The chairman of the House Committee on Homeland Security Subcommittee on Oversight and Management Efficiency harshly criticized the Department of Homeland Security’s (DHS) department-wide acquisition processes last week during an acquisition oversight hearing on how effectively DHS is safeguarding taxpayer dollars.
“A broken acquisition process delivers tools that are late, cost more and do less than anticipated. Watchdogs continue to find failures in DHS’s management of its acquisitions, which is unacceptable and puts taxpayer dollars at risk," said subcommittee chairman Scott Perry (R-Pa.).
“This hearing will examine DHS’s major acquisition programs and processes and what must be done to fix long-standing problems and achieve better outcomes for the American taxpayer and frontline personnel,” Perry stated.
“Each year, DHS invests billions of dollars in its major acquisition programs to help execute its many critical missions. In fiscal year 2014 alone, DHS planned to spend almost $11 billion on these acquisition programs, and the department expects it will ultimately invest more than $200 billion in them,” said Michele Mackin, director of Acquisitionand Sourcing Management at the Government Accountability Office (GAO).
“DHS and its underlying components are acquiring systems to help secure the border, increase marine safety, screen travelers, enhance cyber security, improve disaster response and execute a wide variety of other operations,” Mackin said.
“Each of DHS’s major acquisition programs generally costs $300 million or more and can span many years,” she explained to the subcommittee, noting that, “We have reported that DHS’s acquisition policy is generally sound, in that it reflects key program management practices,” but, “Due to shortfalls in executing the policy, we have highlighted DHS acquisition management issues on our high-risk list and made numerous recommendations to improve acquisition management practices.”
While “In recent years DHS has taken steps to improve acquisition management by dedicating additional resources to oversight and documenting major acquisition decisions in a more transparent and consistent manner,” Mackin said, “many of our recommendations have not yet been implemented, including that DHS ensure all major acquisition programs fully comply with DHS acquisition policy.”
Mackin told lawmakers that, “In its April 2015 report, GAO reviewed 22 major programs at DHS and found that two of them were on track to meet schedule and cost parameters—that is, the initial schedules and cost estimates DHS leadership approved after the department revised its acquisition policy in November 2008.”
However, she said, “GAO was unable to assess six programs—four of which are in Customs and Border Protection—because DHS leadership had not yet approved baselines establishing their schedules and cost estimates as required by DHS policy. The remaining 14 programs had experienced schedule slips, or schedule slips and cost growth. On average, these program milestones slipped more than three-and-a-half years, and their life-cycle cost estimates increased by $9.7 billion, or 18 percent.”
GAO had reported in 2012 that three key factors increased the likelihood that schedules will slip and costs will grow: shortfalls in program office staffing; gaps between needed and expected funding for programs; and changes to program requirements.
“GAO found that these issues remain prevalent department-wide," Mackin said. "In March 2015, GAO reported that DHS has taken steps to improve oversight of major acquisition programs, such as defining the role of the senior acquisition official within each component and clearly defining roles and responsibilities of headquarters staff who carry out day-to-day oversight of these programs.”
Yet, “Despite these efforts," Mackin said, "DHS lacks key information necessary to manage its programs. For example, GAO found ambiguity across DHS testing assessments in that they did not always clearly identify whether the systems tested met all of their key performance parameters (that is, the capability or system attributes that are required to successfully meet the DHS mission).”
“In addition,” Mackin explained, “DHS’s official system for acquisition program reporting—which feeds into required congressional reports—is hampered by data problems, such as inaccurate lifecycle cost estimates. As a result, the most recent data provided to DHS and congressional decision makers for oversight, through the fiscal year 2014 Comprehensive Acquisition Status Report, were not consistently accurate and up-to-date.”
“Finally,” Mackin told the subcommittee, “DHS does not have information on operations and maintenance costs for 42 operational programs for which the normal documentation requirements were waived in 2013. GAO found that only one of these 42 programs has an approved life-cycle cost estimate. Operations and maintenance costs—which can account for more than 80 percent of program lifecycle costs—could run in the billions of dollars for these 42 programs."
In Fiscal Year 2014, DHS still “lack[ed] written guidance for a consistent approach to day-to-day oversight,” according to an earlier GAO audit, which stated, “Federal standards for internal control call for organizations to define and document key areas of responsibility in order to effectively plan, direct and control operations to achieve agency objectives."
Meanwhile, for the second straight year, DHS achieved a much sought-after clean audit of its financial statements by independent auditor KPMG.
The audit found DHS’s financial statements were in order. The auditors certified they had “reasonable assurance that what they saw on” DHS’s books “is correct,” said Chip Fulghum, DHS’s chief financial officer and acting undersecretary of management.
“I am pleased to announce that for the second year in a row, our audit firm KPMG, working in conjunction with our Office of Inspector General, has issued the Department of Homeland Security an unqualified audit opinion — essentially a reasonable assurance from our outside auditors and the department’s Inspector General that our financial statements are accurate,” Fulghum said, adding that, “For the third largest department of our government … consisting of 22 components, 240,000 personnel, a 60 billion dollar budget and six core financial systems and hundreds of feeder systems, I consider this a remarkable achievement.
"Nevertheless, while GAO said DHS has taken steps to improve oversight of its major acquisition programs in recent years, it still hasn’t implemented many of GAO’s previous recommendations for reform.
“Today’s [GAO] report shows that the Department of Homeland Security still has some serious challenges with its major acquisitions,” said Sen. Tom Carper (D-Del.), former chairman and now ranking member of the Senate Committee on Homeland Security and Governmental Affairs. “Whether it’s purchasing ships or aircrafts, cybersecurity technology, passenger and baggage screening devices or a host of other goods and services to carry out its missions, the department needs strong procedures to make sure the government – and taxpayers – are getting what they pay for.”
“While I believe significant progress has been made on this front in recent years," Carper said, the “department’s procedures for approving and overseeing major acquisitions need to mature, as the GAO report shows. I share GAO’s encouragement that the department’s leadership has acknowledged the importance of improving acquisition management. I have seen first-hand the commitment [DHS] Secretary [Jeh] Johnson and Deputy Secretary Alejandro Mayorkas have to making further progress on this effort. I’ve also spoken with the newly-confirmed Under Secretary for Management Russell Deyo about his plans to address the concerns identified by GAO.”
Carper was especially incensed about GAO having found that DHS “needs to develop more realistic baselines for the cost and schedules of major acquisitions, improve testing and ensure that senior DHS leaders and Congress have complete and reliable data on the status of major acquisitions.
An earlier GAO audit found “DHS has defined the role of the Component Acquisition Executive, the senior acquisition official within each component, and established monthly meetings to discuss programs that require management attention,” but the department “has not defined all of the roles and responsibilities of the Office of Program Accountability and Risk Management (PARM)—the lead body responsible for overseeing the acquisition process and assessing the status of acquisition programs—and other headquarters organizations."
GAO further disclosed found "officials’ involvement and relationships with components varied significantly” and that “DHS does not have a structure in place for overseeing the costs of 42 programs in sustainment (that is, programs that have been fielded and are operational) for which acquisition documentation requirements were waived in 2013.”
Sustainment costs can account for more than 80 percent of total costs, but all but one of these programs lack an approved cost estimate. GAO said “cost estimates are necessary to support decisions about program funding and resources.”
GAO" audit report revealed, “The most recent data that PARM provided to DHS and congressional decision makers for oversight were not consistently accurate and up-to-date. Specifically, PARM’s FY 2014 Comprehensive Acquisition Status Report (CASR), which was based on FY 2013 data, contained inaccurate information on DHS acquisition programs. To develop the CASR, PARM drew from DHS’s official system for acquisition program reporting, the Next Generation Periodic Reporting System (nPRS); however, the system is hampered by data issues, including inconsistent participation by program officials responsible for entering the data.”
“Further,” GAO stated, “DHS has not provided useful information for certain CASR reporting requirements. DHS interpreted one requirement in a way that eliminated the need to report cost, schedule, or performance changes for almost half of the programs in the CASR. Holding programs accountable for maintaining their data in nPRS and providing decision makers with more in-depth information would enhance future acquisition reports and render the CASR a more effective instrument for DHS and congressional oversight.”
GAO recommended DHS take a number of actions including developing written guidance for a consistent approach to oversight, addressing programs in sustainment and enhancing data quality and reports to Congress.
DHS concurred with GAO’s recommendations.
Former acquisition officials discuss the issues
“As DHS did, I [also] agree with GAO’s recommendations (they were, and are, typically very helpful), however, I would add one thing — DHS needs people to effectively carry out everything that is on paper (rules, guidelines, etc.),” Homeland Security Today was told by former DHS Chief Procurement Officer Dr. Nick Nayak, who along with former DHS procurement ombudsman Jose Arrieta, wrote their report, Partnering with Industry is Key to Improving Acquisition Outcomes, in the Aug./Sept. 2014 issue of Homeland Security Today.
Nayak explained that, “There simply are not enough cost estimators or program management people to carry out the oversight everyone wants.”
“DHS programs are large and complex, much like DoD, and they simply do not have the capability (through people) to get every single thing done,” Nayak said, emphasizing that, “The limited people in place perform heroically — because they are mission driven to protect the country – [but] they are stretched so far that it is humanly impossible to sustain that level of performance over time.”
And it all leads “to another problem,” Nayak said, which is “employee burnout, low morale and ultimately high turnover.”
“Everyone has good intentions, and sometimes you just need more people,” Nayak said.
Similarly, Cedric J. Sims, the first executive director of DHS’s Office of PARM, where he served for three years, told the subcommittee, “There were pockets of excellence across DHS’s programs, but there were also some very troubled programs. Despite its large budget, DHS had very little department-wide institutionalization of process disciplines, standards and tools for IT programs. Coincidentally, GAO had just delivered a letter to DHS in September of 2010, advising the Secretary of Homeland Security, ‘to strengthen its requirements development process.’ In the letter, perennial program management deficiencies were highlighted. The confluence of events was a clear call to action for reforms in program management.”
Sim said that “in order for acquisition practices to continue to mature in terms of process and oversight, DHS must continue to work collaboratively with partners across the homeland security enterprise.” During his tenure, Sim said "none of the maturation, or any of these improvements in oversight, could have occurred without the on-going discipline of reviews, done both internally by DHS and its components, and externally by GAO and Inspector General.
Rep. Curt Clawson (R-Fla.), a member of the House Committee on Homeland Security who introduced the DHS Private Sector Office Engagement Act to improve private sector engagement in protecting the homeland, said, “With more than 85 percent of critical infrastructure owned by the private sector, DHS needs a robust mechanism to understand the needs of the private sector … Having come to the Congress as a former CEO, this is the kind of partnership our marketplace needs to help our economy grow."
“Over the last several years, the quality, quantity and strategic engagement from DHS’s Private Sector Office has significantly decreased,” added House Committee on Homeland Security Chairman Rep. Mike McCaul (R-Texas). “While the department has recently taken to steps to improve private sector input, such as assigning private sector loan executives to TSA and CBP to promote travel and tourism, more can and should be done.”
Nayak and Arrieta wrote in their Homeland Security Today report that partnering with industry is key to improving acquisition outcomes, and that DHS is supposed to be training its acquisition workforce to be smarter and faster.
“At DHS,” Nayak and Arrieta wrote, “the acquisition process is fundamental to achieving [DHS’s] mission. The department has over 1,400 contracting professionals, 8,500 acquisition professionals managing approximately $17 billion a year in spending, and does business with over 15,000 companies. At DHS, the contracting workforce is not in the business of simply contracting for products and services; [it’s] also supporting 505 program offices that secure our borders, protect our transportation system, seize drugs, protect our airspace, etc.”
“To combat market pressures,” they said, “DHS has developed a unique way to train its acquisition workforce to be smarter and faster. DHS has developed an innovative approach to fill a gap in acquisition training that has existed forever across government agencies – lack of industry understanding. By focusing on quality communications with industry, DHS will be able to minimize the negative impact of brain drain, the changing marketplace and declining budgets.”
Nayak and Arrieta said it’s necessary to “partnering with industry to manage challenges.”
“Federal acquisition and contracting training classes, as well as daily on-the-job training, develop the contracting workforce’s understanding of procurement law, public policy and mission – all of which are necessary,” they wrote, noting that, “In most places, there is nothing in training curricula that focuses on developing an understanding of industry, raising questions about how the contracting workforce responds to thousands of requests for proposals every year. DHS has injected industry perspective in a sampling of courses offered at the Homeland Security Acquisition Institute.”
According to Nayak and Arrieta, “Today, DHS is spending 17 billion more a year teaching acquisition professionals about how industry does business, including concepts such as how companies determine to bid on a requirement, the best approach to minimizing proposal costs in order to maximize competition, and how to minimize or eliminate protests through effective communication.”
They added that, “DHS has been able to address the systematic and market convergence pressures immediately by partnering with industry associations to develop industry led seminars for the workforce – the cost is almost zero, and the impact is immediate. The seminars,” they explained, “focus on developing DHS acquisition professionals’ understanding of the marketplace and create a safe environment outside the acquisition process for contracting professionals to learn about their potential industry partners and to gain valuable experience before ever soliciting them for a requirement. They are even frank discussions about contracting and acquisition issues that nobody typically talks about until they are adverse in nature.
“At DHS,” Nayak and Arrieta said, “we tested this approach with excellent results for our contracting professionals. It also had the unintended positive result of industry executives learning about DHS’s acquisition processes by being around our contracting professionals. Through our Procurement Liaison Office, we developed seminars on a range of topics that we felt would develop our workforce’s understanding of strategic challenges they and industry were facing in the current federal bidding environment.”
Continuing, Nayak and Arrieta said in their exclusive Homeland Security Today report that, “The business of the federal government requires agency officials to balance mission need, procurement law, public policy and dealings with industry. The complexity that’s created by these intersecting priorities creates a challenging environment for all stakeholders, including legal officers, program officials, contracting professionals, industry, Congress and even the public. Furthermore, the brain drain in the acquisition profession and changes in the federal marketplace are challenging the existing system.”
Further, Nayak and Arrieta said there’s also a problem with government acquisition “brain drain.” They noted that, “In every magazine, newspaper and blog on federal contracting, you will find an article about transforming the acquisition workforce. Why? Because acquisition professionals are important. The federal acquisition process is a business executed and managed by people. Annually, the federal government spends $500 billion through the acquisition process. In total, across the federal government, there are 40,000 contracting professionals, about 30 percent of whom are eligible to retire in five years."
Meanwhile, 30 percent of the acquisition workforce has less than five years of work experience. Furthermore, it takes about five years to provide adequate training and experience to develop a competent contracting professional. Government-wide, however, one in four individuals with less than five years of experience is jumping to the private sector. The acquisition community across government must directly address the challenge of this brain drain.”
Furthermore, they wrote, “Systemic market pressures are also creating headaches for government officials across the government in acquiring goods and services to support their agency’s mission. Budget growth is not expected for years to come, and in many instances budgets are declining. Declining budgets require agencies to achieve the same mission with fewer dollars.”
And, they stated, “Declining budgets will add to the challenges already facing acquisition functions across the government. Less money significantly increases competition from industry for all contract opportunities, which in turn increases the importance of market research for both government acquisition professionals and industry. The impact of declining budgets on both government and industry’s integration of the sales function and the proposal into a single ‘capture’ contract will be dramatic. Set-aside decisions in this environment will reshape long term investment strategies.”
“Federal market researchpractices and private sector capture decisions will have an immediate and long term impact on investments in specific mission areas,” Nayak and Arrieta said, adding, “The inability to understand and execute market research effectively will negatively impact an agency’s ability to acquire goods and services in a reasonable amount of time. And due to market convergence, market research will have to be done in concert with industry for the entire industry space unrelated to a specific procurement.”
“Furthermore,” they stated, “the rapid convergence of technology and professional services marketplaces is dramatically changing the way federal contracts are structured, awarded and managed, and will have a dramatic impact on how we do business over the next 10 years.”
There is a light at the end of the proverbial tunnel, though, Nayak and Arrieta said. “Through partnership, we believe the contracting professional of the future will be able to significantly reduce the time it takes to award major acquisitions. We believe that the new generation of contracting professionals — armed with knowledge of industry trends — will better support the mission of protecting the homeland.”
Finally, “We also believe this knowledge will help the next generation of contracting professionals make adjustments as the industrial base changes — not after it changes – as this will give our professionals and industry partners the ability to spend more time communicating before a requirement hits the street. It will also reduce the time from when a Request for Proposal is let to when a contract is awarded to less than six months on major complex requirements.”
The former two top DHS acquisition officials said, “Acquisition professionals of the future will be developed at DHS in partnership with industry.”
Building acquisition policy
Before he stepped down in May 2014 as the longest serving policy chief at DHS, then Assistant Secretary for Policy David Heyman exclusively talked to Homeland Security Today about DHS’s 2014 Quadrennial Homeland Security Review (QHSR) — which Heyman was one of the chief architects of – as it related to future DHS acquisition efforts.
“This year, and as a result of substantial work we did over the last several years to build better strategic and analytic capability, the 2014 QHSR is focusing on what is the risk environment that we operate in now and over the next four or five years, and the strategic shifts that must be made in our homeland security posture to adapt to that risk environment," Heyman said.
Over “the last couple of years,” he said, “we spent a lot of time improving and building our risk analytics, and we have national risk assessments, and we have a homeland security strategic environment analysis – there’s a lot of background material to this homeland security review.”
Emerging from out of all that, Heyman said, are “strategic shifts in our homeland security posture in a number of areas, to include our counterterrorism posture and what we do in terms of preventing terrorism and violent extremism.”
Heyman also said, “We spend some time talking about managing biological threats. We’re focusing on the international flows, that is to say things that move in and across our borders, and the dramatic shifts that we’ve seen in terms of the volume and intensity of movements of goods and people. We have a section that focuses on public and private partnerships and the importance and the approach we should be taking in terms of working with the private sector. And then a section on cybersecurity and critical infrastructure protection.”
“And within each of those areas which we spent a substantial amount of time studying over thelast couple of years, there are recommendations on how to shift what we should be doing in homeland security over the next four years,” Heyman said.
Howard Steinman, a principal with A.T. Kearney with 20 years of consulting experience, including IT program and portfolio management for large government and private sector clients who has directed multiple engagements for clients across DHS, and Christian Hagen, a partner in A.T. Kearney’s strategic information technology practice where he advises many of theworld’s largest organizations across multiple industries, including government and defense contractors, wrote about how DHS can unlock the value of its IT investments in the March 2014 issue of Homeland Security Today.
“DHS invests approximately $6 billion a year – between 10 percent and 15 percent of its annual budget – on large-scale information technology (IT) systems,” Steinman and Hagen wrote. And, “This investment makes it possible for IT to support a wide range of mission operations across the department’s 23 component agencies, which greatly rely on this support for critical duty functions that include border security, cybersecurity, emergency response, and preventing and deterring terrorist and chemical, biological, radiological and nuclear attacks.”
“With such a sizeable technology investment, it is critical that DHS maximize IT program value and better manage related IT expenditures, especially in the current fiscal environment," they noted. "In recent years, DHS has reviewed component programs and acquisitions with an eye toward increasing IT oversight,” and that “these reviews led to governance improvements at the program and portfolio level and consolidated infrastructure investments. They also prompted DHS to eliminate or restructure underperforming investments and reduce operational costs and duplication.”
“Nevertheless,” Steinman and Hagen wrote in Homeland Security Today, “DHS continues to strive to improve outcomes and affordability by better defining and maximizing its IT value.”
“The first step in defining IT ‘value’ as the measurement of IT efficiencies and effectiveness is to establish the ‘current state’ baseline,” Steinman and Hagen wrote. “It is likely that quantitative and qualitative data exists across the organization, which may help leaders make informed decisions. But if this data doesn’t exist, it is important to ask the right questions to obtain the necessary information.”
Steinman and Hagen observed that, “Lack of complete and reliable data is a challenge for government and commercial organizations. Recent Government Accountability Office reports show DHS is no exception. But DHS can build off of its successes in increasing IT oversight, and it can benefit from a proven and repeatable approach to assessing IT function to unearth and/or substantiate data about IT operations and procedures to identify how to better enable DHS missions.”
“One approach,” they wrote, “is to gather the necessary data by looking at an IT program through six different IT transformation framework perspectives to drive improvement in capabilities and affordability.”
“These perspectives,” Steinman and Hagen wrote, “provide a fact-based, transparent view of DHS IT operations, showing where on the stages of excellence it stands in each area. By making clear which aspects need minor tweaks or major overhauls, DHS is better positioned to be cost efficient and effective.”
“Employing these six perspectives could result in annual savings of 5 percent to 15 percent” in IT procurement costs, Steinman and Hagen wrote.
In concluding, Steinman and Hagen wrote that, “By optimizing their internal and external workforce, DHS IT executives potentially can save up to 50 percent of what the department spends annually on IT servicesand labor.”
“Once DHS IT executives have employed an IT transformation framework to thoroughly assess these six aspects, it will know where to begin to make the changes needed for IT to more efficiently and effectively support the missions of the components. The assessments would provide a number of fact-based options to implement needed IT changes.”
“DHS’s challenge,” they said, “is to organize the options into discrete areas of improvement as well as into short-, medium- and long-term projects so they are better managed. This will allow the most urgent to begin immediately, and set the department on the path to unlocking the value of its IT investments.”
Not satisfied with the DHS procurement processes, last November, Rep. Curt Clawson (R-Fla.), a member of the Homeland Security Committee, introduced the DHS Private Sector Office Engagement Act to improve private sector engagement in protecting the homeland. Committee Chairman McCaul co-sponsored the bill, which Clawson said would improve private sector engagement with DHS.
The legislation would:
- Require DHS to analyze and report on the economic impact of changes in homeland security policy including all new regulations;
- Direct the department to determine what actions are needed to reduce associated burdens on the private sector including unnecessary barriers to private sector job creation;
- Authorize the Private Sector Office for four years with the streamlined functions of economic impact analysis and business liaison responsibilities;
- Authorize the Loaned Executive Program to provide top executive-level and subject matter experts from the private sector an opportunity to share their expertise with DHS;
- Require the department to coordinate private sector efforts, with respect to functions of the department and throughout all department components, to identify private sector resources and capabilities that could be effective in augmenting Federal, State, and local government agency efforts to prevent or respond to an incident;
- Require DHS to promote existing public-private partnerships and develop new public-private partnerships to address homeland security challenges;
- Put accountability mechanisms in place such as a strategic plan with objective outcome-based performance metrics to be validated by the GAO; and
- Prevent the Private Sector Office from duplicating procurement liaison functions.