Carrots and Sticks: Why Does Public Procurement Live in Fear?

This post, written by Tim Laseter, originally appeared on Public Spend Forum.

Ongoing efforts to bring commercial practices such as strategic sourcing to the world of federal procurement face many challenges. Many assume the answer lies in reform of the 2,000-plus page Federal Acquisition Regulation, commonly known as “the FAR.” The best acquisition professionals recognize the bureaucracy inherent in the FAR. They operate under the assumption that commercial practices can be applied as long as the FAR does not explicitly disallow them. Unfortunately, many contract administrators have been trained to operate under the assumption that an approach must be explicitly described in the FAR to be allowed. We may simply dismiss this narrow interpretation of the FAR as the inevitable result of bureaucratic thinking. But, a look at the contrasting incentive structures in the commercial world versus the government suggests that such tunnel vision is a rational response to burdensome legislative oversight.

A procurement professional in the commercial word faces the traditional combination of carrots and sticks of business: salary, bonuses, career progression, and job security. The most recent annual survey of the 40,000 members of the Institute of Supply Management documented an average salary of $102,218, with 63% of respondents earning bonuses that averaged 20 percent. And the field offers great career progression as top companies use procurement as a training ground for high potential candidates, and business schools continue to see expanded enrollments for supply chain specialties.

Federal procurement offers a less compelling story. Positively, the Federal Government has more than 25,000 contracting officers responsible for spending $400 billion per year. The Federal Government has been hiring acquisition professionals as many long-time employees reach retirement age. Lower risk of losing a job once hired may also be an attraction: Federal employment attrition tends to run at a rate less than half of the overall economy. The government environment, however, offers far more sticks than carrots. A buyer in the commercial world will be fired for incompetency or dishonesty, but a federal worker faces the additional risk of civil and criminal legal suits, so much so than many procurement professionals buy federal employee liability insurance. Such insurance covers, for example, the personal legal fees for a conflict of interest complaint filed by a contractor who loses a competitive award which can be found valid without proving wrongful intent. Commercial suppliers present no such threat so commercial buyers have no such need.

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