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Thanks to Anne.
Here's the column:
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The Federal Office of Management and Budget (OMB) recently issued revised competitive sourcing guidelines intended to make competition simpler for federal agencies - both as managers of competitions, and as responders.
The product of a two-year effort, OMB's revised Circular A-76 streamlines the rules federal agencies must follow for public-private competition. It will be used by agencies to meet the Bush Administration's goal of subjecting to competition 425,000 of a total of 850,000 jobs previously identified as performing commercial activities.
Both public and private participants had complained that the previous process was unfair, cost too much and took way too long to complete - in some cases, up to four years. In addition to speeding up the process and making it easier, the revised guidelines address requirements that federal agencies and employees said gave unfair advantage to outside bidders and add new expectations that agencies put more services up for competition.
Key changes to the process
Encouraging competition.
The first step agencies must take in the competition process is to divide their activities into "inherently governmental" and commercial categories. Commercial activities are then subject to competition. However, agencies may choose to exempt some commercial activities from competition by submitting a special form to OMB. Under the old A-76, agencies exempted nearly 500,000 of the 850,000 commercial activities. Now, OMB can challenge agencies' decisions on exemptions.
On the flip side, agencies are no longer allowed to bypass competition and simply contract for activities that involve fewer than 10 FTEs, a practice that employees and unions said was unfair.
Reducing cycle time.
The new guidelines set a 12-month deadline for general competitions and provide a new 90-day streamlined process for activities that use 65 or fewer employees. Depending on the service, the streamlined process can require only that agencies get prices by phone and complete a simple one-page form
Focusing on value.
The old guidelines used a low-cost criterion for choosing a provider. Now, agencies can factor in performance and quality, allowing agencies to compete on factors other than cost. Cost is still a big factor, however. Agencies must weight cost equal to the total weight of all other factors.
Holding in-house winners accountable.
Previously, in-house winners were seldom held responsible for cost overruns or failure to perform up to specification. The new guidelines require that in-house providers agree to performance standards with an agreement more equal to a contract with a private vendor. If in-house teams fail to perform, they may be excluded or have points taken away in future competitions.
How federal agencies are responding
Federal agencies' responses to A-76 requirements are varied. Before the revised process was developed, some agencies simply resisted implementation. Other agencies, including the Department of Education, expressed the intent to implement but sensibly delayed implementation while it restructured its management systems.
OMB's Office that runs the competitive sourcing initiative, the Office of Federal Procurement Policy, hopes that agencies begin to see competition as a routine management practice. An article by Jason Peckenpaugh in Government Executive Magazine's July 1, 2003 edition says that some agencies are using competition not only to comply with A-76 guidelines but also to restructure their operations. Cited as examples:
- The Forest Service and the Energy Department are competing their information technology services.
- The Army is planning to move more than 58,000 soldiers from non-combat to combat positions and subject more than 150,000 civilian jobs to competition.
In any government competition initiative, treatment of employees is a major concern. Employees frequently see competition programs as implicit or explicit criticism of their competence. Others fear losing their jobs.
Federal agencies have responded to employee concerns in various ways. Peckenpaugh provides examples of how agencies have handled this, including
- Personally informing each individual whose job is at risk
- Creating "transition centers" where employees can get job training or help in finding a new position
- Guaranteeing up front that employees will not lose jobs, or even be moved to lower pay grades
- Holding vacancies so that no layoffs will be necessary if a private contractor wins
- Using employee buyouts.
Federal managers involved in the process are torn between the need to display loyalty to their employees, who are the people who deliver results for which the managers are accountable, and the need to be responsive to direction from upper management to compete services. In one agency, managers are approaching the competition process with both imperatives in mind. They are finding visible ways to support competitive sourcing as a way to improve processes and deliver services more efficiently. At the same time, they are responding to employee concerns that they are not valued or that there is a "hidden agenda" to privatize services. The agency has funded consulting assistance to help employees prepare a competitive proposal and managers are urging employees to contribute their best thinking to prepare a winning bid --- and providing them with time to do so.
Competitive sourcing at all levels of government is constantly evolving. Although each government's competition program is developed to fit its specific management culture and legal requirements, many parts of the process can inform efforts elsewhere. Over the last decade or so, governments have developed best practices by learning from their colleagues in other jurisdictions, and this learning continues.
Government leaders who want to know more about starting up or improving competition initiatives can contact a PSG partner directly by email at Reinvent@psg.us for ideas on how to start up a managed competition initiative or retool your existing process.
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