OMB touts the value in best-value

Administration wants Congress to remove its A-76 restrictions

Report on Competitive Sourcing Results, Fiscal Year 2005

Bush administration officials want Congress to strike the constraints on best-value trade-offs that often force agencies to accept the lowest-cost A-76 bids even when higher-priced offers might be better. Congress, however, may see it as too small an issue to consider during its busy appropriations season.

Congress has created some safeguards intended to protect agency employees against too easily losing the competitions. Agencies may not shift work currently performed by more than 10 federal employees to the private sector without showing that the company could do the job at a savings of at least 10 percent or $10 million compared with the government’s costs.

The stipulation was established in the fiscal 2006 Transportation, Treasury, Housing and Urban Development, Judiciary, the District of Columbia and Independent Agencies Appropriations Act.

“The experience to date suggests that the repeal of [Section 842 of the appropriations bill] would have minimal negative effect while the retention of 842 would have significant negative effect,” according to a new Office of Management and Budget report, “Competitive Sourcing: Report on the Use of Best-Value Trade-offs in Public-Private Competitions.”

But House Appropriations Committee spokesman John Scofield said there are so many provisions and areas inside the appropriations bill that best-value trade-offs may or may not be addressed.

The cost requirements passed last year shifted how companies view A-76 contracting, said Joanne Kansier, former director of competitive sourcing at the Federal Aviation Administration. Kansier, who now works for Grant Thornton, was part of a panel discussing the topic at the Interagency Resources Management Conference April 24 in Williamsburg, Va.

Kansier led the FAA in the Automated Flight Service Stations project, the largest and most complex government contract under OMB’s competitive sourcing Circular A-76. By using competitive sourcing, the government saved approximately $2.2 billion, OMB told Congress in a letter accompanying two new reports on competitive sourcing.

But now, Kansier said, contractors concentrate on finding ways to perform projects more cheaply to win the bid. In essence, “you’ve done away with capital investment,” she said.

Dennis O’Brien, a competitive sourcing officer at the Energy Department and a conference panelist, agreed with Kansier. He said awarding contracts based on the lowest costs works fine with “roads and commodes,” but on high-tech projects, “it’s a loss to ignore quality.”

National Treasury Employees Union President Colleen Kelley said she doesn’t object to the bill’s language. “OMB’s determination to undermine that reasonable requirement is disappointing, to say the least, and reflects the administration’s insistence on injecting a measure of unnecessary and unwise subjectivity into the spending of taxpayer dollars,” she said in a statement.

She cited agencies’ lax contractor oversight and private companies’ failure to pay their full share of taxes in 2004 and 2005.

“The OMB report also clearly reflects an administration seriously out of touch with Congress and the American people,” she said.

Since May 2003, OMB policy has given agencies more freedom in choosing the best service provider based on cost and quality. OMB reported that best-value trade-offs save three times as much money as A-76 competitions based solely on cost.

OMB plans to meet with lawmakers to emphasize best-value trade-off flexibility in this year’s legislation.

OMB confronts Congress on A-76 jobsThe Bush administration wants Congress to recognize the importance of evaluating the quality of work in getting the best deal on government contracts.

Congress included a restriction in a fiscal 2006 appropriations bill that no longer allows agencies to outsource work performed by more than 10 government employees unless they can show that a private company can perform the work at a lower cost.

The law states that a company must beat the government’s related employee costs by 10 percent or charge at least $10 million less for the project.

In the current budget cycle, the Office of Management and Budget has asked Congress to lift that restriction. OMB would like quality to be as important a consideration as cost for some projects, and officials have presented the request in two reports to Congress and an accompanying letter to congressional leaders.

Officials also touted the value of competitive sourcing, in which public employees and private companies vie to perform government work, by saying that they expect deals awarded in fiscal 2005 to save $3.1 billion in the next five to 10 years.

They have projected cumulative savings from competitions completed between fiscal 2003 and fiscal 2005 to total $5.6 billion, or about $27 for every dollar spent on the competitions.

— Matthew Weigelt


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