New competition process praised

Commercial Activities Panel report

The Office of Management and Budget's plan to quickly but cautiously implement an improved process for agencies to compete with the private sector to perform commercial-like functions is drawing praise from agency and industry experts.

OMB is putting together an interagency task force to act on the recommendations released April 30 in a report from the congressionally mandated Commercial Activities Panel. Those recommendations are to first update and then replace OMB's Circular A-76, which sets the rules for determining whether the private sector can more efficiently perform a government service.

"This could be the foundation for some dramatic, significant improvements that are definitely needed, but [OMB] needs to make sure that they are very careful in the implementation," said Bill Roberts, a partner and co-chairman of the government contracts practice at the law firm of Wiley Rein and Fielding LLP in Washington, D.C.

The task force should have proposed revisions for A-76 ready within the next few months so that a final revision can be made by year's end, said Angela Styles, administrator of OMB's Office of Federal Procurement Policy and a member of the panel.

"I want to move as quickly as possible," she said.

However, the task force must carefully consider many details as agencies get involved in a process originally designed to govern competition for the private sector, she said (see box).

The panel's recommendations focus on moving from the cost comparison-based A-76 process to competition based primarily on best-value qualifications modeled after the Federal Acquisition Regulation (FAR), which details the rules for competition held among commercial companies submitting proposals in response to an agency's solicitation.

Changing to competition based on the FAR — even making minor modifications to the current circular for immediate use — can only improve agencies' ability to meet the competition requirements laid out by the Bush administration for the next two years, experts say.

Last year, the administration set the goal for agencies to seek bids on 5 percent of their commercial-like functions in fiscal 2002 and another 10 percent in fiscal 2003. Agencies have been working with OMB to put together the plans for these competitions, even though only the Defense Department has any recent experience using A-76, Styles said.

Moving to a FAR-type process will help counteract that inexperience, Roberts said.

"A-76 was so different from anything they were doing day-in and day-out, so few people had training," he said. The "training and knowledge of contracting officers is much better in the FAR area."

Agency contracting officials agreed that they have become much more comfortable with the flexibility to emphasize best value that the FAR and procurement reform have brought to the acquisition process.

The FAR "is a process that we have used, and one that we can continue to apply," said one civilian agency contracting official who asked not to be named.

Although DOD will be unable to move to the new process without legislative changes, one Pentagon official said that it is important for OMB to move quickly on the initial A-76 modifications because agencies are already so far into the fiscal 2002 competition process.

OMB does expect the changes to help meet the overall 15 percent target, but officials are working with agencies on a case-by-case basis, and the percentage goals are not arbitrary numbers that must be met at all costs, Styles said.

Despite the increased comfort level, inserting a government organization into a competition, particularly if the organization is the one currently performing the function, brings up many questions about making the process fair to all parties, Styles said.

"We want to ensure objectivity to the greatest extent that we can," she said.

Several agency officials agreed that OMB must consider the "guaranteed seat at the table" issue because the incumbent government provider of the service should clearly have some level of protection.

But if a competition is truly going to be fair, there should be no across-the-board guarantee, said Stan Soloway, another member of the panel, who is president of the Professional Services Council and former DOD deputy undersecretary for acquisition reform. The competition should really come down to whether the federal organization can match the requirements defined by the agency solicitation, just like any other offeror, he said.

The protest rights of agency employees and organizations likely will be tied into the same discussion, but the problem of accountability is a different matter, and one that stretches far beyond the task of updating the competition process, experts say.

The panel and almost every agency and industry official interviewed agreed that federal management of contract performance must improve. Mechanisms are already in place to measure vendors' performances after they win a contract, even if those methods are not always properly used, Styles said. But there are still few ways to measure the performance of a government organization after a competition is completed, she said.

"It creates a lot of confusion not having some sort of reporting and accountability," she said.

The Pentagon has a database, put together during the past few years, to track the performance of programs if the government wins the A-76 competition, but there is really no comparable tracking mechanism in civilian agencies, said Joseph Sikes, DOD's director of competitive sourcing and privatization. Even within DOD, officials are just beginning to be able to use the information in the database to hold program managers accountable, he said.

"It's very important to be able to compare public- and private-sector performance," Sikes said.


Fair competition under FAR

According to Angela Styles, administrator of the Office of Federal Procurement Policy, some of the questions the Office of Management and Budget must address when moving to a competition process based on the Federal Acquisition Regulation include:

* How far through the competition process is the federal offeror guaranteed participation?

* What are the protest rights of the federal employees and organizations?

* What structures are necessary to ensure performance accountability after the contract is awarded?


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