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Fiscal Year 2020 Budget Oversight Hearing

Wednesday, April 3, 2019

Testimony of George A. Schutter, Chief Procurement Officer and Director

Before the Committee on Facilities and Procurement
Chairman Robert White
April 3, 2019
10 am
Room 412
John A. Wilson Building
1350 Pennsylvania Avenue NW
Washington, DC 20004

Good Afternoon, Chairman White, members, and staff. I am George Schutter, Chief Procurement Officer and the Director of the Office of Contracting and Procurement (OCP.) Joining me today is Marvin Manassa, Associate Director of Business Resources, and Alemayehu Awas, the Agency Fiscal Officer. It is my pleasure to testify before you today on Mayor Bowser’s proposed Fiscal Year 2020 (FY20) budget for the agency.

Last month, the Mayor introduced “A Fair Shot,” the Fiscal Year 2020 Budget and Financial Plan, which is the District’s 24th consecutive balanced budget. This budget does more to make Washington, DC a place where people of all backgrounds and in all stages of life are able to live and thrive by making key investments in affordable housing, education, infrastructure, families, public safety, seniors, and protecting DC values. These investments reflect the key priorities identified by District residents at Budget Engagement Forums and telephone town halls held during the budget formulation process.

OCP’s FY20 budget maintains funding to continue the agency’s goal to improve the integrity, quality, and efficiency of the contracting function of the District of Columbia. The agency’s total operating budget for FY20 is $29.2 million, an increase of 2.1 percent or $595,000 above FY19 levels, with an FTE count of 228, the same as last year’s FTE count. OCP’s budget is straightforward with 93 percent for funding staff and seven percent to cover basic administrative needs. I would like to note a technical mistake that we are working to correct. A transfer of $618,140 from intra-district funding into local funding was erroneously placed in Non-Personal Services (NPS). However, the correct transfer amount is $657,240, and the funding is for Personal Services (PS). The FTEs supported by the funds are current OCP employees working at the Department of Employment Services (DOES). These funds simply transfer the funding source from an interagency agreement to OCP local funding. This move supports our centralized procurement operations for DOES. After adjustment for the technical correction, the NPS budget for FY20 is $2.1 million, and PS is $27.1 million.

OCP’s FY20 budget supports the procurement and contracting needs of 78 offices and agencies. It also supports the continuation of the Procurement Training Institute (PTI), which provides everything from requisition training to Purchase Card training to a three-tiered certification training for contracting professionals throughout the District. It also allows for the continuation of surplus property support to the entire District and the continuation of OCP’s engagement with industry.

Workplace Improvement

OCP’s $475,000 increase in NPS for FY20 will be utilized to provide staff with the tools and resources to continue to be great business advisors and allows OCP to continue efforts toward investing in a more efficient, engaged, and productive workplace. As I shared during my performance oversight hearing in February, during Fiscal Year 2018, OCP leadership realized that, given the changes our organization experienced while implementing the reform initiatives driven by the Procurement Practices Reform Act (PPRA) of 2010, it was imperative to better understand our workplace through direct feedback from OCP employees. Thus, we conducted an employee engagement survey in a confidential and anonymous manner. The results of the survey provided OCP leadership with insight into some of the significant workforce development opportunities and challenges facing OCP and its staff. During FY19, we began implementing OCP T.A.L.E.N.T. initiatives that enhance the tools, training, and technology used by the District’s procurement professionals to leverage the opportunities to enhance employee engagement and mitigate some of the workplace challenges highlighted in the survey results. Specific strategies include: 1) assessing the various course offerings provided by the Procurement Training Institute (PTI); 2) introducing our Merit-Based Pay Plan (MPP) to recognize and encourage strong employee performance; 3) hosting monthly all managers’ meetings; 4) implementing employee-driven communication and engagement initiatives; and 5) increasing the frequency of our communication with staff with the deliberate goal of communicating about internal strategy and contemporaneous operational issues. In FY20, OCP will also continue its efforts to improve communication so that District residents ultimately reap the benefits of improved contracting expertise and business processes gained from more effective tools, meaningful on demand/on time training, and increased communication and collaboration.

Purchase Card Program

OCP also manages the Purchase Card Program for the District, leading to efficient and cost-effective control and execution of small purchases. The District has almost 800 authorized purchase card users who initiated over $34 million in activity in FY18. This program saves the District the administrative costs of these small transactions while still proving an effective control and review process to ensure that district funds are used appropriately. Payments to the bank are managed through the Purchase Card Transactions Agency designated as PX0, which has an operating budget of $36 million and allows OCP to warehouse the funds required for the District’s Purchase Card transactions. OCP does not spend these funds, as they are solely designated for monthly payment to the bank. The funding provided to individual agencies supports their actual purchase card transactions. Prior to the creation of this paper agency, the Purchase Card program funding was incorporated into OCP’s local budget. This paper agency allows OCP to manage the Purchase Card program without co-mingling OCP’s budget with the budgets of other agencies.

System Refresh Activities

The FY20 budget also provides $6.7 million in capital funding to support the refresh of the Procurement Automated Support System (PASS). These funds, along with the $5.8 million previously authorized, will allow the District to refresh from the software version currently operated in the District, which becomes unsupportable at the end of 2020, to the current version offered by SAP/ Ariba (the software provider).

SAP/ Ariba is providing a pathway to a next generation, modern Software as a Service (SaaS) version in the cloud. This system refresh approach provides the most cost-efficient and timely method to continue on a supported system, while increasing our cybersecurity integration and leveraging new features. Refreshing the District’s procurement system, rather than replacing it, is less risky, requires less change management, and is estimated to be a quarter of the cost than would be required if changing to a completely new solution. OCP is also allocating significant funding for training to prepare the supplier community and District personnel to use the refreshed system.

By moving to a modern SaaS platform, we will position the District to have more agility to respond to evolving requirements and opportunities. A key example of this new capability is the ability of the authorized business administrator to more easily adjust workflows with a new drag and drop interface that allows a quick response to our evolving needs. By taking advantage of the significant investment that has been made by the software developer in the application, we are able to leverage new features and capabilities and utilize embedded industry best practices.

We are currently operating four Ariba modules, and, with the refreshed system we will introduce a new module to include the Supplier Lifecycle and Performance Management module. This module will provide a new self-service feature that will allow suppliers to register and accurately update and maintain their records without having to contact a DC helpdesk. After the refresh, suppliers will be able to update all of their information through online forms. We will also be able to improve some of the tools that help us ensure compliance with our complex set of regulations and policies. With a more capable and complete platform for the execution of the transactional documents supporting the contracting function, we will enable our contracting officers to function in the business advisory capacity that provides the maximum value to agency operations.

Providing contracting staff with the ability to author contracts in the system will provide a foundational element of support to our strategy of digitally transforming our procurement capabilities. We are combining this process improvement with the utilization of an improved solicitation and contract clause library that will drive more consistent and current terms and conditions, enabling an enhanced compliance review capability. With the addition of the electronic signature function, we anticipate that this streamlined contracting execution will provide benefits to both our industry and agency partners, while also managing the risk of obsolete terms and language in our obligating documents.

We are currently in the project-planning phase, which seeks to further define and plan over 40 integration points with other District IT systems, including integration of the Encumbrance Fund accounting with the System of Accounting Record (SOAR). In making sure that the PASS refresh is synchronized with the PeopleSoft Human Resource Management System (HRMS) and the SOAR Cloud upgrade, OCP, along with the Office of the Chief Technology Officer (OCTO), the Office of the Chief Financial Officer (OCFO), and representation from the City Administrator’s office, is forming a project governance structure to make sure that cross-agency decisions, along with integration and process issues, are raised and addressed.

In FY18 and FY19 to date, OCP worked closely with the OCTO and the OCFO to complete the blueprinting phase, which ensured a proof-of-concept that the functionality required by the District will be operational in the refreshed system. In addition, the refresh team accomplished significant improvements in workflow and transparency, as reflected in the Contracts and Procurement Transparency Portal that launched in February. OCP will build upon this work in FY20 by completing the planning for product development and configuration, with the goal to enter the implementation phase of the refreshed system beginning in 2020. OCP plans to have a fully implemented refreshed system by early 2022. Achieving our objectives of the system refresh is critical, as the system will ultimately provide all of our stakeholders with greater insight into the progress of contract actions and improve our ability for transparency in our reporting. This will provide the District Government with a holistic understanding of how we are spending taxpayer dollars to support District residents.

Conclusion

As I mentioned at our performance oversight hearing in February, I am very excited and energized by the progress that OCP has made this past fiscal year. The Mayor’s FY20 budget provides all the resources and support necessary to continue to improve the efficiency, quality, and integrity of contracting and procurement in the District. I want to thank the entire staff at the Office of Contracting and Procurement for their dedication and hard work. I also want to thank Mayor Bowser, City Administrator Young, Deputy City Administrator Donahue, and Assistant City Administrator Melder, for their leadership and support. Thank you, Councilmember White and members of the Committee on Facilities and Procurement, for your continued support of the Office of Contracting and Procurement. This concludes my prepared testimony. I am happy to answer any questions you may have.