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Contractors say new competitive sourcing methods are unfair

The Office of Management and Budget is giving agencies some flexibility in how they fulfill a White House directive to let contractors bid on thousands of federal jobs, but some contractors believe this approach could put them at a disadvantage once the job competitions begin.

On April 4, OMB said the Interior and Veterans Affairs departments could use two variations of the traditional public-private competition process to meet their competitive sourcing targets. OMB has asked agencies to hold competitions on 15 percent of all jobs considered commercial in nature by October 2003.

The Interior Department's plan allows it to hold competitions on functions involving 10 or fewer federal employees. Traditionally, such small functions are shifted to the private sector through the direct conversion process, which does not allow federal employees to compete for their jobs. The VA's approach, in turn, cuts out the private-private phase of a full competition, using market research to determine if the private sector can perform work more efficiently than the in-house team.

Other agencies can petition OMB to use these methods for credit toward the competitive sourcing goals, although the VA plan was designed to suit a unique agency-the Veterans Health Administration-where a regulation protects most jobs from traditional competitions.

But contractor trade groups are questioning whether the new methods are necessary and fair. Stan Soloway, president of the Professional Services Council, said agencies generally shouldn't need to hold studies to make outsourcing decisions on functions with 10 or fewer jobs.

"The question that has to be asked is if it's not core to the mission and it is small, why would you want to waste resources studying it, when those resources could be used elsewhere," he said. Soloway and Gary Engebretson, president of the Contract Services Association, also criticized the VA's plan for using market research as the basis for an outsourcing decision. The VA plans to compare an in-house bid to perform certain work--such as grounds maintenance--against what it costs lawn care companies to do similar work in the private sector. The department will also consider performance strengths in making these decisions, but Soloway questioned how this process could be fair to the private sector.

"The best way to determine how to make these sourcing decisions is through competition," he said. "I think everybody in industry is somewhat concerned with what they see in these proposals."

The VA believes its method is fair and proves that the government can decide whether work should be outsourced without asking private companies to submit formal bids. "It implies the government can make a good sound business case decision without doing a formal solicitation," said Curt Marshall, director of the VA's strategic planning service. The department has already started pilot versions of its process at four VA laundry facilities around the country, he added.

The new methods are promising to a different kind of contractor-those who help agencies conduct job competitions. Dale Warden, chief of operations at the Springfield, Va.-based firm Warden Associates, believes Interior's plan could be used by several civilian agencies.

"This is a potential solution for many of our clients. It maintains a rigor of analysis that's appropriate, that we didn't have in the past for situations of 10 or fewer employees," he said. It also gives in-house employees facing direct conversions a chance to compete for their jobs, according to Warden.

"At the moment, [in-house] employees have no chance in cases of 10 or fewer (jobs)."

The plans show how OMB has tried to tailor its competitive sourcing initiative to the needs of individual agencies, said Allan Burman, president of Jefferson Solutions, a Washington-based consulting firm, and a former administrator of the Office of Federal Procurement Policy.

"Well it seems to me that when folks have come to them they've been willing to listen," he said. "If somebody wants to try something else it doesn't seem like the door is closed to them." Besides signing off on the Interior and VA methods, OMB has also said that the Department of Housing and Urban Development would not be held to the 15 percent target.