What happens when the agency secretary starts reviewing grants and contracts

Terry Gerton: You have been watching something that I think is really interesting happening kind of across the federal agencies now under the Trump administration, where each agency is undertaking a review of all of their contracts. That might be a good thing, but it could also be very confusing. Tell me what you all are seeing there at PSC.

Stephanie Kostro: So Terry, I’m so glad that you raised this. It has been fascinating to watch. Having watched contracting officers and acquisition professionals across the board for the last few years, this new tendency or trend toward additional contract review is eye-opening, and I’ll give you a couple of examples. Just earlier here in June, we saw a memo come out where at the Department of Homeland Security, the secretary herself will review any obligations for either a grant or a contract in excess of $100,000. So this is a surprisingly low threshold. And they do say give the front office there at least five days to review. If you think about the volume of contract vehicles that go through DHS — whether it’s we got grants, we’ve got task orders, we got lots of vehicles where you can obligate money — that’s a very low threshold, so that’s going to be a very high level of throughput through the front office. The concern among contractors, of course, is that it will cause delay in award, it will cause delays in getting the work performed, and at the end of the day, delays in fielding the kinds of capabilities and capacities that the government needs.

Terry Gerton: You can hardly read a contract in five days, much less analyze it. Are the different agencies coming up with similar criteria or are they all different? So if you’ve got somebody like one of the big contractors who’s got contracts at lots of agencies, are they getting 17 different perspectives?

Stephanie Kostro: They are in fact getting 17 different perspectives. Before we leave the DHS memo, I just wanna highlight that the previous threshold that came out earlier this year in March was $25 million and now it’s $100,000. So just again, the throughput of paperwork that’s gonna have to go through their front office is significant. I just wanted to throw that out there because it’s a fun fact for me. On the other agency perspective, we at PSC offer our members a briefing every Tuesday. It’s virtual at noon about what’s happened in the last week. We had a couple of recent sessions dedicated to similar actions at other agencies, in particular the Department of Defense and the Department of Veterans Affairs. Now, the question that you asked was a great one. Is it one size fits all or are each of the agencies doing their own thing? And in this case, each of these agencies is doing its own thing.

Terry Gerton: So how are contractors responding to that? Are they having any opportunity to express their concerns?

Stephanie Kostro: We are, as an industry association, trying to collect and coordinate a little bit on, hey, what are the major pain points here with these different reviews? And I’ll give you an example. In the Department of Defense, they had a memo come out in late May that talked about IT and management services contracts. It also talked about advisory and assistance contracts. And so they had two different thresholds there too. For IT and management services, the review by the deputy secretary of defense or his designee would be $10 million and higher. And for other elements within that memo, it was $1 million or higher.

So even inside departments there are different thresholds, different review processes, etc. At the VA, there was a specific memo that came out that talked about sending it to two individual people who were affiliated with the Department of Government Efficiency and having them do a final review before contract award. Some of the concerns that industry is expressing really comes down to predictability, consistency — where can they have their voice heard in the process. On the predictability and consistency piece, the earlier these reviews can happen in the acquisition process, the better for companies. If it happens at the very, very end, right before contract award or task order award, there’s a little bit of a flail about, this is something that they thought they were gonna have booked for business and now it’s up in the air again. And so it’s that uncertainty and lack of consistency that really cuts to the industry’s concern. Again, having it earlier in the process would be better. And then finally, on the sort of uncertainty of it all, we’re not entirely sure what the parameters are for these reviews. What are the officials looking for? It would be helpful if there was greater industry engagement with the departments and their industry partners on exactly that — what does this last hurdle mean and how can companies prepare for it?

Terry Gerton: I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Stephanie, before we leave this topic, one more question. In addition to all of these agency reviews, GSA has been notifying 10 big contractors at a time that they’re reviewing their contracts. So in that whole environment, is there a point where a government contractor says, enough? This is like the last straw. This is too much trouble. I’m not in.

Stephanie Kostro: That is the fear, Terry, to be honest. We’ve talked a lot about the defense industrial base shrinking over the last few decades. We’ve talked about the general industrial base throughout those who service the government shrinking throughout the years. There was an effort in recent years to try to get additional small businesses involved to lower barriers to entry.

I would consider these reviews to be a significantly chilling, to have a potentially chilling impact on those companies who are going, hey, do we want to work with the government? All of this uncertainty, it makes for a very unstable business plan. And so there are companies that can weather uncertainty to a certain extent. But for those who are thinking about getting into the government space, this is somewhat of a deterrent. And I think that message can’t be understated.

Terry Gerton: Well, here’s hoping that you and your partners in the contracting space have an opportunity to make those opinions known and that GSA and the agencies are listening to them. Let’s shift gears a little bit because there’s some legislation moving that you all have been watching — the SPEED Act. Tell us a little about that.

Stephanie Kostro: Thanks for raising this, Terry. I am a recovering House Armed Services Committee staffer myself, and so I always appreciate when something comes out of a committee that is this thoughtful. The SPEED Act is the acronym — I love it when the legislation has acronyms you could pronounce. It’s always fun. But this one is Streamlining Procurement for Effective Execution and Delivery, SPEED. And it’s really about acquisition reform within the Department of Defense. I would also note that the committee staffers have indicated that they’ve been working with their colleagues across the House of Representatives. So we may see some of this language translate over to the civilian agencies.

But what at the end of the day it does is it addresses structural barriers and promotes a shift toward best value contracting, which, as you know, PSC has been pushing for a while. There’s lowest price technically acceptable, which is really you’re going for the lowest price that meets the requirements, versus really thinking about how can innovation be leveraged. And so that might not be the lowest price, but it will get you a bigger bang for the number of bucks you’re willing to spend. And so as we move forward, I think the SPEED Act is really, really thoughtful and is worth really watching in the coming months.

Terry Gerton: How does it compare to — I guess it might be a companion piece in the Senate — the Forged Act, which is also looking at acquisition reform?

Stephanie Kostro: It’s a great question. The Forged Act was introduced by the chairman of the Senate Armed Services Committee, Wicker, last December as a standalone bill. We do see pieces of it probably coming through in the National Defense Authorization Act markup process. The Forged Act was also great in that the very first title of it went through all of the different regulations that could be rescinded or tweaked or otherwise modified to help the acquisition system work more efficiently. The SPEED Act does not do that. And even in great candor, the staffers who worked on it said, hey, we think the Senate did a great amount of work over there on looking at the regulations and their statutory basis.

And so I think it is a companion piece in that way. They do compete a little bit in terms of how their approach is and industry engagement and involvement in going through. And so, I think the SPEED Act, for one, does talk about commercial items and how that’s defined — the push toward commercial goods and products and services, as well as strategic collaboration between industry, whether it’s traditional or nontraditional companies, and the department to meet requirements. I really do think it’s a very, very responsive piece of legislation.

Terry Gerton: Well, certainly Secretary Hegseth has talked a lot about wanting to improve the Department of Defense’s acquisition process — make it speedier, bring more commercial products into it. Do you think these two pieces align with his policy or his preferences?

Stephanie Kostro: I do think they do. I think they would put the department on a good path toward getting access to cutting-edge technology — again, to be results-focused and outcomes-based as opposed to, hey, what is this going to cost? The real question is, what effect is this gonna achieve? If we put this technology in the hands of the warfighters, what can he or she do with it? I think that is a great approach. I would note, though, that the push toward commercial products and services does have a little bit of tweak here. We always come across concerns about intellectual property. And so if you’re going to go toward a commercial solution, chances are you’re not going to get the intellectual property rights there. And so I think we, as an industry, also need to talk more frequently and deliberately with the department on what is in the realm of the possible. One suggestion is data as a service, and that was also raised in the SPEED Act. I think, as we move forward, that is a space worth watching.