Testimony of David P. Gragan
Chief Procurement Officer

“Fiscal Year 2008 and Fiscal Year 2009 Performance Oversight Hearing on the Office of Contracting and Procurement”

Committee on Government Operations and the Environment
Mary Cheh, Chair
Council of the District of Columbia

Monday, March 2, 2009
11:30 am – 1:00 pm

John A. Wilson Building
1350 Pennsylvania Avenue, NW
Washington, DC   20004
 
Good morning Madam Chair and members of the Committee on Government Operations and the Environment.  I’m David P. Gragan, the District’s Chief Procurement Officer (CPO) and the Director of the Office of Contracting and Procurement (OCP).  Thank you for the opportunity to present testimony on our performance during Fiscal Years 2008 and 2009.  My prepared testimony will be posted on OCP’s Website after this hearing.

OCP’s mission is to provide quality goods and services for District agencies through a coherent and streamlined procurement process that is responsive to the needs of government agencies and the public.  To give you an idea of our workload, in FY 2007 we processed over 17,000 purchase orders totaling over $1.3 billion; and in FY 2008, we processed over 15,000 purchase orders, again totaling just over $1.3 billion.  At the same time, we continued to award small and large contracts for the agencies we serve, and also provided oversight and guidance to the District’s entire procurement process.  Most importantly, however, is the fact that we continued to re-engineer our business processes to make them more efficient and effective, a process we call our Procurement Transformation Initiative, which began shortly after my arrival in June 2007.

FY 2008 Budget
OCP’s approved FY 2008 budget was $14,066,856, and our authorized staffing level was 142 FTEs.  The composition of our budget remained essentially the same as the previous year in terms of funding sources and expenditure distributions, and we ended the fiscal year within our allocated budget.

FY 2009 Budget
OCP’s approved budget for FY 2009 is $18,282,345. Our FTE count and the distribution of expenditures remains virtually the same as FY 2008, and we expect to end the current fiscal year within budget.

Key Goals and Recent Accomplishments
OCP’s overarching reform efforts and annual goals fall into five key areas – streamlining the procurement process, increasing staff and customer procurement knowledge and training, delegating authority in a sensible and enforceable manner, enhancing the level of competition and vendor performance, and improving compliance.  We are also pursuing legislative reforms to ensure OCP is agile and has no constraints in terms of employing procurement best practices.  We still have a considerable amount of work ahead of us, but in FY08 we laid a critical foundation in the following areas:

Streamlining our processes:  A key tool for simplifying the purchasing processes, and simply reducing the number of solicitations that are required, is to consolidate purchasing agreements for like goods and services into aggregated contract vehicles.  In FY08, we had a goal of establishing 10 term contracts and OCP established 26.  In order to facilitate this process going forward, we revamped our purchasing staff structure by changing from an agency-based to a commodity-based organization.  As a result, contracting staff has been reorganized into five commodity groups.  This approach is considered a best practice in public purchasing since it eliminates duplicative solicitations for similar items, ensures objectivity, and allows staff to develop expertise in the industries from which they buy.
Another process improvement involved annual procurement planning.  OCP struggled with ensuring that agencies planned appropriately and alerted OCP about their purchasing needs prior to the beginning of the fiscal year.  In July FY08, agencies were able to enter their FY09 planned purchases directly into our electronic procurement system (called PASS).  This eliminated redundant steps under our old planning process, and ensured that adequate funds were available to meet agency purchasing needs.

Increasing staff and customer procurement knowledge and training: In order to curb ratifications and sole source contracts, it’s critical that both OCP staff and our agency customers are clear about public procurement requirements and process steps.  In FY08, OCP launched a DCPedia site to serve as an interactive repository of procurement fundamentals for our customers.  OCP also completed a detailed procedures manual for staff, to ensure that all staff are pursuing an accurate and consistent process.  OCP contracting staff continues to receive internationally recognized training and certifications from the Uniform Public Purchasing Certification Council (UPPCC) and other organizations.  We hope to increase the current number of employees who are certified and trained each year.
Delegations of authority:  In FY08, 76% of the purchase orders OCP processed were for items under $25,000.  The total dollar value of these purchase orders reflected less than 5% of our total purchases.  The amount of work for OCP staff to conduct a solicitation is primarily the same – whether a purchase is $11,000 or $91,000.  As mentioned earlier, increasing the number of term contracts should reduce the number of small solicitations required.

Another key tool to reduce the amount of time OCP spends on small purchases is the delegation of limited contracting authority, in a sensible and enforceable manner, to trained and certified District agencies.  This allows my staff to focus on the more complex procurements.  In FY08, I promulgated a policy allowing designated Agency Contracting Officers to receive delegated authority up to $25,000.  Two agencies – Fire and Emergency Medical Services and the Office of the State Superintendent of Education – have received delegated authority to date. In addition, the most common form of delegation is the procurement card, which has been an extremely effective vehicle for purchases below $2,500.  We have stressed the mandatory use of that vehicle for purchases below that amount; giving agencies needed control over their smallest purchases, and allowing my staff to focus on more value-added tasks.

Increasing competition and vendor performance:  In FY08, 44% of OCP’s requests for proposals (RFPs) and invitations for bids (IFBs) received only one response.  It is critical that OCP increase its vendor outreach to raise the level of competition, both to reduce our costs and improve the quality of the goods and services we purchase.  In FY08, OCP began establishing wiki sites for complex procurements in order to provide potential vendors with access to an unprecedented level of information via the Internet.  This included videotaped pre-solicitation conferences, responses to vendor questions, acquisition calendars with deadlines, and any solicitation amendments.  The agency was recognized for this innovation by the National Association of State Procurement Officials when it was awarded the George Cronin Silver Award for Procurement Excellence last year.

OCP held its first annual vendor appreciation day and continued to host roundtables and forums to better understand perceived obstacles to doing business with the District.  OCP also registered 1,097 new vendors in FY08, above our goal of 965.

OCP also implemented new efforts to better monitor the quality of vendors we work with.  OCP revised its contractor evaluation policy to bring it into compliance with DC Law 17-137, the “Excellence in Local Business Contract Grading Act of 2008.”  As a result, the contract monitoring process is more comprehensive given that contractors are now being graded A (for excellent), C (for satisfactory), or F (for unsatisfactory), and contractor performance is being reviewed and documented more regularly during the period of performance and at the end of the contract term.  Vendors with unsatisfactory performance will be suspended from doing business with the District for a year.

Compliance:  OCP’s audit division, known as Office of Procurement Integrity and Compliance (OPIC), has been in operation for a year.  Thus far, it has updated OCP’s contract file checklists; reviewed the contract files for activities of OCP and agencies with independent procurement authority to ensure compliance with contract policies and procedures; and provided guidance and training to agency personnel regarding how to best monitor vendor performance.  Also, in FY08, OCP hired a professional Records Management Specialist to ensure our procurement files are complete, secure, and properly handled.

Legislative Changes:  OCP introduced 4 bills designed to make the procurement process more efficient.  If passed, the legislation would:  (1) amend current law to make the CFO responsible for reporting interest penalties rather than the CPO; (2) change the current debarment and suspension process by eliminating the Debarment and Suspension Panel and transfer the responsibility to the CPO; (3) eliminate the requirement that the CPO approve all Memorandums of Understanding between District agencies; and (4) amend the Procurement Practices Act to add new definitions for various terms; establish reverse auctions as a procurement method; reduce the small purchase limit for the Metropolitan Police Department and the Office of the Chief Technology Officer from $500,000 to $100,000; allow the CPO to cancel solicitations without the Inspector General’s review and approval; and authorize the CPO to transfer surplus property, goods and supplies to non-profit organizations.

Regulatory Changes:  We also initiated two significant rule changes.  The first authorizes the use of a two-step procurement process to select a contractor to design and build a replacement for the 11th Street Bridge.  The second reduces the noncompetitive small purchase limit from $10,000 to $5,000, which would encourage more competition and is more in line with other jurisdictions.

Top Goals for FY 2009

In FY09, OCP plans to continue its reform efforts by implementing the following key initiatives. In the current year, I will:

1. Introduce omnibus procurement reform legislation and revising Title 27 of the District’s Municipal Regulations to reflect the legislative changes;
2. Increase the number of agencies with delegated contracting authority, including rolling out a new agency contracting officer certification program;
3. Promote procurement transparency by maximizing the amount of procurement data available to the public;
4. Re-engineer sourcing and contract management processes, including the implementation of the remaining two PASS modules (Sourcing and Contract Compliance); 
5. Award a term contract for office supplies which will include as many environmentally-preferred products as possible; and
6. Improve records management to achieve a clean CAFR audit.

Conclusion

I think it’s important to note how we are working more closely than ever before with our colleagues in this administration, including the Department of Small and Local Business Development, the Office of the Chief Technology Officer, and the Department of Employment Services, to improve the procurement process and to ensure that there is coherence and mutual support within District government.  Also before I close, I’d like to publicly thank the dedicated procurement and support professionals who work within my agency, all of whom are engaged in our transformation effort.

Chairperson Cheh, this concludes my prepared testimony.  I am prepared to answer any questions you or the other Committee members might have.