Can OMB's rebuilt A-76 find consensus?

David Walker, Comptroller General

The Office of Management and Budget's Circular A-76 may be an oldie, but it's no goodie.

You've heard the refrain: A-76 is broken and needs to be fixed.

First issued in 1966, A-76 sanctified executive branch policy from the 1950s that encouraged agencies to obtain commercially available services from the private sector.

At its core, A-76 offered agencies a process for comparing the cost of in-house and commercial services. First, private companies bid against each other for work performed by government employees. Then the employees, under the label of most efficient organization, compete against the private-sector winner. If the MEO's bid is within 10 percent or $10 million of the commercial bid, the work stays in house.

But it's easier said than done. Over the years, few civilian agencies have put it to use. It's been most widely employed by the Defense Department, which has conducted hundreds of A-76 studies.

The debate over A-76 use has been gathering steam since March 2001, when OMB directed agencies to use A-76 to compete at least 5 percent of the noninherently governmental jobs in its Federal Activities Inventory Reform Act list in fiscal 2002. OMB has since expanded the goal to 15 percent in fiscal 2003. The administration's ultimate aim is to compete at least 50 percent of FAIR Act listings, about 425,000 positions.

What's at stake

Also fueling the debate is the nature of the jobs at stake. A-76 covers a lot of services, but many of the easy decisions'building or grounds maintenance, for instance'have long been settled. The drive to compete more jobs has now moved into professional services such as IT.

Criticisms of the A-76 process are many. It's too complicated, it's not fair, it takes too long and it costs too much.

Now comes the Commercial Activities Panel's report on A-76. A majority of the panel members recommended formulating a new process for competition between the public and private sectors and basing it on the best-value approach of the Federal Acquisition Regulation.

The panel's minority, including two representatives of federal labor unions, denounced the FAR process as unworkable and potentially unfair to employees. They say employees won't be able to compete on a best-value basis.

The panel also recommended interim modifications to the current A-76 process; OMB is at work on drafting those modifications.

In earlier years, A-76 was seen more as an outsourcing vehicle. A 1987 executive order from President Reagan that directed agency heads to use A-76 to study 3 percent of their commercial jobs referred to the A-76 process as a privatization effort.

But the new buzz phrase is competitive sourcing.

'It's an issue of sourcing, not outsourcing,' Comptroller General David Walker, chairman of the Commercial Activities Panel, told a recent House hearing on the CAP report and A-76.

For all the projected benefits of outsourcing, the administration faces a formidable challenge in implementing a new, FAR-based process. The political waters will be rough.

In the meantime, OMB expects to release its modifications to A-76 in the next couple of months.

'Stay tuned,' said Jack Kalavritinos, OMB's associate administrator for federal procurement policy. 'Get ready for some cost savings and performance improvements.'

Until then, the lords of A-76 have declared, agencies must get on with it and continue to use the present process.

So dig out your copy of OMB's Circular A-76 Revised Supplemental Handbook, 'Performance of Commercial Activities,' which lays out all of the guidelines for the process.
You'll need it.

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