Feds Wrestle With Contracting
Lists of stimulus-funded projects are now rolling out of federal agencies, but there are still many questions about how government entities will effectively manage the nearly $135 billion in work hitting the market in coming months. With many agencies hampered by staff cutbacks in key areas such as procurement and contract oversight, federal officials are seeking answers from within their ranks and debating the need to tap private industry for help. Many project-management and construction-management firms believe trends are in their favor.
Todd Wager, executive vice president of business development at Pasadena, Calif.-based Parsons Corp., says the steady loss of contracting officers and other administrative positions in federal agencies over the past decade has created a demand for contracted PM and CM services, something that is likely to increase in response to the stimulus. “Over the last 10 years, you’ve seen far more of the non-inherently governmental operations go to contractors as these cuts have taken place,” he says. “With all of this work coming, [internal staff] isn’t something you can grow quickly. It’s a huge challenge for some of these agencies, especially the smaller ones.”
Stimulus watchdogs are already flagging in-house capacity as a concern. Earl Devaney, chairman of the new Recovery Accountability and Transparency Board, has warned there aren’t enough procurement officials at all levels of government. He told the Senate Homeland Security and Governmental Affairs Committee on April 2, “Federal agencies, in particular, will have great difficulty attracting and hiring enough procurement professionals to minimize the risks associated with moving this amount of money quickly to accomplish the [recovery] act’s goals.”
Because the stimulus program is designed to get projects started and completed quickly, the U.S. General Services Administration sees its staffing demands as temporary, says Bill Guerin, head of the agency’s new Recovery Act Program Management Office. Rather than hiring new permanent staff, GSA is seeking private-sector help to ensure that the agency meets its short-term goals, he says.
“We have a great opportunity now with so many qualified people out of work to bring people in to support us,” Guerin says. “We also have contractors, including large construction managers that we work with regularly. [GSA] can reach out to [those firms] directly to offer additional work.”
Similar strategies are expected within the Dept. of Defense. Tom Bishop, senior vice president of the construction services division of San Francisco-based URS Corp., anticipates the U.S. Army Corps of Engineers and the Naval Facilities Engineering Command will lean more heavily on project managers, as they did under the Base Realignment and Closure program.
“They are building up in the right ways, which is at the programmatic control level,” Bishop says. “That allows them to get the contracts out the door quickly. That’s the appropriate place to focus.”
NAVFAC has brought on program managers under BRAC, particularly in high-activity regions, such as the Mid-Atlantic and Southwest. Joseph Gott, NAVFAC chief engineer and director for capital improvements, says he expects to continue using program-management firms in those regions to help with stimulus projects.
Although PM/CM firms are filling vital roles, J. Joseph Tyler, director of military programs at the Corps of Engineers, says the Corps is careful to keep private involvement to a minimum. “We use CM firms to augment our abilities on-site but not to administer contracts,” he says.
GSA and DOD are already well-versed in PM/CM contracting, but other agencies are more hesitant to hand off management duties. The Dept. of Veterans Affairs plans to manage all its nearly 1,000 construction projects in-house, says Fred Downs, chief procurement and logistics officer for the Veterans Health Administration. VA will administer and oversee the nearly $1 billion in work through its 21 regional Veterans Integrated Service Network offices, as well as the medical centers themselves.
Although using contractors or agencies such as GSA for assistance are options, Downs sees those as fallbacks. “The plan for now is to not reach out for private-sector assistance,” he says. “Every year we ask for funding for more of these projects. This is an opportunity to show how our contracting staff can perform under pressure, to prove we can handle more work.”
The Dept of Energy’s Office of Environmental Management also does not plan to dole out new duties to management firms. DOE has been on a hiring spree since 2006 and is confident it is staffed to handle the work, says spokesman Jim Fiore. DOE staff levels dropped from around 2,000 in 2001 to 1,300 by 2006. But after a 2006 National Academy of Public Administration review, DOE began expanding and now has nearly 1,600 staffers.
“We’ve already augmented our resources and did that in a number of areas like contracting and facility representatives that oversee work and do safety reviews,” he says. “We had momentum before the stimulus process started.”
Anticipating the stimulus’ $4.2 billion for nuclear cleanup projects, Fiore says the environmental management office dedicated 15 employees to managing that work. DOE also was permitted to use existing contracts at its cleanup sites to quickly release more than two-thirds of the stimulus funding. Rather than undergo a lengthy bid process, work is issued as task orders. Staffers also are being instructed to expedite review and approvals of contract modifications. “We’re pulling in added resources in the field and headquarters and haven’t made the major decision to go with oversight contractors,” he says. “We still believe it can be done by federal staff.”
For other agencies, stimulus funds are expected to stretch the limits of their capacity. The U.S. Forest Service received nearly $650 million in stimulus funds for construction, more than double its fiscal 2009 budget. USFS contracting officers will continue to administer contracts, but will lean on outside inspectors and contract specialists, says spokesman Joseph Walsh.
The National Park Service is faced with a similar dilemma. Its Denver Service Center will award nearly $500 million in stimulus projects, almost double its 2008 workload. “There’s no way we could do this if we kept the same staff,” says Sam Whittington, the center’s director. “We’ve made changes.”
Like many agencies, the Park Service center is seeking to add temporary in-house staff whenever possible. It now has 80 project managers and 45 contract officers on staff. Whittington says the center has drawn in many out-of-work architects and engineers looking for short-term jobs.
Faced with a staffing shortage, Whittington says NPS will change its procedures for stimulus projects, such as reducing the steps in design task orders and pushing more design duties to outside A/E firms. “Normally, we push to reduce risk to the minimum, but we’re compromising some on processes to get this done,” he says. “We’re matching the steps we take in the process to the staff levels we have. If we don’t have staff, that means we have to reduce process.”
The flow of stimulus funds now is picking up as the Environmental Protection Agency announced on April 8 that it would distribute $197 million to assess and clean up leaking underground storage tanks. The Interior Dept. on April 10 announced $17.8 million for the U.S. Geological Survey construction account.
The Dept. of Transportation also is maintaining a busy pace. As of April 7, DOT had obligated more than $6.3 billion of its stimulus funds, including $5 billion for highway work. President Obama went to DOT headquarters on April 13 to mark approval of the 2,000th transportation stimulus project, a $68-million overpass rebuild and widening of Interstate 94 in Portage, Mich.
“What is most remarkable about this effort...isn’t just the size of our investment or the number of projects we’re investing in; it’s how quickly, efficiently and responsibly those investments have been made,” Obama said, adding, “Competition for these projects is so fierce and contractors are doing such a good job cutting costs, that projects are consistently coming in under budget.”