Panel urges White House, Congress to scrap A-76 process

By Jason Peckenpaugh

April 29, 2002

A congressionally mandated panel has voted to scrap the government's 36-year old outsourcing process and replace it with a new process based on the federal procurement system.

In a report to be issued Tuesday, the Commercial Activities Panel, convened under a provision in the fiscal 2001 Defense Authorization Act, will recommend that the Office of Management and Budget replace the policy that has defined federal outsourcing for decades--Circular A-76--and design a new method based on the Federal Acquisition Regulation (FAR). Under this new approach, which the report calls the "integrated competition process," private firms and in-house employees would face off in a one-step, winner-takes-all competition to perform work earmarked for possible outsourcing.

This proposal was opposed by some members of the 12-person panel, but was approved by a supermajority of panel members, according to a copy of the report obtained by Government Executive. The panel was chaired by Comptroller General David Walker and included representatives from OMB, the Defense Department, government contractors, federal employee unions, and academic institutions.

While leaving final details up to OMB, the panel called for the new outsourcing process to be conducted according to the rules of FAR Part 15, which outlines how agencies should buy private sector services under the "best value" procurement standard.

"The panel believes that all parties--taxpayers, agencies, employees and contractors--would be better served by conducting public-private competitions using the framework of the Federal Acquisition Regulation," states the report. "OMB should develop and oversee the implementation of a FAR-type, integrated competition process."

The new process would keep some elements of the current A-76 method. In-house employees would still form a competitive team, known as a "more efficient organization," and the process would retain the current A-76 rules for calculating the cost of the in-house bid. But private firms would no longer compete against one another for the right to square off against the in-house team, as is required under current rules. Instead, all interested parties, public and private, would compete in a single competition.

In effect, the panel believes that the in-house team should be treated like a private bidder in job competitions, although their proposal would give federal workers some chance to revise their bid if it wasn't competitive, according to the report.

"The panel believes that fairness dictates that an incumbent workforce be given an opportunity to correct deficiencies in its initial offer," states the report. "To ensure that all offerors are treated equitably, the panel recommends that at least one round of discussions be conducted with all offerors if the initial in-house offer does not lie within the competitive range."

The FAR has been held up as a possible replacement for A-76 before. A provision in the fiscal 1999 Defense Authorization bill would have allowed the Pentagon to hold job competitions under FAR part 15 procedures. But the measure ran into opposition from the Clinton administration's OMB.

"It must be clear, however, that the Federal Acquisition Regulations at Part 15 were not developed with public-private competitions in mind," wrote G. Edward DeSeve, acting deputy director for management at OMB, in a July 21, 1998 letter to congressional officials. "We are opposed to any language that could be interpreted to permit DoD or any other agency to rely simply on Part 15 procedures in a public-private competition," he wrote. The measure was dropped from the final bill. As in 1998, the Defense Department will not be able to use the FAR to guide public-private competition without congressional action. Lawmakers must first repeal a statute that requires public-private job competitions at Defense to be decided by low cost before the new process could be used there. But civilian agencies could use the new method now, according to the panel.

"It may be advisable to limit the new process initially to agencies where its use would not require legislation, that is, civilian agencies," states the report. OMB should report to Congress on the use of the method a year after it is put in place, according to the panel.

By Jason Peckenpaugh

April 29, 2002