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The Office of Management argued in a report released last week that extending the use of criteria on quality, as well as cost, in bids in public-private competitions for federal work would increase overall savings to the government. But critics of the Bush administration's competitive sourcing initiative have challenged that conclusion.

Agencies that selected contract award winners through so-called "best value tradeoff" competitions, in which both performance and cost factors are weighed in the final bid assessment, have saved about $68,000 per position competed in fiscal years 2004 and 2005, OMB said. In contrast, competitions decided based on cost alone saved $24,000 per position, the report stated.

The budget office said the promise of best value competitions was not just in cost savings, but in new ideas for how to perform work.

"The most significant benefit of the tradeoff process is measured not in dollars alone, but in the transformational improvements that are made possible when the government has the ability to choose the solution that is best in terms of both cost and quality," the report stated.

But critics of the administration's competitive sourcing initiative disagreed with this argument, and with the savings figures presented in the report.

Colleen Kelley, president of the National Treasury Employees Union, said OMB failed to support the estimates and projected savings presented. John Threlkeld, a lobbyist for the American Federation of Government Employees, has previously questioned OMB's methodology for estimating competition costs and savings, arguing that the figures do not fully account for employee time running the competitions and overestimate the wages of federal employees performing the work.

"When the acquisition process is engulfed in scandals and OMB is pressuring agencies to hit numerical privatization targets, now is the worst time to make the A-76 privatization process more subjective and thus more vulnerable to abuse," Threlkeld said of OMB's support for expanding the use of best value contests.

A federal acquisition advisory panel composed of leaders in the procurement community recently decided to recommend dropping governmentwide quotas for performance-based acquisition, a strategy similar to best value contracting in which agencies outline solicitation goals and allow industry to develop innovative responses. That panel found that while performance-based contracting had achieved some successes, further training and refinement were needed to fully achieve its potential benefits.

Threlkeld said A-76 appeal rights will also become more contentious if the government performs more best value competitions. Federal employees currently have limited opportunities to appeal an agency's decision through protests with the Government Accountability Office and Court of Federal Claims.

OMB used the best value report to advocate for the repeal of a portion of the fiscal 2006 Transportation-Treasury Appropriations Act that says agencies can only outsource work when the contractor bid would save at least the lesser of 10 percent of personnel-related costs or $10 million. That requirement inhibits firms from bidding, OMB said.

Chris Jahn, president of the Contract Services Association, an industry group, expressed dismay at congressional mandates for how agencies must conduct competitions. "Will Congress continue to place restrictions on the goose that's laying the golden egg?" he asked. Jahn echoed the report's assertion that firms have been reluctant to compete, saying, "Without competition, there can be no savings."

OMB reported that 63 percent of competitions involving more than 65 full-time jobs had two or more private sector offers in 2005, compared with 47 percent in 2004. Meanwhile competitions with no offers fell from 29 percent in 2004 to 11 percent in 2005.

OMB works with agencies to foster private sector interest in competitions, and the report highlighted techniques such as holding public forums for feedback, establishing dedicated Web sites for communication, and reaching out to industry groups and leaders, as means of encouraging private sector involvement.

"Real competition, when it is present, and with best value trade-offs, when they are appropriately utilized, generates substantial savings and improvements -- certainly much more so than traditional low-bid competitions," said Stan Soloway, president of the Professional Services Council, in response to the report.

"Indeed, the report's data makes clear that we have only touched the tip of the iceberg when it comes to generating meaningful savings and performance improvements through the competitive sourcing process," Soloway said.

COMMENTS

• If cost saving were the true goal of competitive sourcing, the competition should work both ways, not just federal job becoming contract jobs. Contract jobs tend to stay contract jobs, with the contract tending to become more and more expensive every year. Set that aside for now, and take a look at measuring performance. Having been both a contract employee and a federal employee, I can honestly say that my performance has been much, much better as a federal employee. I am much more efficient at my job, knowing that I have health and dental insurance, paid time off, and am saving for retirement. As a contract employee -- and doing essentially the same job -- I had no insurance, a paltry 24 hours time off, no way to save for retirement, and the knowledge that every year my job would go out to be bid on (to the lowest bidder no less). As a federal employee I feel committed to my agency's goals and mission, and pride in being a civil servant and in doing good works to benefit all citizens of the nation. I honestly don't mind that I could be paid more if I worked outside of government. As a contract employee, I never felt part of the team (occasionally feeling deliberately excluded), and had to be looking out for number one just to survive. I often wondered if my agency, which was primarily engaged in scientific research, ever thought about whether I could be trusted to perform the research objectively and without bias because of my employment with a for-profit company. Sometimes, in the case of employee benefits, you get what you pay for. Sometimes, in the case of padding the profit margin of industry, you don't. Embedded in all contracts is some amount of profit for the company that wins the contract, otherwise the company wouldn't be interested in obtaining it. Imagine for a moment, that the government isn't tethered to the federal pay schedule or required to provide a standard package of benefits, and is able to provide the employee the same pay and benefits as the contract company. Up for grabs, then, is the profit embedded in the contract. Which is better, to recruit a better and more efficient worker with that extra money, to give it back to the hardworking taxpayers, or to give it to a corporation? This, I think, is the invisible elephant in the middle of the room. GovExec.com reader Posted May 5, 2006 11:52 AM
• In A-76 studies or contracting out work, the bottom line is to get rid of government workers and not pay for retirement in the out years. The major cost in all the bids is labor. The majority of the other costs are considered sunk cost since the government will have to pay for these cost no matter who wins. The government personnel cost is fixed at a high dollar/hour level because the present government workforce is old due to government cutbacks. The contractor pay is somewhat limited to the pay like jobs within the geographical area. In addition, the contractor benefits are considerably less than government’s. GovExec.com reader Posted April 25, 2006 1:33 PM
• This latest OMB report leaves one wondering if their acronym really means Office of Magic Budgets and statistics. This is another case of the Bush administration massaging statistics to support to its ideological agenda. The conclusions of the OMB report are highly skewed by the outsourcing of DOT Flight Services. Most of the claimed savings are based solely on the flight services competition. Yet, this competition was economically complex and the actual savings are probably much lower when evaluated properly. Somehow OMB has taken a questionable, if not meaningless, statistic and leaped to a conclusion that supports the Bush administration's position. Amazingly, the report doesn't even offer a cautionary footnote to the interpretation. GovExec.com reader Posted April 25, 2006 5:07 PM