Tuesday, August 21, 2007

Lurita Doan, Buying for the Government at Highest Possible Prices

There’s an outfit called the General Services Administration (GSA) that’s been around since Harry Truman signed the legislation in 1949. It was organized to buy pencils and desks and ‘general services’ for the federal bureaucracy at the best possible price. Someone in the Congress thought that because the fed was a big buyer, it ought to get a good price.

There’s an outfit called the General Services Administration (GSA) that’s been around since Harry Truman signed the legislation in 1949. It was organized to buy pencils and desks and ‘general services’ for the federal bureaucracy at the best possible price. Someone in the Congress thought that because the fed was a big buyer, it ought to get a good price.
Wal-Mart in Washington, Harry style.
Newtgingrich2 And it worked pretty well. Until 1994, when Newt Gingrich’s Contract With America decided that the GSA’s contracting with vendors could be (and should be) a profit-center. Those were the heady days of privatizing government and making it smaller.
The Federal Supply Service (FSS) Multiple Award Schedule (MAS) Industrial Funding Fee (IFF) Program was developed by working closely with industry and customer agencies. A mouthful. It was profitable, at one percent of contract amounts over a total of $66 billion in annual procurements.
Things get fuzzy though in the privatizing business, when Bush appoints someone like GSA Administrator, Lurita Alexis Doan. Lurita is a political supporter with no prior experience that would even remotely qualify her to supervise 13,000 employees who look after $500 billion in government property.
Luritadoan What she does have is a BA in English, a Masters in Renaissance Literature, fund-raising expertise for Bush and enough moxie and political connections to build a 40 person firm that oversaw border protection with Canada and Mexico.
It seems she also has little patience with criticism.
(Washington Post) In February 2005, an auditor at the General Services Administration presented evidence to agency leaders that one of the government's top technology contractors was overcharging taxpayers.
GSA auditor James M. Corcoran reported that Sun Microsystems had billed the government millions more for computer software and technical support than it charged its commercial customers.
Not a few bucks more. The GSA, which was created by Harry Truman to take advantage of government’s enormous buying power—to save money—was paying millions more. On this and who knows how many other contracts?
If true, the allegation was grounds to terminate the contract and launch a fraud investigation. Instead, senior GSA officials pressed last summer to renew the contract.

That decision meant the government's leading contracting agency would be able to continue collecting millions of dollars in what are called industrial funding fees from Sun under rules that permit the GSA to take a percentage of every sale made to the government. It also meant that taxpayers would pay millions more than necessary, according to congressional investigators.
Whoa. Is the GSA a government agency or a privatization experiment at taxpayer expense?
"We thought of ourselves as being, not a part of the government, but as being a business, and we looked to profit on our customers," said GSA contracting officer Herman S. Caldwell Jr., who warned his superiors against renewing the Sun contract. "When a government buying office becomes a profit center, then bad things are likely to happen."
Davidsafavian Things like fraud. Things that sent former GSA Chief of Staff David H. Safavian to jail for eighteen months on a guilty verdict that might have gotten him 20 years.
In testimony before Congress in March, GSA Administrator Lurita Alexis Doan said the agency made a good decision on behalf of taxpayers by renewing the contract. She also said a top aide had looked into the auditor's allegation and told her "nothing was there."
That’s interesting. Doan didn’t sit down with the auditor and ask what was going on and if there was a risk of fraud against American taxpayers. She says a top aid told her nothing was there. I guess that's how she was used to dealing with auditors in her own business.
Safavian was a top aid. At least I think that’s what you would call a chief of staff. Safavian was not there when Doan took over, but when a predecessor’s chief of staff goes to the pokey for fraud, it might make a more circumspect administrator than Doan a bit careful about dismissing auditor allegations.
"This has been a scandal of great proportions," said David E. Cooper, until recently the director of acquisition and sourcing management at the Government Accountability Office, the investigative branch of Congress. "Our work and the work by the Defense Department inspector general and the GSA inspector general all show hundreds of millions, if not billions, that has been wasted."

Abuses have been well-documented.

In 2001, auditors found that GSA contracting officials failed in 10 of 11 price negotiations to secure the best deals for photocopiers largely because they "too readily accepted vendors' unsubstantiated or inaccurate information." Auditors put the cost to taxpayers at $195 million.
Luritadoan1 One cannot avoid the obvious question. Would a company with $500 billion invested in 8,000 buildings, along with a fleet of 130,000 vehicles and an annual budget of $66 billion,  hire a CEO with no more experience than Doan to run it all? The GSA buys desks and pencils and toilet paper for those facilities, leases and builds and remodels, hires and fires staff and decides, on all of those issues, what is in the best interest of the American taxpayer.
I shudder to think of a multi-billion dollar firm’s executive board deciding to put it all in the hands of a woman with no proven management skills beyond running a company with 40 employees. And donating big bucks to George.

The streamlining efforts have drawn contractors and government agencies into close relationships, often referred to as partnerships. Companies are no longer required to certify their prices on services as most favorable to the government even as the number of federal contracting officials watching the prices has not kept up with the growth in spending.
Where I come from, they don’t call that a relationship, they call it collusion and people go to jail for it when public funds are involved.
In May 2006, Lurita Doan became the administrator of the GSA. Doan, the former owner of a technology company, came to the job pledging to work more closely with industry to make it easier to do business with the government.

"I am committing to you here today that we are going to fix these pesky issues," Doan told a group of GSA contractors days after taking office.
Apparently a jailed former chief of staff and possible fraud investigation against Sun Microsystems  fall into the category of pesky issues for Doan. I always thought pesky meant irritating or bothersome. It’s difficult to know what the peskiest issues might be for Lurita.
Throwing slow pitches to Sun Microsystems or answering to the American taxpayer.
Media comment;


  1. Seems to me we had bi-partisan support for the FAR changes removing the financial certification. Steve Kelman and Al Gore were big fans at the time. Streamlining pesky public acquisiiton rules is indeed fraught with risk of uninitended consequences. Our hindsight is now better than our early 90's foresight. Perhaps a few more pesky rules are needed to assure the Federal Government receives discounted prices commensurate with its large acquisition expenditures. Check with the folks at Lockheed, Boeing, United Technologies, SAIC and others to see if they agree.

  2. Mmmm . . . that doesn't solve the issue of an appointee with no substantive skills running a $60 billion agency. Hindsight is okay with me, but the idea is to not have to check with Boeing and the bunch.