Privatization and Competition

H.R. 716, the Freedom From Government Competition Act, would require the government to procure from the private sector, with some exceptions, the goods and services it needs. This testimony, which discusses that proposed legislation as a potential vehicle for competitive contracting, draws on recent GAO work on privatization in state and local government.

GAO noted that: (1) on the basis of GAO's literature review, privatization experiences and lessons learned by state and city governments in implementing privatization efforts, the views of a panel of privatization experts, and GAO's work in Georgia, Massachusetts, Michigan, New York, and Virginia, as well as the city of Indianapolis, GAO identified six lessons that were generally common to all six governments; (2) in general, the governments found that they needed to: (a) have committed political leaders to champion the privatization initiative; (b) establish an organizational and analytical structure to implement the initiative; (c) enact legislative changes and/or reduce resources available to government agencies to encourage greater use of privatization; (d) develop reliable and complete cost data on government activities to assess their performance, support informed privatization decisions, and make these decisions easier to implement and justify to potential critics; (e) develop strategies to help their workforces make the transition to a private-sector environment; and (f) enhance monitoring and oversight to evaluate compliance and performance and ensure that the government's interests are fully protected; (3) H.R. 716 provides a tool but not a substitute for a political champion; (4) H.R. 716 would establish a flexible implementation structure; (5) implementation of H.R. 716 would be helped by integrating it with agencies' strategic and performance planning activities; (6) incentives may be needed for implementing change; (7) the relationship of H.R. 716 to other relevant laws is unclear; (8) reliable and complete cost information is needed for privatization decisions; (9) H.R. 716 recognizes federal workforce transition needs; (10) effective monitoring and oversight of contractor performance are essential to successful privatization; and (11) the Freedom From Government Competition Act would redirect current policy, which does not now have the weight of legislative authority and significantly affect the operation and management of the federal government.