Pentagon readies new rules for public-private competitions

The Defense Department will soon introduce new guidance providing step-by-step instructions for conducting public-private job competitions under the "best value" procurement standard. The guidance will provide much-needed direction to Pentagon managers who have labored to hold job competitions under the best value approach, which factors both cost and technical advantages into procurement decisions, according to Defense officials. While agencies have had the option of using best value criteria in job competitions since 1996, the best value format complicates the process of comparing an in-house bid with the bid from a contractor. Several best value competitions have wound up in bid protests decided by the General Accounting Office, according to Annie Andrews, assistant director of the competitive sourcing office at Defense. "We have had a lot of GAO protests come out of [best value] competitions," said Andrews. "It's clear that people need additional guidance." A central challenge of the best value process is ensuring that in-house and private sector bids are based on the same scope of work before the competition enters its cost comparison stage. In a best value competition, private sector firms can put forward bids that exceed the requirements of the scope of work, or performance work statement, during the phase of the competition in which private firms compete against one another for a chance to compete against the government. But the in-house bid can only fulfill the minimum requirements of the performance work statement under federal outsourcing rules. This means that the private sector firm and in-house team will likely offer different levels of performance, making it difficult to ensure a fair cost comparison. The Pentagon has created a detailed process for solving this problem, according to a draft of the new guidance obtained by Defense will require the performance work statement to be amended to include performance standards of the private sector firm that are relevant to the competition. "The performance work statement is changed to reflect only those performance standards that were the material reasons the selected contractor offer was rated higher than acceptable and…offered the 'best value,' " said the guidance. After the performance work statement is revised, Defense officials will change the in-house bid to meet the new performance standards before starting the cost comparison. Defense officials must revise the in-house proposal without borrowing elements from the private sector bid, according to the guidance. For example, consider a public-private competition to staff a call center. A contractor might propose to answer all phone calls to the center within 30 seconds, while the in-house team pledges to field all calls in a minute. Under the new guidance, Defense officials could be required to rework the in-house bid so it meets the 30-second response rate. But officials would not be allowed to impose the contractor's staffing requirements on the in-house bid. Defense plans to issue a final version of the guidance by the end of the summer. The Office of Management and Budget has signed off on the Pentagon approach, and the guidance builds off recent GAO decisions, according to GAO Associate General Counsel Daniel I. Gordon. "I think the guidance does reflect an effort to incorporate recent bid protest decisions in this area," said Gordon. But GAO does not endorse the new guidance and will likely end up evaluating its fine points in bid protests, according to Steven Sorett, a lawyer with Reed Smith LLP. For instance, contractors who lose out in the private-private competition might protest if the performance work statement is changed in a later phase of the competition, he said. "You are changing the rules [of the competition] in midstream," said Sorett. "Certainly, if we were representing a client, we would look into that issue." Requiring changes in the performance work statement could also lengthen the competition process, Sorett said. "Here you are talking about a material change to the statement of work," he said. "Knowing how the bureaucracy works, you're talking about an addition of a minimum of a couple of months to the competition." Stan Soloway, president of the Professional Services Council, commended Defense for trying to improve the best value process but said that competitions must consider a contractor's past performance to truly reflect best value. "[Defense officials] are trying hard to do the right thing, but the [best value] problem goes deeper than how you do the evaluation," he said. "Right now you can't factor a contractor's past performance into these competitions." Soloway added that the GAO Commercial Activities Panel is studying ways to factor best value into public-private competitions. OMB Director Mitch Daniels and Comptroller General David Walker have said that agencies should look for best value and not lowest cost when they hold job competitions. Wiley Pearson, defense policy analyst with the American Federation of Government Employees, said the new best value guidance is long overdue. "[Defense officials] are doing what should have been done five years ago," he said. OMB authorized best value competitions in its 1996 update to the Supplemental Handbook to Circular A-76. "They are just now coming up with a handbook telling [Defense personnel] how to do competitions."
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