Reducing Contract Costs and Removing Inefficiencies


MHS contracts must be effective in achieving their desired goal of reducing Per Capita Cost by bending the cost curve by reducing cost and removing inefficiencies. Widespread MHS contract mismanagement results in enormous costs to the taxpayer. Open competition is the best means to safeguard MHS procurement from waste, fraud, and abuse. The general rule of government contracting is "full and open" competition. Competition requirements have a proactive role to play in that they ensure that the government gets the best deal for its money. Even if not always clearly predicted, MHS has a good idea of contract requirements. MHS must ensure both that its money is well spent and that services are efficiently provided.

MHS too easily falls victim to costly inefficiencies without rules requiring competition. MHS awards noncompetitive contracts costing the taxpayer millions of dollars annually based on unsolicited research, unproductive studies, and vague proposals. The proliferation of unsolicited contract awards is contrary to MHS goals of timeliness, fairness, and cost-effectiveness in contracting. The Competition in Contracting Act (CICA) provides that the agency must determine that necessary goods/services are available from only one responsible source, such as when an unsolicited research proposal shows a "unique and innovative concept" unavailable anywhere else. A demonstration audit in the OCFO Directorate of unsolicited contracts and contracts with open requiements awarded would show if these contracts are truly unique and innovative and unavailable from any other source. If these contracts are not unique and innovative and are available from other sources, the contracts should be terminated. If still necessary to OCFO, a procurement with full and open competition could be completed.

The pilot could be conducted by DHCAPE at no additional cost and implemented immediately. The audit of unsolicited research proposals and reducing noncompetitive contracts ensures that MHS receives the best possible value and would best serve private-sector contractors by providing them with equal notice and opportunity to win lucrative government contracts. Moreover, increasing competition for government dollars would increase the number of contractors seeking-- and winning-- government business. The number of MHS contracts is likely to be reduced. Even if the number of MHS-awarded contracts remains steady, the contracts would be distributed among a larger number of contractors.

When competition is restricted, the government loses opportunities not only to obtain lower prices but also to increase the productivity and the effectiveness of its programs. The chance to win a government contract, or the risk of losing one to a competitor, would motivate companies to act with greater efficiency and effectiveness, leading to innovative solutions, new ideas, and, ultimately, improved readiness.

Furthermore, MHS procured several contractors for services and studies which are not focused and do not provide MHS with useful results. The pilot would audit these contracts to determine if the contractor is providing sufficient "bang for the buck." MHS has become far too reliant on contractors to perform functions that should either be done by full-time employees or, in some cases, to staff activities that could – and should – be discontinued. The pilot would reveal how MHS could move ahead with significant reductions in contractor staff support. A clean-sheet review audit to rebalance contractor resources, staff, and functions would reflect the MHS’s most pressing priorities. The audit should produce a number of opportunities to trim the size of the contractor workforce. While new MHS requirements may emerge that require further contractor staff support, those needs should be met by shifting contractor personnel from other less important activities within MHS. For example, internally-generated reports have consumed vast amounts of contractor staff time and energy often to produce documents that are of questionable relevance, value, and in many cases, have been rarely read.

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