We're not like a big bureaucracy here," declared Nancy Darr, the head of the Department of Veterans Affairs' purchasing arm.
Ms. Darr's words could be taken as a challenge. Long known for buying supplies through a Byzantine process, the VA is trying to simplify its act, against great odds.
This month, it took the final steps to let private industry, instead of VA supply depots, deliver goods to its facilities. Meanwhile, President Clinton signed a law to streamline the government acquisition process.
Such efforts, however, don't touch one of government contracting's most talked-about provisions: the right of losers in the bidding process to protest contract awards. And debate still rages about whether government purchasing should be bound-as it is increasingly-by social goals.
"The question is, could the government do things similarly to the large, private buyers out there?" asked Wick Goodspeed, chief executive officer of McGaw, an Irvine, Calif.-based supplier. "On one hand, why should it be any different? On the other, it is the federal government."
Ms. Darr's VA National Acquisition Center, which negotiates about $2.7 billion in contracts each year, won't work like VHA or other private buying groups, despite recent reforms. That's because government contracting is shaped by the belief that everyone deserves a shot at public money.
One firm's experience.McGaw's history illustrates how that belief can play out in an exaggerated quest for fairness. McGaw is the third-largest supplier of intravenous products, behind giants Baxter International and Abbott Laboratories. Amid fierce competition, it has relied on the VA for about 10% of its sales.
For a nerve-wracking year, however, McGaw thought it might lose its largest customer, Mr. Goodspeed recalled.
In July 1993, the VA disqualified McGaw's bid to renew its five-year contract, agreeing with Baxter that the bid was "materially and mathematically unbalanced." A strange conjunction of events followed.
Baxter was suspended from new government contracts-in part because of alleged irregularities in its previous dealings with the VA-and Abbott, the high bidder, was the only company left.
In December 1993, the VA accepted McGaw's original bid (Jan. 10, p. 2). Baxter, again eligible for government contracts, protested. This May, the General Accounting Office upheld the award. In July, it denied Baxter's motion for reconsideration.
Proceedings like these cost the government money and leave companies' budgets hanging and their fortunes in limbo. "We operated the whole time on the assumption that we would prevail. The risk, of course, was that we wouldn't," Mr. Goodspeed said.
In fact, to avoid such contretemps, firms sometimes pay competitors not to file protests, said William Kovacic, a law professor at American University in Washington, who specializes in government contracts.
Support for status quo.Although the VA would like to reform the system, Congress hasn't adopted its recommendations. After all, the system has many supporters.
Joseph Petrillo, another Washington lawyer, is one. "The protest process is the only adequate enforcement for procurement laws," he said. "It's a mistake to make the government operate like the private sector. You don't have the accountability, and you're not trying to achieve the same goals."
One government goal rarely found in the private sector is redistribution of wealth to disadvantaged groups. As part of its reforms, the VA no longer will award contracts automatically to the low bidder but to the "best value" bid. For example, a bidding firm's relationships with women- and minority-owned firms will be one measure of value.
"Our perspective is that you can do good and you can do well at the same time," said Gary Krump, deputy assistant secretary in charge of acquisition and materials management at the VA.
Those standards will come into play for the first time ever in medical-surgical distribution contracts the VA plans to award in spring. One of the three contracts to be awarded in each of its regions has been set aside for small businesses. Other bidders will be judged, in part, by their commitment to such firms.
Obligations like these contribute to the plethora of rule books that govern federal contracting.
Ironically, even as the Clinton administration tried to simplify the rules, it added another layer to them. The Federal Acquisition Streamlining Act of 1994 will let other government facilities buy goods from the federal supply schedule.
That's bound to create some confusion, lawyers said. VA facilities are entitled to discounted drugs under 1992 legislation. Some public hospitals are guaranteed other discounts under an earlier law. Now a third law determines the prices facilities can pay.
The move, however, could give the VA more clout in the marketplace by increasing its volume. Other reforms, such as the elimination of depots and the adoption of nonmandatory contracts, will make the National Acquisition Center more responsive to individual facilities, Ms. Darr said.
Observers uttered cautious praise.
"There is progress," Mr. Kovacic said, "but it is modest because of the social agenda and the fairness controls. Reforms will require years to implement effectively."