While the recent attention to cost comparisons could lead to more insourcing, there's a subtext in the OFPP's position that could be good news for small firms.
While the Office of Federal Procurement Policy's request for comment on cost comparisons could potentially lead to more insourcing of federal work, experts say an underlying theme is a plus for small businesses. Lawmakers are pushing for more transparency in agencies' decision-making and requiring more serious thinking about those decisions' impact on small businesses.
Congress required the Office of Management and Budget to release the procedures and methodologies officials use in decisions to insource work from small businesses. Lawmakers also want to know how officials determine which contracts they study for potential conversion from the private sector to federal employees. The deadline is in September. The somewhat watered-down provision was passed in the fiscal 2013 National Defense Authorization Act, which President Barack Obama signed into law in January.
In a Feb. 15 Federal Register notice, OFPP Administrator Joe Jordan asked for input from the community on additional factors agencies should consider when potentially insourcing work from a small firm. He also sought comment on whether small businesses should be treated differently than large contractors when an agency explores insourcing a project.
"The request suggests that insourcing work currently being performed by small businesses may have important policy and social ramifications," said Steven Koprince, a government contracts attorney and author of "The Small-Business Guide to Government Contracts."
Federal agencies face a conundrum. They need to save money and operate efficiently, and sometimes their own employees meet that requirement better than an outside company. Yet, agencies are also instructed to support small business.
Among other management guidance, OFPP told agencies in 2011 to put a lower priority on insourcing contracts held by small companies, particularly if the agency already struggles with meeting its annual small-business contracting goals.
Jordan's questions are a good sign for companies.
"Given that insourcing is ongoing and is currently affecting many small businesses, putting these issues on the table for discussion is a positive step," Koprince said.
The government's insourcing has hit many small businesses hard in the past several years, Koprince and Robert Burton, former deputy OFPP administrator, both said. An insourcing decisions can quickly dry up a company's revenue stream. Moreover, insourcing often does not allow companies to compete for the work in the way that re-competing a contract among various contractors does.
"The government should not be removing work from small-business contractors without, in most cases, at least going to the trouble of figuring out whether moving the work in-house will save the taxpayers money," Koprince said.
Burton, a partner at the Venable law firm, said the transparency factor is key to, at least, letting companies understand why they are losing their contract. He said the decision-making process has become less transparent since 2008, when lawmakers halted competitive sourcing efforts under OMB Circular A-76 policy. The policy pits the private sector against the public sector for work through what some say is a complicated but disciplined process, considering costs and management efficiencies. A-76 remains a controversial policy.
Despite Congress' moratorium, the House wanted to stop agencies from insourcing small businesses' work until they had published their procedures and methodologies. The final version of the authorization bill gave OMB nine months to publish the information without any stoppage.
When agencies are caught in these fiscally austere times, Burton said small business could save the government money if they did the work. As agencies consider what work might be better done in-house, officials should also be looking for tasks and projects that might better serve the agency if outsourced to small businesses.
"The government should be looking at it from both directions," Burton said.
Yet to avoid over-insourcing small businesses' work, OFPP should be more stern in its policies on getting an agency's small business advocate involved in the process too, Burton said. Jordan should do more than "encourage" agencies to involve the advocate, he argued, as they are often left out of the process altogether.
Otherwise, Burton said, "The theme is insourcing, part 2."
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