Focus on competing widens

OMBCircular A-76

The Bush administration is stepping up its efforts to open activities now done by the public sector to competition from private companies.

The Office of Management and Budget on July 2 unveiled a proposed rule that would make contracts between agencies, known formally as Inter-Service Support Agreements, subject to competition.

Currently, such agreements created prior to 1997 are not subject to competition under OMB's Circular A-76, which lays out the process for conducting such competitions. The proposal from OMB's Office of Federal Procurement Policy would lift the grandfather clause, meaning that all Inter-Service Support Agreements would be subject to competition every three to five years.

An OMB official said this rule—published July 2 in the Federal Register — would affect agencies through "expanded competition, reduced costs, improved performance, and it brings us one step closer to institutionalizing recurring competition for commercial work outside of A-76."

OMB had no estimate on the number of agreements that exist, and OFPP is trying to assess their combined dollar value.

Vendors generally find such inter.agency agreements unfair, and many question whether it is appropriate for agencies to provide commercially available information technology services to other agencies. Industry groups were incensed in 1997 when the Federal Aviation Administration selected the Agriculture Department for its Integrated Computing Environment-Mainframe and Networking outsourcing contract. USDA beat out other agencies and large commercial integrators for the deal.

Industry groups said the proposed rule is a good step but seems to fall short of addressing whether government should compete with the private sector in the first place.

Charles Cantus, vice president of government relations for the Professional Services Council, an Arlington, Va., industry group, said the proposal is "a clear step in the right direction for which the administration should be commended, and I remain optimistic that this proposal is only the first step and that future proposals will address the overarching issues."

The new rule also will require agencies to make changes in the way they compare costs, but does not yet provide specifics. Vendors have been concerned that A-76 guidelines do not adequately account for agencies' budgeted costs, which leads to unfair cost comparisons.

Olga Grkavac, executive vice president of the Information Technology Association of America's Enterprise Solutions Division, said the rule "sounds positive, but there doesn't appear to be any corrective action" for the inequity of such contracts.