Federal Contract Law: Expert panel tackles the A-76 problem

Joseph J. Petrillo

Federal policy wonks are not without irony. Office of Management Budget Circular A-76 starts out by declaring that 'the government should not compete with its citizens.' It then proceeds to explain how to do just that.

The basic idea seems sound enough. By having competition between the public and private sectors for commercial-type activities, the taxpayers will get better performance from the winner. But how to make a prompt, fair and meaningful comparison continues to bedevil the outsourcing process, as it has since 1979.

To help fix the process, Congress ordered the Comptroller General to convene a Commercial Activities Panel, which would recommend changes to A-76. This broad-based group had representatives from the government, the contractor community and government employee unions. After holding several public hearings, it issued its report on April 30.

Although the group wants to improve Circular A-76 in the short run, the centerpiece of the report is a new system to replace A-76.

Unlike the current system, which requires two sequential competitions, the new one would call for one integrated competition. That change alone will surely save time. Now, full-blown A-76 processes take an average of two to three years to accomplish.

The proposed acquisition method would be based on, and part of, the Federal Acquisition Regulation, with its well-understood processes. That might encourage reluctant agencies to become more active.

A major change is that, under a FAR system, the choice between public- and private-sector proposals could be on best-value grounds. The current process makes low cost the determining factor. And the incumbent, whether contractor or government, isn't replaced unless the difference in cost is enough to justify the disruption of a change. The standard for this determination is 10 percent or $10 million, whichever is less.

To be fair to government workers whose jobs might be contracted out, the panel has called for some changes to the normal competitive process.

For instance, the in-house proposal cannot be omitted from the competitive range before the first round of discussion.

If the in-house proposal wins, it would be treated somewhat like a contract under the panel's recommendation. Government workers would qualify for incentives, analogous to the award fee available to contractors. But if they don't perform, they'd face default and recompetition.

Also, the panel thought that government workers should be able to file protests at the General Accounting Office, or suits at the Court of Federal Claims. Current law prohibits this.

Dan Gordon of GAO, the panel's legal counsel, points out two important, unresolved questions stemming from this recommendation. Who specifically can file protests? And who pays for the costs of pursuing the protest?

The report of the Commercial Activities Panel points the way to resolve many of the problems with the current A-76 process. Other issues, like conflict of interest, reluctance to even start the competitive process and cultural change are more intractable.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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