Competitive Sourcing

In May 2003, the Office of Management and Budget (OMB) issued a new Circular A-76--which sets forth the government's competitive sourcing process. Determining whether to obtain services in-house or through commercial contracts is an important economic and strategic decision for agencies, and the use of A-76 is expected to grow throughout the federal government. In the past, however, the A-76 process has been difficult to implement, and the impact on the morale of the federal workforce has been profound. Moreover, there have been concerns in both the public and private sectors about the timeliness and fairness of the process and the extent to which there is a "level playing field" for conducting public-private competitions. It was against this backdrop that the Congress enacted legislation mandating a study of the government's competitive sourcing process, which was carried out by the Commercial Activities Panel, which was chaired by the Comptroller General of the United States. This testimony focuses on how the new Circular addresses the Panel's recommendations with regard to providing a better foundation for competitive sourcing decisions, and the challenges agencies may face in implementing the new A-76.

Overall, the new Circular is consistent with the principles and recommendations that the Commercial Activities Panel reported in April 2002, and should provide an improved foundation for competitive sourcing decisions in the federal government. In particular, the new Circular permits greater reliance on procedures in the Federal Acquisition Regulation--which should result in a more transparent and consistently applied competitive process--as well as source selection decisions based on tradeoffs between technical factors and cost. The new Circular also suggests potential use of alternatives to the competitive sourcing process, such as public-private and public-public partnerships and high-performing organizations. The new Circular should result in increased savings, improved performance, and greater accountability. However, this initiative is a major change in the way the government operates, and implementing the new Circular A-76 will likely be challenging for many agencies. A major challenge agencies will face will be meeting a 12-month limit for completing the standard competition process. This provision aims to respond to complaints about the length of time taken to conduct A-76 cost comparisons. However, GAO studies of competitive sourcing at the Department of Defense (DOD) have found that competitions can take much longer than 12 months. Other provisions in the new Circular may also prove burdensome in implementation. Lessons learned by DOD and other agencies as they initiate efforts to improve acquisition, human capital, and information technology management could prove invaluable as agencies implement the new A-76 provisions--especially those that demonstrate best competitive sourcing practices. Successful implementation of the Circular's provisions will also likely require additional financial and technical support and incentives.