute of Government Purchasing (NIGP); National Association of State and Procurement Officials (NASPO); International City/County Management Association (ICMA); National Contract Management Association (NCMA); Washington Area Council of Governments Procurement Committee; and National Construction Estimator. 8. How does OCP plan to guard against agencies abusing the new authority that would be given if a decentralization (modernization) plan is implemented? We are not proposing to decentralize the procurement function or process. The shared services model OCP is proposing formalizes and streamlines procurement as it is generally already being done in the District. Under shared services, OCP is singularly and explicitly charged with providing oversight, coordination and technical assistance to the agencies. Currently, few agencies are able to assume much procurement authority. In the short term, it will be OCP's mission to enable the agencies to handle more of the procurement function on their own. As the agencies improve, OCP will delegate greater authority on a case by case basis. We do not expect the agencies to improve their performance or institutional capacity at the same pace in the same way. So OCP will offer to delegate procurement authority in different tiers, with those agencies that demonstrate a lower risk of abuse being granted greater authority and those that represent greater risk being given less authority. Any authority that is granted will be conditioned on the interested agencies meeting a transparent set of standards and requirements prescribed by OCP for each tier. If abuse occurs or performance drops below the required standards, OCP will either rescind the delegated authority altogether or downgrade it to the next lower tier. Authority will be delegated in six graduated steps. The level of delegated authority will depend upon the agency's performance and institutional capacity:
This model will communicate to the agencies, from the onset, that procurement authority is not automatically delegated-it must be earned. The new approach will also ensure that oversight will be robust. As OCP is freed from having to procure everything for a lot of agencies, it will be able to focus more on overseeing the agencies. 9. Why does OCP lack basic tools such as a procurement manual, a professional development program for contracting staff, and an integrated procurement data system? Is the office currently working to implement these tools? Provide a detailed timeline. Lack of resources, primarily time on the staff's over-loaded daily agenda, is the primary reason why OCP lacks these basic tools. The current mission statement is very telling in this regard. It envisions an agency that actually does the procuring for the agencies, although the law, practice and simple expediency do not give OCP exclusive control over procurement in the District.
Only by bringing OCP's role more in line with that called for by NASPO and noted by Government Accountability Office will the agency be afforded what it needs to provide itself and the agencies with the tools and services needed for the District to enjoy a high-performing procurement system:
In FY 2006, OCP hired a policy manager who is currently in the process of developing a standard operating procurement manual. This manual will provide employees with the necessary tools to perform their duties. Additionally, we have developed a standard Business Clearance Memorandum (BCM), procurement templates, and a repository of procurement policies and procedures, which is located on our intranet. In FY 2006, OCP developed a series of professional development courses for its employees. The course included the following:
It is our goal to launch a professional training program this summer. A major agency challenge is that of automation. PASS was purchased in 2003, and at the time it was OCP's understanding that all four modules of the system would be implemented. One of the system modules of particular interest to OCP was the contracting module. Despite the fact that all four modules were purchased, the contracting module was never implemented. This has hindered OCP's productivity. We are in the pro. 10. Does OCP participate in any training or certification programs offered by the National Association of State Procurement Officials (NASPO) or the National Institute of Government Purchasing (NIGP) such as the Certified Public Purchasing Officer or the Certified Professional Public Buyer programs? If not, please explain current training and certification programs in which the office participates. OCP has not participated in any training or certification programs in the last several years. Certification is granted upon passing a test given by a certifying agency like NIGP. We are instituting a certification program in OCP for all the staff through this institution. We will first be aiming for the Certified Professional Public Buyer (CPPB) certification for all our contract officers and contract specialists. We are planning for a round of test sometime this summer. 11. How many agencies circumvented procurement procedures in FY 2006 and thus far in FY 2007? In FY 2006, OCP ratified contracts from 18 agencies and thus far from six agencies in FY 2007. A list of ratifications that were presented before OCP in FY 2006 and 2007 can be viewed in ATTACHMENT A. |
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