Commercial Activities Panel
Use of Numerical Goals Gao ID: GAO-02-1022R August 9, 2002GAO reviewed two competitive sourcing initiatives to determine whether they are consistent with the sourcing principles recommended by the Commercial Activities Panel. GAO found that, based on their current design, the administration's "performance target" and the fiscal year 2003 Treasury and General Government Appropriations bill, are not fully consistent with the sourcing principles adopted by the Panel. The most relevant recommended principle concerning these initiatives is that sourcing policy should "avoid arbitrary full-time equivalent (FTE) or other arbitrary numerical goals." The Office of Management and Budget (OMB) issued a memorandum in March 2001, setting goals for a percentage of agencies' FTE positions that are to be subjected to public-private competition or directly converted to contractor performance. This OMB initiative is not consistent with the Panel's recommended principles. There is no evidence to indicate that its numerical FTE goals were based on considered research and sound analysis. Any related goals should be based on a review of historical data on sourcing activity in the public and private sectors combined with an analysis of current and emerging market trends.
GAO-02-1022R, Commercial Activities Panel: Use of Numerical Goals
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Comptroller General of the United States:
United States General Accounting Office:
Washington, DC 20548:
August 9, 2002:
The Honorable George V. Voinovich:
Ranking Member:
Subcommittee on Oversight of Government Management, Restructuring and
the District of Columbia:
Committee on Governmental Affairs:
United States Senate:
Subject: Commercial Activities Panel: Use of Numerical Goals:
Dear Senator Voinovich:
I am pleased to provide the following response to your letter of August
5, 2002,requesting my views on two competitive sourcing initiatives.
Specifically, you asked me to address whether the two initiatives are
consistent with the sourcing principles recommended by the Commercial
Activities Panel (the Panel) in its April 30, 2002, report entitled
Improving the Sourcing Decisions of the Government. The two initiatives
are:
1) the Administration‘s ’performance target“ that federal agencies
compete or directly convert to private-sector performance specified
percentages of their full-time equivalent positions listed under the
Federal Activities Inventory Reform Act (FAIR) by specified dates, and;
2) section 640 of S. 2740, the Fiscal Year 2003 Treasury and General
Government Appropriations bill, which would restrict the availability
of funding for the use of numerical goals, targets, or quotas for
public-private competitions or direct conversions.
As discussed below, I do not believe that, based on their current
design, either of these initiatives is fully consistent with the
sourcing principles adopted by the Panel.
As you know, I convened and chaired the 12-member Commercial Activities
Panel in response to the requirements of section 832 of the Fiscal Year
2001 National Defense Authorization Act. The Panel consisted of senior
representatives from the groups most affected––agencies, federal
employees, and private industry––as well as other individuals with a
broad range of relevant experiences and expertise. The Panel heard and
carefully considered all perspectives on the issues and unanimously
agreed upon a package of 10 principles that should guide decisions in
this area. Although several of the recommended principles are relevant
to your inquiry, the most relevant is that federal sourcing policy
should ’avoid arbitrary full-time equivalent (FTE) or other arbitrary
numerical goals.“ The commentary accompanying this principle stresses
that the success of government programs should be measured by their
value to the taxpayer, not by their effect on the size of the in-house
or contractor workforce. Furthermore, the report notes that any related
FTE or other numerical goal should be based on considered research and
analysis.
As you are aware, the Office of Management and Budget (OMB) issued a
memorandum in March 2001, setting goals for a percentage of agencies‘
FTE positions that are to be subjected to public-private competition or
directly converted to contractor performance. I do not believe that
this OMB initiative is consistent with the Panel‘s recommended
principles. Specifically, I have seen no evidence to indicate that its
numerical FTE goals were based on considered research and sound
analysis. In my view, any related goals should be based on a review of
historical data on sourcing activity in the public and private sectors
combined with an analysis of current and emerging market trends. The
end result would be the identification of specific functions or
activities that should be subject to public-private competition. In
addition, I am not aware that OMB‘s FTE goals took into full account
the capacity of agencies, particularly civilian agencies, to conduct
public-private competitions. In this regard, there is concern that
agencies that lack experience in conducting such competitions, or the
ability to develop the capacity in the near term to perform them, will
opt for direct conversions in order to meet the specified FTE goals.
The Panel report expressed concern about potential misuse of direct
conversions, which generally should occur only when the number of
affected positions is so small that the cost of conducting a public-
private competition would clearly outweigh any expected savings.
Agencies‘ abilities to meet goals in this area could be further
complicated by the fact that OMB‘s goals are based on the universe of
FAIR Act inventories, not a smaller subset that, after further
analysis, may be deemed eligible for competition. The Panel‘s report
notes that guidelines implementing the FAIR Act outline a variety of
reasons for permitting agencies to exclude certain commercial
activities from being considered eligible for competition; they may
include such reasons as legislative exemptions, national security
considerations, etc. Accordingly, the number of positions deemed
eligible for competition may be much smaller than the overall inventory
of commercial activities. For example, while the Department of Defense
reported 412,756 commercial positions in its fiscal year 2001 inventory
only 241,332 positions were considered eligible for competition. The
OMB goal, however, is set as a percentage of the larger overall number.
I recognize the Administration‘s prerogative to set policy, and that,
in general, it has the discretion to decide how best to implement its
policy choices. I also recognize the benefits of well designed and
executed competitive sourcing activities, and understand that
establishing goals is often a key element in achieving change. GAO‘s
work monitoring the implementation of the Government Performance and
Results Act notes the importance of setting qualitative and
quantitative goals with specific performance measures that permit
tracking progress toward meeting the goals. Nevertheless, as noted by
the Panel, the use of arbitrary numerical targets or goals is
inappropriate and can be counterproductive.
On the other hand, I believe the approach of using sourcing targets or
goals reflected in section 640 of S. 2740 could serve to
inappropriately constrain the exercise of reasonable management
discretion. The amendment provides as follows:
’None of the funds made available in this Act [may be] used by an
Executive agency to establish, apply, or enforce any numerical goal,
target, or quota for subjecting the employees of the agency to public-
private competitions or converting such employees or the work performed
by such employees to private contractor performance under Office of
Management and Budget Circular A-76 or any other administrative
regulation, directive, or policy.“
Although not entirely clear, the provision does not appear to be
limited to arbitrary goals or targets. Rather, the provision could be
construed to prohibit use of goals or targets that may be based on
considered research and sound analysis of past activities and current
and emerging market trends. As a result, in my view, any blanket
prohibition on the use of goals, even those based on considered
research and sound analysis, would be inconsistent with the Panel‘s
recommended principles. In this regard, the Congress may wish to
consider incorporating the word ’arbitrary“ in any legislation that
might ultimately be enacted. Doing so would help to ensure consistency
with the Panel‘s recommendations.
I appreciate your interest in this important issue and would be pleased
to provide any additional information or assistance you may require.
Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days after its issue date. At that
time, the report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
Sincerely yours:
Signed by:
David M. Walker:
Comptroller General of the United States:
[End of correspondence]
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