OMB will revise Circular A-76

The Office of Management and Budget last week announced plans to make changes to OMB Circular A-76, drawing on the recommendations of a just-released review of the circular.

In its report issued last week, the Commercial Activities Panel called for making the process to consider privatizing government programs more competitive by applying an approach similar to the Federal Acquisition Regulation. The panel proposed letting agencies base their selections on best value rather than lowest cost and giving employees the option to protest outsourcing decisions.

'We want to give the agencies the tools to compete as soon as possible,' said Angela Styles, administrator of OMB's Office of Federal Procurement Policy. 'We need to test and evaluate the new approach. If it proves that it saves money and is efficient, it will totally replace A-76.'

Besides the FAR approach, the 12-person panel made three other major recommendations. It called for adopting 10 sourcing principles, refining A-76 policies to be used during a transition period to a new method and allowing limited exemptions from federal competitive sourcing policies.

Styles said the goal is to have a revised process in place within 12 months. The changes will help agencies meet the administration's goal of opening 15 percent of their nongovernmental functions to competition from industry by fiscal 2003, she said.

OFPP has formed a working group to draft a rule change for A-76. Styles said the group has not set a deadline for issuing the draft. The draft will be published in the Federal Register and open to a 60-day comment period.

More IT outsourcing

In the IT arena, agencies in recent years have been outsourcing more and more of their work. The Defense Department has been a heavy user of A-76 for IT programs. For instance, the Air Force last August awarded a five-year, $200 million contract to DynCorp Technical Services LLC of Fort Worth, Texas, for support services at Gunter Annex-Maxwell Air Force Base, Ala.

The study concluded that A-76 'has been stretched beyond its original purpose, which was to determine the low-cost provider of a defined set of services.' So by adopting an approach based on the FAR, all parties would compete under the same set of rules, the panel said.

The panel listed 12 elements for applying a FAR-like approach, which included:

  • Creating clear rules regarding conflict of interest

  • Equally applying evaluation criteria and rules on proposal preparation

  • Allowing agencies to award contracts based on low-price or technical criteria, or a combination of both

  • Requiring the same evaluation team to judge all proposals

  • Permitting unsuccessful bidders to protest with the contracting agency, Court of Federal Claims or General Accounting Office.


Styles said it is important that the tenets of the FAR approach remain as objective as possible. She also said the right of employees to protest is key to making sure the process is fair.

In addition to the 12 FAR approach elements, the panel also said government employees should be included in at least one round of discussions before being eliminated from contention, required to have a binding performance agreement when they win a competition, eligible for performance bonuses and offered assistance in the competitive process.

Industry groups lauded the recommendations. 'The panel has made an important and strong statement,' said Gary Engebretson, president of the Contract Services Association of America. 'Replacing A-76 with a FAR-based process that is proven, tested, fair, accountable and allows for best value' is reachable and realistic.

But employee unions dissented on many of the panel's suggestions.

'The panel's recommendations to replace A-76 with an entirely untested and subjective FAR-based approach' are irresponsible, said Bobby Harnage, national president of the American Federation of Government Employees. 'The panel's report is extremely narrow. If implemented, [the recommendations] would worsen the human capital crisis that was caused in part by indiscriminate contracting out and privatization.'

The report is available online at www.gao.gov; scroll down and click on the Commercial Activities Panel link.

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