Good morning. Let me first thank you all for joining us today and giving up your valuable time in support of VA’s acquisition reform efforts.
Allow me a moment to acknowledge and say “thank you” to a number of our acquisition leaders and contractors who are with us this morning:
Welcome, everyone, and thank you for your participation in this landmark meeting to critically assess VA’s acquisition processes. We’re grateful for your generosity in sharing your thoughts and ideas with us because—although VA strives for first-rate programs and services—it’s often the outside viewpoint … the fresh look and new perspective … that results in the best decisions and improvements.
I’ve been at VA five months now, but I’ve already learned a very valuable lesson in leadership from Secretary Shinseki, courtesy of his time at Fort Hood, Texas, where it’s said, ‘There’s no tree too tall for a short-legged dog.’
As you probably know, VA has embarked on a wide-ranging transformation effort that is collectively being driven by new challenges, new demographics, new technologies, and new leadership. I would add that changes in the way we do business are also required by old and lingering systemic problems that continue to hobble our operations.
President Obama has charged Secretary Shinseki to reconstitute VA into a high-performing 21st century organization better aligned with 21st century Veterans and our 21st century responsibilities to them.
Many of the improvements, initiatives, and innovations we undertake will involve acquisitions; that’s because we execute our mission on a national scale—and about 30 percent of what we do today, operationally and administratively, we do through the private sector.
This, of course, has huge implications for you, our suppliers—many of you Veterans yourselves. Last fiscal year, for example, VA spent more than $2 billion with Veteran-owned small businesses; and of that $2 billion figure, $1.6 billion was spent with service-disabled Veteran-owned businesses.
In fact, among this Forum, fully half of you represent Veteran-owned … service-disabled Veteran-owned … minority-owned … woman-owned … and HUB-zone businesses. But whether you’re a Veteran or not, your invitation to this first-of-its-kind meeting is an opportunity to share your perceptions, assessments, and recommendations as we tackle acquisition reform—a critical subset of our larger, overarching VA transformation.
As I see it, the hallmarks of this Forum must be open communication, vigorous debate, and honest discussion if we are to successfully transform VA business processes and practices and improve our vendor-supplier relationship.
It’s interesting that the transformational leader of modern India, Mahatma Ghandi, had this to say about changing the status quo: ‘You must be the change you wish to see in the world.’
In VA’s ‘world,’ the ‘change’ we want to see is defined by three key concepts—Veteran-centric, results-driven, and forward-looking. Within that broad context, today’s Forum is an opportunity for you to forge the change you, as suppliers, wish to see as you (1) focus on problematic supplier issue areas; (2) develop a comprehensive 360-degree customer satisfaction indicator; and (3) lay the groundwork for other survey tools and a larger dialogue with our supplier community.
As this meeting demonstrates, VA’s transformation strategy is both internal AND external. That’s to say that we are not working in a vacuum; we are approaching the tasks before us by first reaching out to our stakeholders.
We have an ‘external’ perspective because in the 21st century, collaborations matter—a great deal. In both the public and private sectors; in local, national, and multi-national organizations; in companies large and small.
For VA, that means alliances across Government at all levels. With industry and academia. With Veterans groups. And with firms, like yours, that work diligently to meet Government’s contracting needs—sometimes, quite candidly, in the face of RFPs with opaque objectives, poorly-written requirements, and deliverables so lacking in clarity that private industry has trouble figuring out just what it is Government is trying to accomplish.
And so, in this time of change, we are enlisting your help. We want to know what you think. We want the unvarnished truth. What processes and practices are working well? What are the ones NOT working so well? And, yes, what are the ones you believe to be outright barriers to acquisitions excellence?
The Department of Veterans Affairs is operating under a new construct—a paradigm for high-performing systems, for meaningful, consistent metrics, and for measurable progress. As VA’s chief operating officer, I look to you as our partners in achieving that progress, and I want you to know that our senior leadership team is prepared to do everything we can to make this possible.
There’s a lot at stake. As the second-largest agency in Government, VA has parity with the top Fortune 15 corporations in America in terms of annual revenue, in our case, taxpayer-generated revenue. President Obama’s 2010 budget request for VA is nearly $113 billion—up 15 percent from our 2009 resource level—and the largest percentage increase for VA requested in over 30 years.
Our scope of services is similarly broad. Of America’s 23 million Veterans, nearly 8 million are enrolled in our health care system. Last year alone, more than 5.5 million Veteran-patients walked through our doors. Nearly 4 million Veterans and survivors receive compensation and pension benefits each month. And in final tribute, each year over 100,000 Veterans are laid to rest in one of our 130 national cemeteries.
These statistics translate to a contract-rich business environment. Yet opportunities are at odds with challenges in acquisitions, Government-wide, and within VA itself. There are a number of barriers to high-performing acquisitions, and I’d like to take a few minutes to briefly review them.
The first is what I call ‘the people factor.’ There are simply too few people with proper training in acquisitions to help agencies meet their mission.
Since 2000, annual spending on Government contracts has increased by 149 percent; at the same time, the number of Federal contract specialists has increased by only 9 percent. In VA, for example, we have a 26 percent vacancy rate for procurement officers. Recruitment is problematic. Government is not only struggling to hire mid-level professionals, but entry-level employees as well, because, in all honesty, Government has not traditionally been a very attractive employer for young adults just coming into the work force.
This situation is compounded by the fact that a quarter of senior-level procurement professionals are retirement-eligible. The average age of VA’s procurement officers is 50, and like Government at large, we are on the cusp of a generational wave of retirements.
Because many federal agencies are understaffed, employees have difficulty keeping up with the workload, making training a luxury not a necessity for most. And even when agencies do invest in employee development, their best and brightest often take the training and leave for better jobs elsewhere.
All of these factors contribute to a negative, if not toxic, work environment.
The second challenge is one of structure. In 2003, Congress passed the Services Acquisition Reform Act establishing a Chief Acquisitions Officer in civilian agencies. In truth, most CAO’s hold their positions collaterally with other major responsibilities; yet the Government spends $500 billion annually to acquire goods and services—an outlay that clearly calls for a full-time, skilled CAO who has direct access to C-suite leadership.
The third challenge is one of process. Government programs have become much more complex. We’ve gone from buying simple supplies and services to acquiring complicated systems and services with an emphasis on managing the performance of highly-visible, high-dollar contracts for mission results.
All too often though, the contracting process is not set up with meaningful metrics or performance measures to achieve the right results to meet the agency’s mission, or to measure customer satisfaction once the project is complete. As businessmen and women, you know all too well that you can’t manage—or manage well—what you can’t measure.
In all of these challenges—people, structure, and process—we need to apply a more comprehensive approach. If agencies hope to improve the value of acquisitions, then they must invest in all three areas. Some of these challenges are addressed in the White House’s March 4th contracting memo, which largely focuses on process issues but which underscores the President’s understanding of the acquisition community and the challenges facing it.
So what is VA doing to further our own acquisition cause? Well, our overarching transformation is driving improvements. When Secretary Shinseki came on board he laid out the three principles I mentioned earlier, which will guide how we lead change at VA. We are committed to a people-centric, results-oriented, and future-focused organization.
By “people,” we mean Veterans and employees; in other words, timely benefits and services for our Veterans and investment in our employees through training, development, and opportunities for growth.
‘Results’ meaning a more coordinated and centralized approach serving Veterans—a corporate approach grounded in sound, business-based principles. I am talking in particular about business principles that are rooted in quantifiable results. And last, ‘forward-looking’ in the sense that we will be attuned to the evolving needs of Veterans and to the best practices and emerging trends by which to serve them.
Many of these improvements will involve acquisitions, and we intend to take that corporate approach I spoke about and manage for results. That means a more coordinated acquisition function that we can operate as an integrated whole across our three administrations to deliver services in a more convenient and satisfying way for Veterans.
Acquisition reform is part of our larger plan to improve all of our management infrastructure. We are adopting a new strategy designed to align our acquisition capability with our mission outcomes. We will apply an enterprise spend-management approach to gain insight into what we are spending and why. This corporate data will help us treat our acquisitions as a portfolio of choices measured against consistent criteria of value, equity, quality, and access.
Moreover, we will rebuild our program management capabilities to deal with large-scale projects. And we will synchronize acquisitions with our IT, human resources, and financial management functions to advance a high-performance culture where suppliers are not viewed as ‘adversaries’ … where open communications are the rule … and clearly-articulated requirements are not the exception.
Our bottom-line to acquisition reform is the ‘bottom-line.’ We want to obtain good value for the dollars we spend. We have an obligation to be transparent and to negotiate the best value for our purchases … to buy goods and services without waste … and with the least amount of bureaucratic overhead.
We have a pressing need to stop thinking and negotiating locally, and start thinking nationally, strategically, with an ‘enterprise’ point of view. Why? Because in FY 2008, we purchased over $19 billion in services, materiel, and supplies. This fiscal year we will spend more than $20 billion; and FY 2010 is projected even higher.
As I see it, our dollar outlays demand two things: (1) full return on our investment on behalf of Veterans and taxpayers; and, (2) a mutually beneficial partnership between VA and its vendors.
As business people who provide us with everything from home oxygen to office supplies to IT systems, we want to enrich our relationship with you. Coming from the business community, I see our partnership as an acknowledgement that a bureaucracy like VA can be run as successfully as the finest companies in America—with an eye toward both the bottom line and customer satisfaction.
The fact is the American public is accustomed to, and expects, the service levels delivered by today’s consumer-obsessed corporations. No longer can Government engage in anything remotely akin to ‘bureaucracy as usual’ in its operations. And VA is no exception.
So what is VA doing to effect the changes needed? First, ‘the people factor.’ We are hiring over 350 contracting and procurement specialists to address the fundamental problem of workload; candidates with private sector experience are welcome.
We are training; we are investing in our people. Last fall, we established the Veterans Affairs Acquisition Academy in Frederick, Maryland to train and certify our acquisition team in a career field that is increasingly specialized and technically complex. We are the first civilian agency to have such an academy—where employees are not only getting the proper certification to do their jobs, they’re getting pivotal courses in team building, leadership, customer service, communication, and more.
Our Academy is an integral part of the blueprint for change. It isn’t written anywhere that Government can’t be innovative. Or that acquisition professionals can’t advance new ideas … or implement creative approaches to their job where it makes sense to do so.
We are intent on taking VA acquisition from a tactical-reactive function to a strategic one aimed at ensuring maximum value for every acquisition dollar spent. How? By giving our acquisition employees in-depth understanding of the VA mission and its related purchasing needs; insight into the dynamics of supply markets; and an understanding of every new acquisition tool and technique available to Federal agencies.
We are proud of our Academy and, so it would seem, is OMB. The Academy was recently honored with OMB’s 2009 Acquisition Excellence Award for its support of the acquisition work force. Like us, OMB recognizes that cost-efficient acquisition solutions and best practices depend on highly-trained and developed professionals.
The Academy is giving VA the high-performing people it needs to get the acquisition job done—and done right! Ideally, we want to train with you to form more capable delivery teams, and we are contemplating joint training—paid for by VA—at the start of all major contracts.
On another front, we’re tackling our structural issues. Legislation has been introduced to authorize VA to establish a new office of the Assistant Secretary for Acquisition, Logistics, and Construction to centralize control and oversight of these three mission-essential, high-visibility functions. That office will be the focal point for ensuring uniform and sound business decisions. Its incumbent—who will be an experienced leader with a solid and proven track record—will have a seat at VA’s leadership table.
As an agency, VA owns or leases 159 million square feet of property. Our office of Construction and Facilities Management has completely altered its acquisition strategy. We engage contractors early in the design process to ensure we receive critical engineering and construction feedback while the design is still malleable—a strategy that translates to cost savings and faster delivery.
In addition to investing in people and structure, we are also investing in process. We now have Integrated Project Teams in place to look at each contract valued at $5 million or more. We are centralizing our IT operations to provide specialized acquisition support at a single technology acquisition center. And, with your help, we are starting to implement customer satisfaction surveys and other targeted efforts to elicit vendor input and suggestions and to learn how we can improve.
We have our work cut out for us, and we have a long road ahead of us; there’s no doubt about it. As I see it, today marks the beginning of an ongoing, long-term VA-vendor collaboration as we establish an environment for open dialogue; lay out VA’s transformation strategy; and reinforce our commitment to transforming the VA supply chain.
Although it is the first-step, it’s not the only step. VA intends to build firmly on the foundations laid here, and we look to your continued involvement. I know you have a lot of good ideas about how we can address system barriers, leverage opportunities where we find them, and foster innovations where we can. But obviously it can’t be done in one day.
It is also a two-way street. And so I have directed our head of the Office of Small and Disadvantaged Business Utilization, and our CIO, Roger Baker, to talk today about major plans and programs, and planned expenditures contained in the 2010 Presidential budget so you will have better insight into our upcoming needs for 2010.
Most of our senior acquisition team will be present throughout the day, and I will return for our no-host reception at the end of the day to meet you personally.
I also want to take this opportunity to personally invite you to participate in VA’s ‘Greatest Challenges’ Competition. Let me tell you about it. We’ve developed a list of VA’s biggest mission challenges to let you know what problems we are trying to solve. It’s our intent to brainstorm for the best solutions out there, and so I’d like to ask you to consider submitting your analyses and recommendations for any of the topics on this list.
VA will review the submissions and may select some of them; after that, those submissions selected will receive an invitation to individually present their thinking directly to me, as well as to discuss one other acquisition topic of their choosing. I hope you’ll take VA up on its offer to help drive our transformation because I am here this morning to tell you that VA is committed to our partnership with industry over the long term. We are committed to acquisition reform. And, above all, we are committed to the Veterans we serve. We can do neither without a strong, healthy partnership with the private sector.
I want to thank each of you again for coming here today and for your contributions to positive change at the Department. I look forward to seeing you later today at the reception.