Federal Contract Law: Will backlash doom A-76 revision?

Karen D. Powell

OMB Circular A-76 establishes the process for deciding whether work performed by a federal agency should be outsourced and to whom.

Competitions under the circular were in a practical and legal backwater until Congress passed the Federal Activities Inventory Reform Act, or FAIR, in 1998. But as with most reforms in government contracting, just as the pendulum starts to swing too far in one direction, momentum develops to swing it back.

Positions identified as commercial under the FAIR Act are eligible to be contracted out under A-76. Outsourcing advocates quickly realized, however, that the old A-76 provided an unwieldy mechanism for competing large numbers of jobs.

The circular was revised last year after a lengthy process. Once all the changes become effective'assuming the White House and lawmakers resolve their current dispute over the provisions'A-76 will mandate a single public-private competitive process and authorize awards on a best-value basis. This replaces the two-step process under the old circular, where lowest price determined what work would be privatized.

The outsourcing movement has focused attention on A-76 and its implications for employees. A study by the Brookings Institution of Washington showing a loss of 46,000 civilian positions since 1999 confirms the anxiety felt by many about the administration's plans to compete more jobs.

Not surprisingly, employee concerns contributed to the decision by Office of Federal Procurement Policy administrator Angela Styles to step down this month. She had spearheaded the effort.

The General Accounting Office recently addressed two of the thornier legal issues raised by the new circular: How will federal employees obtain the resources they need to compete? And can they protest if they lose?

Regarding protests, GAO requested comments in June on whether it should recognize a federal bidding entity or its union representative as an 'interested party.'

Previously, GAO denied interested party status to government employees because they were not in line to receive a contract. Under the circular's new procedure, however, an employee team'a Most Efficient Organization in A-76 parlance'would be eligible to receive a contract of sorts.

Comments filed by the American Bar Association point out that an award to an MEO is not really a contract within the meaning of the Competition in Contracting Act, which created GAO's bid protest authority. The association concluded that without statutory change, an MEO could not be considered an interested party.

Regarding resources, comptroller David Walker testified to Congress in July that most agencies' teams would have difficulty participating in new A-76 competitions. GAO recommended the creation of a governmentwide fund to help MEOs prepare their offers.

Meanwhile, political opposition to the outsourcing movement has been gaining headway.

The House this month approved a fiscal 2004 spending bill that would nix funding for projects under the new competitive-sourcing rules. OMB said the president will veto any bill that withholds such funds. Expect Congress to impose more limitations on funding as the backlash gathers momentum.

Karen D.Powell is a lawyer with the Washington law firm of Petrillo & Powell. E-mail her at kdp@petrillopowell.com.

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