By including competitive sourcing as one of five governmentwide  initiatives announced in August 2001, the administration directed agencies  to implement competitive sourcing programs to achieve increased savings  and to improve performance. Agencies Have Established a Foundation for Their Competitive Sourcing Programs

When the President announced competitive sourcing as one of five  governmentwide management agenda items in August 2001, few agencies  other than DOD had an established competitive sourcing infrastructure—a  key component of OMB’s strategy for institutionalizing competitive  sourcing. Since that time, all six civilian  agencies we reviewed have established a basic competitive sourcing  program infrastructure. Interagency forums for sharing information also have been established. OMB Guidance Has Focused More on Meeting Targets and Milestones Than on Improving Outcomes

The ultimate goal of the competitive sourcing initiative is to improve  government performance and efficiency. VIII for further  discussion on the criteria these agencies have used to select positions  for competition.) To address this challenge, the Federal Acquisition  Council is currently studying agency staffing and skill requirements. Despite these additional personnel requirements, many department-level  offices in the civilian agencies we reviewed have only one or two full-time  staff to complete FAIR Act inventories, interpret new laws and regulations,  and oversee agency selection of positions to compete and the  competitions. Funding Challenges

Funding their competitive sourcing programs also has been cited as a  challenge for agencies. However, some officials told us that OMB recently instructed their  agencies to include a line item in their fiscal year 2005 budget request  for their competitive sourcing programs. Some Agencies Used Strategic Approach to Identify and Prioritize Activities for Competition

Several agencies have developed strategic and transparent competitive  sourcing approaches by integrating their strategic and human capital plans  with their competitive sourcing plans—an approach encouraged by the  Commercial Activities Panel. OMB, in its leadership role, has  a difficult task in guiding this initiative and must balance the need for  transparency and consistency with the flexibility agencies need in  implementing significant changes to operations. While OMB is addressing  the funding and human capital challenges that agencies face, it needs to  ensure that the FAIR Act inventory and goal-setting process is more  strategic and helpful to agencies in carrying out their competitive sourcing  responsibilities. Recommendations for Executive Action

To complement efforts already underway that address funding and human  capital challenges and to help agencies realize the potential benefits of  competitive sourcing and ensure greater transparency and accountability,  we recommend that the Director of OMB take the following three actions:    ensure greater consistency in the classification of positions as commercial  or inherently governmental when positions contain a mix of commercial  and inherently governmental tasks by reviewing current guidance and  developing additional guidelines, as necessary, for agencies and OMB  examiners;    work with agencies to ensure they are more strategic in their sourcing  decisions and are identifying broader functional areas and/or  enterprisewide activities, as appropriate, for possible public-private  competition; and  require agencies to develop competition plans that focus on achieving  measurable efficiency and performance improvement outcomes. Appendix I: Scope and Methodology

To describe the progress DOD and the civilian agencies have made in  establishing the competitive sourcing program in response to the  President’s Management Agenda, we interviewed officials at the  Department of Agriculture; DOD; and the Departments of Education,  Health and Human Services, the Interior, the Treasury, and Veterans  Affairs. (Contained in revised Circular A-76)

Appendix VII: OMB Scorecard Criteria for the Competitive Sourcing Initiative

Appendix VII: OMB Scorecard Criteria for the  Competitive Sourcing Initiative    an OMB approved “yellow” competition plan to compete    an OMB approved “green” competition plan to compete  commercial activities available for competition;  commercial activities available for competition;    completed one standard competition or publicly announced  standard competitions that exceed the number of positions  identified for competition in the agency’s yellow competition  plan;    publicly announced standard competitions in accordance with  the schedule outlined in the agency “green” competition plan;    since January 2001, completed at least 10 competitions (no  minimum number of positions required per competition);  in the past two quarters, completed 75% of streamlined  competitions in a 90-day timeframe; and  in the past year, completed 90% of all standard competitions in  a 12-month time frame;  in the past two quarters, canceled less than 20% of publicly  announced standard and streamlined competitions.
Why GAO Did This Study

In August 2001, the administration announced competitive sourcing as one of five initiatives in the President's Management Agenda. Under competitive sourcing, federal agencies open their commercial activities to competition among public and private sector sources. While competitive sourcing is expected to encourage innovation and improve efficiency and performance, it represents a major management change for most agencies. This report describes the progress selected agencies have made in establishing a competitive sourcing program, identifies major challenges these agencies are facing, and discusses strategies they are using to select activities for competition.

What GAO Found

Since the President announced competitive sourcing as a governmentwide initiative, the six civilian agencies GAO reviewed created a basic infrastructure for their competitive sourcing programs, including establishing offices, appointing officials, hiring staff and consultants, issuing guidance, and conducting training. With infrastructures in place and leadership involvement, each agency has developed competitive sourcing plans and conducted some competitions. The Department of Defense (DOD) has had an extensive competitive sourcing program since the mid-1990s. Interagency forums for sharing competitive sourcing information also have been established. While such activities are underway, each agency GAO reviewed, including DOD, cited several significant challenges in achieving its competitive sourcing goals. Key among these is maintaining workforce inventories that distinguish inherently governmental positions from commercial positions--a prerequisite to identifying potential positions to compete. Agencies also have been challenged to develop competitive sourcing approaches that would improve efficiency, in part because agencies have focused more on following OMB guidance on the number of positions to compete--not on achieving savings and improving performance. Ensuring adequate personnel with the skills needed to run a competitive sourcing program also challenged agencies. Many civilian department-level offices have only one or two full-time staff to interpret new laws, implement new OMB guidance, maintain inventories of competable positions and activities, and oversee agency competitions. The Federal Acquisition Council is currently identifying agency staffing needs to address this challenge. Finally, some of the civilian agencies we reviewed reported funding challenges in implementing their competitive sourcing programs. OMB told agencies to include a line item for competitive sourcing activities in their fiscal year 2005 budget requests. Several agencies integrated their strategic, human capital, and competitive sourcing plans--an approach encouraged by the Commercial Activities Panel, which was convened to conduct a congressionally mandated study of the competitive sourcing process. For example, the Internal Revenue Service (IRS) used business case analyses to assess the economic benefits of various sourcing alternatives. An IRS official said this approach required minimal investment to determine an activity's suitability for competitive sourcing. The National Institutes of Health, the Army, and the Department of Education also took a strategic approach to competitive sourcing. OMB's task in balancing the need for transparency and consistency with the flexibility agencies need is not an easy one. While OMB is addressing funding and human capital challenges, it needs to do more to assure that the agencies' inventories of commercial positions and goal-setting processes are more strategic and helpful to agencies in achieving savings and improving performance.