Asking the Wrong Katrina Questions

September 20, 2005
Steven Kelman

Federal Computer Week

I have spent a good deal of my life thinking about how government can most effectively buy goods and services that support important public purposes. When judging federal contracting during Hurricane Katrina relief efforts, the first three questions that come to my mind are:

1. To what extent is the government using prenegotiated contracts to meet emergency needs?

During an emergency, the government must have immediate access to goods and services. But it also should maintain competition to find the best prices and vendors.

Agencies must balance the need for speed vs. competition’s benefits. For example, procurement rules require the government to collect bids for 45 days for noncommercial items worth more than $100,000 before it can evaluate them.

Agencies should negotiate contracts in advance, just like the government should have prepared to send supplies to the Gulf Coast before the hurricane hit. If agencies know they will need disaster-related services, such as debris cleanup and construction, they should award contracts that activate when disaster strikes. Set prices and establish delivery terms with the best vendors. Then agencies only need to place orders when the time comes.

2. To what extent is the government using innovative contract structures that reward rapid and high-quality performance?

After the 1994 Los Angeles earthquake destroyed portions of the Santa Monica Freeway, a major highway, career civil servants came up with a great idea: They asked freeway reconstruction contractors to include a price and target completion date in their bids.

The contracting officials created a schedule of rewards and penalties for exceeding or failing to meet goals. They considered all three factors — cost, speed and rewards — when comparing the bids. The winning firm worked around the clock, promised to share half of all rewards with employees and finished the job in a fraction of the time that engineers had originally estimated.

3. To what extent is the government using online reverse auctions to buy items not covered by contracts negotiated in advance?

Negotiating contracts in advance won’t answer some unanticipated needs. But online auction technology can help avoid no-bid contracting during emergencies.

In many cases, for products and simple services, agencies can set up online reverse auctions in which vendors bid against one another in real time. They can leave an auction open for 24 hours, or as few as 12, and get significant competition and world-class prices. In the interest of full disclosure, I am a member of the board of advisors of FedBid, one of the companies that offers such services.

Based on those three questions, I don’t know how well the government’s post-Katrina contracting efforts correspond to this wish list of good practices.

The reason I don’t know is that despite the media’s coverage about Katrina contracting issues, no one has covered those questions or similar ones, which would be the first questions a contracting expert would ask. Instead, the media has obsessed about whether contracts are going to Bush administration cronies or whether avaricious contractors will cheat and steal.

Those issues needs some attention, of course. The Homeland Security Department’s inspector general is right to send people into the field now to try to prevent problems before they occur. But the IG also said in a New York Times article that he had no evidence to support accusations of improprieties. But most federal contracting experts would say the possibility that unqualified contractors are getting contracts because they are administration cronies or contributors is low down a list of concerns.

The reporters who fail to ask the right questions about Katrina contracting think they are acting as public watchdogs. But through a single-minded focus on abuse-hunting rather than accomplishment-finding, they threaten to produce a procurement system –- and a government more generally -- that works worse than what we have now.

Organizations should operate ethically. We don’t want bribes, favoritism or scams in procurement. But every organization has substantive goals it needs to accomplish. And in the case of Katrina contracting, that goal is to speedily obtain goods and services from companies with good track records and offer incentives for them to do their jobs well.

If the media covered themselves the way they are covering Katrina contracting, newsrooms would be filled with reporters who never tell lies or reveal sources but also never bother to learn how to uncover a good story or write it well.

Steven Kelman is a professor of public management at Harvard University's Kennedy School and former administrator of the Office of Federal Procurement Policy.

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