By Calvin Biesecker
Beginning with the FY ’11 budget and continuing into the out-years the Department of Homeland Security (DHS) will be seeking less funding from Congress, at least in real terms, than it has received annually beginning in FY ’03, department officials said yesterday.
The fact that the Obama administration plans to hold the line on homeland security spending was actually made known to Congress in the spring when it submitted its FY ’10 budget requests, although the DHS didn’t discuss future plans publicly. At the time Sen. Joseph Lieberman (I/D-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, said he would keep a close watch on how DHS would square future budgets with homeland security demands.
“We’re actually for the first time going to be facing some declining budgets,” Peggy Sherry, acting chief financial officer at DHS, told attendees at DHS sponsored Industry Day for acquisition planning.
Total budget authority for DHS has risen from $31.2 billion in FY ’03 to $55.6 billion in FY ’10, with annual growth typically between 7 and 8 percent, Sherry said. That funding excludes emergency funds the department has received over the years, most of which has been for the Federal Emergency Management Agency for disaster response, she added..
To better leverage its resources, Homeland Security Secretary Janet Napolitano earlier this year launched a multi-phase Efficiency Review Initiative aimed at saving hundreds of millions of dollars annually (Defense Daily, March 30). Initially that review has focused on basic things such as more efficient administrative activities such as copy functions and vehicle purchases.
“This is going to be very important, that piece of it, as we move forward with a flat, and really in real terms, declining budget,” Elaine Duke, undersecretary for management at DHS, said. “Efficiency has to be one of the tools in management because we have to decrease the amount of overhead, leverage our spend, so we can accomplish the same mission with what amounts to a lesser budget in the out-years. So the Efficiency Review Initiative is going to enable us to make the overhead wedge a smaller piece of our budget moving forward.”
Duke also said that the concept of “One DHS” is going to help drive efficiencies as well. She said the department’s senior leadership is committed to One DHS for both administrative and mission functions in order to “eliminate redundancies and close gaps in delivering the mission.”
Both Sherry and Duke said that the soon-to-be released Quadrennial Homeland Security Review (QHSR), and a new Bottom-Up Review, will inform future budgets. The QHSR is a comprehensive review of homeland security that will inform policies, programs and missions. The report is due to Congress by year-end.
Sherry said the QHSR will provide the “strategic framework” for the FY ’12-’16 budget process that is under way. The Bottom-Up Review, which is just getting under way and is being led by the Program Analysis and Evaluation branch of Sherry’s office, will tie missions to budgets.
“What we’re trying to do then is take what we learned about our mission in the QHSR and actually say, ‘What does that mean in terms of mission and the performance outcomes of mission tied to budget,'” Duke said. “So the two goals, I guess, of the Bottom-Up Review are to take the strategic decisions of the QHSR and turn them into metrics in terms of performance outcomes and then make sure they are aligned with the budget.”
Accomplishing those goals will be difficult and will likely be an “iterative process,” Duke said. In the end DHS wants more “standardization” and “granularity” in putting budgets together, she added.
Duke also touched on a number of important management and acquisition trends that have begun in FY ’10 at DHS and that industry needs to be aware of. One is an increasing reliance on fixed-price contracts and less use of cost type contracts, she said.
This is being driven by the Office of Management and Budget, which over the summer directed federal departments to move away from high-risk contracts. To do this means that DHS will have to be better at defining requirements in order for industry to bid fixed-price, Duke said.
There will still be cost type contracts, but these will be incentive fee rather than award fee, Duke said. Award fees are subjective while incentive fees are tied to performance metrics, which is the way DHS wants to go.
“You know, increasing schedule, increasing performance, lowering costs,” Duke said.
According to the latest data available on USASpending.gov, 50 percent of the contracts used by DHS in FY ’09 were fixed-price, down from a high of nearly 63 percent in FY ’02. Cost type contracts have fluctuated from between 25 and 35 percent over the years.
Rick Gunderson, acting chief procurement officer at DHS, said later in the conference that the department is still developing its plans for when to use fixed-price versus cost type contracts. He said if requirements can’t be defined well then “we’re not going to fix price it.”
Other trends to expect include more strategic sourcing, and greater oversight by DHS headquarters of major acquisition programs throughout the department, “with specific emphasis on our IT (information technology) programs,” Duke said.
The strengthened “governance,” as Duke called it, really began late last year and early this year with a new acquisition management directive known as 102-01 (Defense Daily, Jan. 9). Already key DHS programs such as Customs and Border Protection’s Secure Border Initiative, the Coast Guard’s Deepwater modernization, and the Domestic Nuclear Detection Office’s Advanced Spectroscopic Portal are receiving closer scrutiny at the senior levels of DHS and must meet certain criteria before money can be obligated.
Early on with DHS the emphasis was on “fast,” Duke said. But that means cost and performance suffer. The department still needs to be “nimble and quick,” she said, but there will be more balance in the acquisition process.
The formal review process for these and other programs is known as the Acquisition Review Board, which for major programs is chaired by Jane Holl Lute, the deputy secretary of Homeland Security.
“She is absolutely engaged and committed to this,” Duke said of Lute.
Human capital planning is another trend to be on the look out for in FY ’10, Duke and Gunderson said. This has to do with finding the right workforce balance DHS needs between its federal and contractor employees.