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OVERSIGHT OF THE FEDERAL PROCUREMENT

SYSTEM

THURSDAY, JULY 2, 1981

U.S. SENATE,
SUBCOMMITTEE ON FEDERAL EXPENDITURES,

RESEARCH, AND RULES,
COMMITTEE ON GOVERNMENTAL AFFAIRS,

Kansas City, Mo. The subcommittee met, pursuant to notice, in Kansas City, Mo., in the Jackson County Legislative Chambers, Jackson County Courthouse, Hon. John C. Danforth (chairman of the subcommittee) presiding.

Present: Senator Danforth.

OPENING STATEMENT OF SENATOR DANFORTH Senator DANFORTH. The U.S. Government is the world's largest consumer. Each year it buys anywhere from $100 billion to $125 billion worth of goods and services.

But selling to the Federal Government is no simple task. Some 4,000 statutory provisions govern procurement. Specifications for products the Government wants to buy are sometimes so detailed and outdated that the Government finds itself seeking bids for products no commercial manufacturer makes. Contractors who do sell to the Government often find that they get more than they bargain for. Auditors inquire into hiring practices, wage scales, and the like. And when the time comes for the Government to pay the bill, frequently, the Government ends up telling the contractor, "The check is in the mail." A General Accounting Office survey back in 1978 concluded that as many as 40 percent of the Government's bills were not getting paid on time.

The rules and regulations that entangle the Federal procurement system do more than simply aggravate the people who try to do business with the Federal Government. They cost the taxpayers money. The complexities of the procurement system discourage people from doing business with the Government. That means less competition for Government work and higher prices. And the Government's propensity for writing detailed specifications for Government work, telling businesses how to build products instead of just telling businesses what it wants to buy-that costs money, too, driving up costs as businesses strive to customize products to Government specifications. It also keeps the Government from taking advantage of new product innovations, new technologies. Poor training of Government procurement officers often means the Government isn't doing a good job of bargaining for the products it does buy. That also costs money.

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All told, some estimate that the inefficiencies of the Federal procurement system may be costing the American taxpayers $20 billion a year. Clearly, if we are really concerned about Government spending, we've got to launch a major effort to reform the way the Government does business.

This October the Office of Federal Procurement Policy must submit a proposal to Congress to make some sense out of the procurement system. It will then fall our lot to try to work that bill through the Congress. In the meantime, we're considering other proposals as well, such as my bill to require the Federal Government to pay interest whenever it pays its bills late. One way or another we hope to bring some much needed reforms to the procurement system.

In today's hearing we will hear testimony from some of the experts on the subject of doing business with the Federal Government—the business people who deal with the Government day in and day out. Their firsthand experiences should tell us a great deal about the problems with the procurement system as it now stands, and what we must do to make it better.

Recently, I took this subcommittee to St. Louis to assess the experiences of St. Louis business with Government contracts. That testimony proved extremely useful to us in our work. I am confident we can expect similar good advice today.

The first panel consists of three people who are in the construction industry: Mr. Bruce Patty, Mr. Charles Garney, and Mr. Bill Dunn. Gentlemen, thank you very much for being here. TESTIMONY OF R. BRUCE PATTY, PARTNER, PATTY BERKE

BILE NELSON ASSOCIATES, ARCHITECTS, INC., AND REGIONAL DIRECTOR, CENTRAL STATES, AMERICAN INSTITUTE OF ARCHITECTS; CHARLES GARNEY, PRESIDENT, GARNEY COS., INC., AND PRESIDENT, THE HEAVY CONSTRUCTORS ASSOCIATION OF THE GREATER KANSAS CITY AREA; AND WILLIAM DUNN, SR., PRESIDENT AND CHAIRMAN OF THE BOARD, J. E. DUNN CONSTRUCTION CO., CHAIRMAN, MINORITY BUSINESS ADVISORY COUNCIL, KANSAS CITY AREA HUD OFFICE, AND FIRST VICE PRESIDENT, ASSOCIATED GENERAL CONTRACTORS, KANSAS CITY CHAPTER Mr. Patty. Senator, I thank you very much for the opportunity of being here today. I am most pleased you invited me to attend as I respect your concern for the cost of professional services and the cost of construction of the federally funded projects. My name is Bruce Patty, Kansas City architect and principal in the architectural firm of Patty Berkebile Nelson Associates. We're the architects of record of several Federal agency projects and recently won a national competition to restore the St. Louis Post Office facility in St. Louis, Mo. We've completed other projects for GSA, the U.S. Air Force, and are currently in the preliminary design of the Jerry Litton Visitor Center for the Corps of Engineers. Additionally, in my role as an architect, I wear a second hat because I serve on the National Board of Directors of the American Institute of Architects in Washington, D.C., representing the five Central States of Iowa, Nebraska, Missouri, Kansas, and Oklahoma. As a national director tees on practice and documents and next year will chair the National Practice Commission. As an architect and member of the American Institute of Architects, I am vitally interested in the quality of the built environment. Perhaps no external factor so strongly influences a person's attitude and development as does the quality of his built environment. We live, work, pray, and play in architecture. Since the Federal Government is, as you just stated, the largest contractor of the built environment, the actions and attitudes of the Federal Government greatly influence the actions and attitudes of other forms of government as well as private practice.

Presently there are 19 agencies of the Federal Government which are authorized to contract directly for architectural or engineering services. These agencies all have procurement and contracting arrangements particular to their agency dictates. The lack of continuity from agency to agency, I believe, adds greatly to the cost of performing architectural or engineering services and most frequently hinders the quality of the final design. If these agencies were able to provide continuity in their procurement and execution phases, it would reduce the cost for architectural and engineering services and subsequently reduced the cost for construction of projects.

It would lead to far more efficiency in architectural and engineering services, would certainly allow and encourage more architectural and engineering firms an entry into the Federal building process; continuity would reduce the potential for liability and, perhaps most important of all, would encourage the highest degree of quality from the total construction industry. This continuity would also encourage more quality construction and more quality contractors to bid Federal work and, of course, this would lead to higher quality of construction at the lowest possible cost to the Federal Government.

Incidentally, as we discuss the cost for professional services in construction for the Federal Government, we must think in terms of the Federal Government's influence on other levels of government, vis-a-vis county, city, and the quasi-governmental agency such as school districts. These other levels of government are strongly influenced by the Federal Government's route and most frequently follow patterns that Federal agencies set.

Now let me state at this time that everything is not wrong with the Federal procurement and services execution. Each agency has qualified staff; each agency has qualified procedures; and each agency has its examples of quality architecture and engineering. It is in my view predominantly a lack of continuity and consistency which precludes many architects or engineers or construction contractors from entering the Federal marketplace.

There are, however, some rays of hope. In the mid-1970's, the contracting agencies adopted standard forms 254 and 255, which are the architect and engineers' related services questionnaires for specific projects. This is an excellent example of what the Federal agencies should be doing in their contracting procedures. And I have an attachment there for you. So in the time remaining, let me give you a couple of my thoughts which would reduce the cost

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of providing architectural and engineering services and would lead to the continuity which I discussed.

No. 1, standardization of all documents which impact upon the architect's or engineer's procurement, negotiations, design execution, or contract delivery systems. Presently this is not the case. Most agencies have their own jargon and vocabulary for different phases of architectural and engineering services. Most agencies have different approaches in analyzing the cost for architectural and engineering services. This leads to confusion, escalates the cost for performing services to the Federal Government, and ofttimes leads to disagreements between the agencies and the professional contractor. I refer you to a full family of documents developed by the American Institute of Architects, and I have included two examples for you. These documents are very clear and precise in their content.

They have consistency from one document to another regarding definitions and scopes of services. They have been time-tested, reviewed, and developed under the guidance of legal counsel and are recognized in the industry as being contracting documents which are fair to the client, to the architect, the engineer, and the construction contractor as well. As testimony to their validity, my firm is given credit toward our professional liability cost if our services are performed under the contractual direction of these American Institute of Architects' documents. I am not advocating that the Federal Government adopt the family of documents of the American Institute of Architects. I am professing, however, that the Federal Government develop their own family of documents, and in my professional judgment, this would be a giant step forward in reducing cost of Federal construction.

Point No. 2: Contract with the same architectural or engineering firm who started the job to finish the job. Presently, there is a tendency in many agencies for the architect or engineer which originally designed the project not to be involved in the field coordination and observation of the project during construction. There is absolutely no way an architect or engineer can be responsible toward a project if they are not involved in the construction process. When certain goods or services are specified by an architect or engineer during the design process and then the quality of goods or service is altered or aborted during the construction process, the Federal Government simply has not received what they have paid for.

Point No. 3: Please consider Senate bill 1081, introduced by Senator Charles Mathias of Maryland, dealing with professional services liability insurance.2 The average architectural firm size is nine people or less. As small businessmen, we are particularly hard hit by the amount of deductibles which we must bear in order to obtain affordable levels of insurance. This forces our architectural and engineering firms to pay claims and legal fees up to the amount of our deductibles from “out-of-pocket" costs. The bill now before Congress allows architectural-engineering firms a limited tax deduction for funds set aside to satisfy professional liability claims and related expenses, such as attorneys' fees incurred in

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