Let’s Say Goodbye to Incremental Funding
By Dyson Richards
Vice President, USfalcon

While there are endless opportunities to improve the acquisition process for professional services, I believe that there is a unique opportunity to quickly alleviate a burden on the contracting community
by eliminating the practice of incremental funding. I agree with many of the proposals put forth by industry and the government over the years to enhance debriefings, hire and develop more contracting professionals, improve communication with industry and better leverage technology, and believe they are all admirable objectives and will help in the long term. However, I am convinced that abolishing unnecessary incremental funding would yield more immediate, positive effects than other proposals by lowering costs and increasing the velocity of the acquisition process.

Let me explain what I mean by incremental funding. In my experience, consistently-staffed contracts (e.g. a five-year contract with a value of $1M/year) are far too often initially funded with less than a year’s worth of funding. Let’s say it is initially funded with $250,000 for the first quarter of performance. Nearing the end of that period, the contractor is in the position of having to remind the government staff (operational and contracting) that the funding is running out. This is usually done by sending a 75% letter to the Contacting Officer Representative or Contracting Officer. Then, the contractor and the government staff must work together to identify the funds, initiate a purchase requisition (PR), route it through leadership for approval, and ultimately issue a contracting modification (MOD) to deliver the next increment of funding to enable uninterrupted performance.

This takes valuable time and resources away from the actual objectives of the contract. The contractor program manager, contracts and accounting staff are distracted from normal business of executing the real work that was acquired by the contract and instead are focused on securing the next increment of funding. More impactful is that the contracting staff are spending time developing and processing unnecessary funding MODs that take them away from their primary objective of soliciting, evaluating and awarding contracts. I have had acquisition executives tell me that as much as 80% of their staff ’s time is spent working on incremental funding MODs. This is in no way helping the government operate as a smarter and more efficient buyer.

In discussing the issue with my colleagues across our industry, I’ve found the practice is more prevalent in the Defense Department than in Civilian Agencies—although many Civilian Agencies do it as well—and that the Navy and Air Force are the most prolific users of this practice. When asked why this practice exists, I’ve been told it is to keep funds in reserve for unknown contingencies or it is mandated by Congress or OMB. I’ve not been able to find any evidence that is the case; rather, I think that often it is just done out of habit. Even if that was a legitimate concern, the government always has the option to de-obligate contract funding to meet a more important need. One industry executive offered a fitting metaphor that this practice is like constantly spraying a fire extinguisher just in case a fire breaks out.

Government and industry should work together to eliminate this debilitating habit that is bogging down our acquisition system. If acquisition professionals were relieved of this non-value added burden by fully funding contracts for at least a year, they could spend more of their time and energy reducing the Procurement Acquisition Lead Time (PALT) and executing better acquisitions
This article appeared in the fall 2018 Service Contractor magazine's Sounding Board feature. Click here to view the PDF article.