	New Circular Provides an Improved Foundation for Competitive Sourcing Decisions

Following a yearlong study, the Commercial Activities Panel in April 2002  reported its findings on competitive sourcing in the federal government. Chief among these was a recommendation that public- private competitions be conducted using the framework of the Federal  Acquisition Regulation (FAR). As I noted previously, the new A-76 Circular is generally consistent with the  Commercial Activities Panel’s sourcing principles and recommendations  and, as such, provides an improved foundation for competitive sourcing  decisions in the federal government. In particular, the new Circular  permits:    greater reliance on procedures contained in the FAR, which should  result in a more transparent, simpler, and consistently applied  competitive process, and   source selection decisions based on tradeoffs between technical  factors and cost. The new Circular also suggests potential use of alternatives to the  competitive sourcing process, such as public-private and public-public  partnerships and high-performing organizations. If effectively implemented, the new Circular should result in increased  savings, improved performance, and greater accountability, regardless of  the service provider selected. However, this competitive sourcing initiative  is a major change in the way government agencies operate, and successful  implementation of the Circular’s provisions will require that adequate  support be made available to federal agencies and employees, especially if  the time frames called for in the new Circular are to be achieved. Ultimate Success of Competitive Sourcing Will Depend on How It Is Implemented

Implementing the new Circular A-76 will likely be challenging for many  agencies. GAO’s past work on the competitive sourcing program at the  Department of Defense (DOD)— as well as agencies’ efforts  governmentwide to improve acquisition, human capital, and information  technology management—has identified practices that have either  advanced these efforts or hindered them. The lessons learned from these  experiences—especially those that demonstrate best competitive sourcing  practices—could prove invaluable to agencies as they implement the  provisions in the new Circular. A major challenge agencies will face will be meeting a 12-month limit for  completing the standard competition process in the new Circular. This  provision is intended to respond to complaints from all sides about the  length of time taken to conduct A-76 cost comparisons—complaints that  the Panel repeatedly heard in the course of its review. Even so, our  studies of DOD competitive sourcing activities have found that  competitions can take much longer than the time frames outlined in the  new Circular. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

In May 2003, the Office of Management and Budget (OMB) issued a new Circular A-76--which sets forth the government's competitive sourcing process. Determining whether to obtain services in-house or through commercial contracts is an important economic and strategic decision for agencies, and the use of A-76 is expected to grow throughout the federal government. In the past, however, the A-76 process has been difficult to implement, and the impact on the morale of the federal workforce has been profound. Moreover, there have been concerns in both the public and private sectors about the timeliness and fairness of the process and the extent to which there is a "level playing field" for conducting public-private competitions. It was against this backdrop that the Congress enacted legislation mandating a study of the government's competitive sourcing process, which was carried out by the Commercial Activities Panel, which was chaired by the Comptroller General of the United States. This testimony focuses on how the new Circular addresses the Panel's recommendations with regard to providing a better foundation for competitive sourcing decisions, and the challenges agencies may face in implementing the new A-76.

What GAO Found

Overall, the new Circular is consistent with the principles and recommendations that the Commercial Activities Panel reported in April 2002, and should provide an improved foundation for competitive sourcing decisions in the federal government. In particular, the new Circular permits greater reliance on procedures in the Federal Acquisition Regulation--which should result in a more transparent and consistently applied competitive process--as well as source selection decisions based on tradeoffs between technical factors and cost. The new Circular also suggests potential use of alternatives to the competitive sourcing process, such as public-private and public-public partnerships and high-performing organizations. The new Circular should result in increased savings, improved performance, and greater accountability. However, this initiative is a major change in the way the government operates, and implementing the new Circular A-76 will likely be challenging for many agencies. A major challenge agencies will face will be meeting a 12-month limit for completing the standard competition process. This provision aims to respond to complaints about the length of time taken to conduct A-76 cost comparisons. However, GAO studies of competitive sourcing at the Department of Defense (DOD) have found that competitions can take much longer than 12 months. Other provisions in the new Circular may also prove burdensome in implementation. Lessons learned by DOD and other agencies as they initiate efforts to improve acquisition, human capital, and information technology management could prove invaluable as agencies implement the new A-76 provisions--especially those that demonstrate best competitive sourcing practices. Successful implementation of the Circular's provisions will also likely require additional financial and technical support and incentives.