OMB makes a bid for best value

The Office of Management and Budget’s renewed offensive to promote competitive sourcing is taking a page out of the e-government playbook.With two new reports and planned face-to-face meetings, OMB will try to make its case to Congress through raw numbers which, officials hope, clearly show that public-private competitions provide significant savings. Officials are working to convince Congress to remove limits on competitions under OMB Circular A-76, including using the best-value trade-off.But some observers think the onus is still on OMB to prove the benefits of competitive sourcing, and one government official admits that the White House has not provided enough evidence.This is a “tough sell to Congress,” the official said, speaking on the condition of anonymity. “We need to have more studies that show how it has made government better and brought in more bidders.”OMB acting director Clay Johnson said, “The key is how we follow up with the Hill with meetings and explain the benefits.”OMB officials say the reports show agencies have only scratched the surface on the amount of money and time that can be saved through this initiative. They also show that competitive sourcing does not mean federal workers are losing jobs. (To read the reports, go to and enter 572 in the Quickfind box.)The reports show “an accurate reflection of the progress agencies have made, and there are areas where we can get better,” the government official said. “It really shows civilian agencies can do it. Very few federal employees are being laid off, and I don’t see many unions’ fears coming true.”OMB is launching the offensive after Congress inserted a provision in the fiscal 2006 Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies appropriations bill that limits how agencies can use best-value trade-offs when competing inherently commercial jobs against the private sector. Best value is when agencies consider not just lowest cost, but which offer gives agencies the best deal in technology, terms, conditions and price.The provision precludes agencies from converting work performed by more than 10 employees to the private sector unless the agency proves a contractor could cut the work’s cost by an amount that equals or exceeds the lesser of 10 percent of the personnel-related costs or $10 million.It has the support of federal unions, who argue that it requires agencies to make determinations based solely on cost, not best-value judgments.“OMB’s determination to undermine that reasonable requirement is disappointing, to say the least, and reflects the administration’s insistence on injecting a measure of unnecessary and unwise subjectivity into the spending of taxpayer dollars,” said Colleen Kelley, president of the National Treasury Employees Union.But in a report to Congress, OMB and the Office of Federal Procurement Policy said this limitation tilts public-private competitions in favor of the incumbent agency and discourages industry from participating. Choosing winners from these competitions based on cost alone might not always result in the best value, OMB said.“The most significant benefit of the trade-off process is measured not in dollars alone, but in the transformational improvements that are made possible when the government has the ability to choose the solution that is best in terms of both cost and quality,” OMB said in its Report on the Use of Best Value Tradeoffs in Public-Private Competitions.The report gives, as an example, the Federal Aviation Administration’s outsourcing last year of its automated flight services modernization. FAA awarded a contract to Lockheed Martin Corp. for $1.9 billion, which, OMB extimates, could bring in about $2.2 billion in savings. Had the limits on best value been in place then, “FAA would have been left with selecting between proposals that offered little more than maintaining the current environment—i.e., a low-cost, short-term fix with minimal capital investment, and a remaining burden,” the report said.The FAA contract is one of the largest public-private competitions won by the private sector—so big, in fact, that it reduced the overall number of federal employees winning these competitions by nearly 30 percent, OMB said in a separate report.Through fiscal 2004, federal employees won competitive-sourcing competitions nearly 90 percent of the time, but because of the FAA deal and other large competitions conducted by NASA and the Office of Personnel Management, that number dropped to 60 percent in 2005, the report said.The drop-off is a major contention point for federal unions, which claim the competitive-sourcing initiative is a political move to turn over government operations to the private sector.A-76 competitions to the private sector could result in higher costs because of potential project overruns and missed deadlines. Companies can artificially offer low bids to win contracts and then increase those costs once the project is ongoing—at the expense of the taxpayer, NTEU said.One area OMB can improve, observers said, is increasing the number of private companies that participate in competitive-sourcing competitions. Nearly half of the competitions over the past two years have received one or no industry bids.“The more competition there is, the more savings you have. The data proves it,” said Robert Burton, acting OFPP administrator.