Increased contract competition contributes to good government

Contracting fairness is not about eliminating government jobs.

That’s the message members of Congress and federal contracting and public policy experts want to make clear. But that doesn’t mean there isn’t room for improvement when it comes to doing business with the private sector, especially with a looming administration turnover.

“Whoever it is who can do the job best and most cheaply ought to do the job, and we have a hard time trying to make those comparisons,” said Donald Kettl, a professor of public policy at the University of Maryland, during a July 8 House subcommittee hearing on contracting fairness.

“But the other thing — and this is a lesson the private sector teaches us — one of our real problems is that contracts don’t manage themselves,” Kettl added. “If you look at sustained studies from [the Office of Management and Budget] and from [the Government Accountability Office]  over the years, our acquisitions workforce is not strong enough and is not capable enough to do the jobs we’re asking it to do.”

“This is not about eliminating federal employees, what this is about is lower cost, better service, but also access to expertise, better quality, improved risk management, innovation, and a better meeting of peak demand and timeliness,” said John Palatiello, president of the Business Coalition for Fair Contracting.

How to achieve that balance can be done in a number of ways, the experts told committee members, and a legislative change could also provide a leg up.

Too big to succeed

Rep. Mark Meadows (R-N.C.) said contracting reform is not going to happen overnight, nor this year, but he was hopeful a foundation would be laid next spring.

Meadows and other committee members asked the panel of experts where to start in making changes to achieve contracting fairness.

Maurice McTigue, vice president of outreach at the Mercatus Center, and a former member of the New Zealand Parliament, said there should be no departures from a contract, and contracts should have fixed terms with no automatic renewals.

He also  suggested “internal markets,” a concept the New Zealand government employed.

It allowed “government departments to compete to provide goods and services for each other,” McTigue said. “A department that had a very high quality legal department could sell those services to another department or they could combine to buy payroll services or HR services, accounting , data collection.”

Kettl said the focus should be on having an effective cost-comparison system and effective contract management, because “effective contract management is essential to try to deal with the underlying problems.”

“I recently completed a study of GAO’s High Risk List, the programs in the federal government most prone to fraud, waste, abuse and mismanagement,” Kettl said. “Half of all the programs on the high risk list have been identified as having problems in contract management. Over the last 25 years, 24 areas have been taken off the list, and half of them were taken off because of improvements in contract management.”

The federal government also lacks methodology for a comparison system, Kettl said, which “handicaps” the cost comparison process.

Palatiello suggested the establishment of a federal entity to review commercial activities and center the government back to its overarching mission.

“The government has become too big to succeed,” Palatiello said. “In an effort to be all things to all people, it cannot effectively provide core services. The federal government is spread too thin, it’s carrying out too many activities best left to free enterprise. Using the private sector for commercially available products and services will help focus the government on its core inherently government activities.”

Competition and survival

One thing Congress can do — and which some lawmakers are already attempting — is to resurrect Circular A-76, or something like it.

A-76 for most of the early 2000s governed the competitive sourcing process. A moratorium was placed on it in 2008 after a series of legislative actions.

Rep. John Duncan (R-Tenn.) is sponsoring the Freedom from Government Competition Act, which is pending before the House Oversight Committee, and has a Senate companion.

Duncan, who is not a member of subcommittee, participated in the hearing. He said his bill “is not about contracting out to the private sector just for the sake of contracting out.”

“This bill proposes a very simple concept: If federal agencies are providing goods or services that can be provided  by the private sector more efficiently and more cost effectively, we should contract out for that good or service,” Duncan said. “This bill is about getting the best service at the lowest cost to the tax payers. This bill is not an attack on federal employees. It’s been hard enough though, for small businesses to survive the past many years, they should not have to compete against their own government to survive.”

Angela Styles, the first administrator with the Office of Federal Procurement Policy under President Bush, is now a partner with Crowell and Moring in Washington. She led the rewrite of A-76 and testified on the benefits of competitive sourcing when asked by Rep. Glenn Grothman (R-Wisc.) about the cost of competition.

“Of course there’s a cost. There’s an infrastructure of people that actually have to run competitions and then have to manage contracts,” Styles said. “The cost savings are so significant, whether it stays in house or whether it goes out to private sector, it is not wholly eaten up, there are still cost savings and  frankly there are still tremendous befits of simply the pressure of competition giving us better performance and better service.”

The last annual report issued by OMB and the OFPP was in 2008. According to the report, agencies held 1,375 competitions between fiscal 2003 and 2007. OMB estimated those competitions would save taxpayers more than $7.2 billion over all performance periods and would be realized over the next five years.

Styles said little information, if any, exists online about more recent cost savings.

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