House Panel Approves Services Acquisition Reform The House Government Reform Committee has approved a sweeping overhaul of the way the government buys services. The Services Acquisition Reform Act, H.R. 1837, would expand the definition of “commercial items,” making it easier for agencies to buy services through simplified acquisition procedures. The bill encourages the use of performance-based contracts and would allow the use of time and material and labor-hour contracts for services. At a committee hearing April 30, SARA’s sponsor, committee chairman Tom Davis (R-VA), said it would allow services acquisitions to “reflect business-like practices” and would provide incentives for new companies to enter the federal marketplace. But opponents, including the committee’s ranking Democrat, Henry Waxman of California, said the bill “goes too far” in removing protections against overcharging and fraud. The bill would place commercial services on the same level as commercial products that are sold to the government. The law assumes that any product or service that is offered for sale in the commercial marketplace has a clearly established price, so vendors are exempt from provisions of federal cost accounting standards that are designed to ensure that they are not overcharging. Davis said, “We often lose some…firms as competitors in the government market” because they don’t want to adjust their accounting systems to meet federal standards. Under his bill, a company that gets 90% of its sales from commercial customers would be exempt from the accounting standards. “I think by expanding the definition of a commercial entity, that opens it up to a lot of small businesses that haven’t been doing business with us,” he said. But Waxman countered, “Almost any service that could theoretically be offered in the commercial market could be designated as a commercial item.” When the committee marked up the bill May 7, it adopted Waxman’s amendment saying that services can be designated commercial items only if they are offered and sold “in substantial quantities” in the commercial marketplace. The committee also approved an amendment by Waxman and Chairman Davis that the exemption from cost accounting standards and cost or pricing data requirements would apply only to contracts worth $15 million or less. Angela Styles, administrator of the Office of Federal Procurement Policy, said the administration has some reservations about the commercial item provision: “It’s a little harder to compare services than to compare commodities.” Styles also raised objections to the proposed expansion of labor-hour contracts and share-in-savings contracts. A labor-hour contract gives “no incentive for the contractor to control costs,” she warned. Styles said the administration will continue to work with Davis to iron out their differences. Most provisions of the bill won endorsement of contractor organizations including the Information Technology Association of America, the Contract Services Association and the Professional Services Council. The committee approved an amendment that would limit Federal Prison Industries’ source preference. It would require an agency to determine that an FPI product is “comparable” to that available from the private sector and to open the contract to competition if the FPI product is found not to be comparable. It also adopted an amendment prohibiting the Office of Management and Budget from using “a numerical goal, target or quota” in Circular A-76 sourcing competitions unless the goal is based on research and analysis. Similar restrictions have been passed by the House before, but never survived in conference committees. OMB has angered federal employee unions and their supporters in Congress by setting a goal of competing 15% of commercial jobs by the end of the current fiscal year. Among other provisions, the bill would create a chief acquisition officer in each agency and would establish a training fund for acquisition personnel. The committee approved the bill on a 22-18 vote. One industry lobbying group said SARA will be included on the fiscal 2004 Defense Authorization bill.