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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 25, 2003

SUBJECT: Office of Management and Budget (OMB) Eliminates Competitive Sourcing Goals

SOURCE: OMB Report "Competitive Sourcing: Conducting Public-Private Competition in a Reasoned and Responsible Manner," issued July 24, 2003

AGENCIES: OMB, Office of Federal Procurement Policy (OFPP)

ACTION: Notice

SYNOPSIS: OMB has decided to drop its goal of competing 15% of all federal positions performing commercial activities by the end of Fiscal Year 2003. Instead, goals will be negotiated with each agency "based on mission needs and conditions unique to the agency."

EDITOR'S NOTE: For more on the recent revisions to OMB Circular A-76, Performance of Commercial Activities, see the May 29, 2003, FEDERAL CONTRACTS DISPATCH "Office of Management and Budget (OMB); Revision of OMB Circular No. A-76, Performance of Commercial Activities."

SUPPLEMENTAL INFORMATION: On July 24, 2003, OMB published a report titled "Competitive Sourcing: Conducting Public-Private Competition in a Reasoned and Responsible Manner," and OFPP Administrator Angela Styles testified before the Senate Government Affairs Committee Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, notifying Congress that OMB has decided to drop its goal of competing 15% of federal "commercial" jobs by the end of FY 2003, with an eventual goal of competing 50% of such jobs. (EDITOR'S NOTE: OFPP is part of OMB.)

Federal Activities Inventory Reform (FAIR) Act of 1998, Public Law 105-270, requires that each agency prepare a list of government activities it is performing which are not "inherently governmental functions," and the Bush Administration decided to use OMB Circular A-76 as the vehicle for reaching its competitive sourcing goals. The reason for the administration's emphasis on competitive sourcing is that "both the public and private sectors have conducted independent studies to document the effects of public-private competition. Each has reached the sam conclusion: subjecting in-house operations to competition consistently generates cost savings -- anywhere from 10% to 40% on average, regardless of whether the competition is won by a private contractor or the government."

According to the report, "To begin the process of opening commercial activities identified on workforce inventories to competition, OMB instructed agencies to complete competitions on 5% of these activities by the end of FY 2001 and an additional 10% by the end of FY 2003. These figures were intended to ensure a level of commitment that would help institutionalize use of the tool within each agency."

However, OMB recognized this was inadequate, so it created scorecards to measure progress using a traffic-light grading system -- red-yellow-green. An agency would move from "red" to "yellow" if it completed competitions for 15% of the total commercial positions listed in its FAIR Act inventory. An agency would move from "yellow" to "green" when it competed 50% of the total commercial positions in its FAIR Act inventory. "The 50% figure was meant to ensure that the dynamics of competition would be brought to bear on a significant portion of commercial activities over time."

OMB "learned that baselines would need to vary based on mission needs and conditions unique to the agency," so OMB has decided to drop the 15% and 50% goals in favor of individually-negotiated goals. In addition, OMB has developed a new scorecard criteria. Agencies will receive a "yellow" if they have:

Agencies will receive a "green" if they have:

Finally, the report says, "OMB and the agencies will monitor costs and results achieved. This information will be used to evaluate the effectiveness of competitive sourcing at each agency and devise additional strategies to address agency-unique implementation issues...Agencies will share lessons learned and best practices for addressing common issues. Using past experiences to inform future decision making will further ensure competitive sourcing is a fair and effective tool for improving the delivery of services to our citizens."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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