The Defense Department has issued new guidance directing defense agencies to go beyond the public-private competitions it has traditionally used to cut costs and use additional methods, including restructuring and direct privatization.
The guidance clarifies the department's effort, which it calls "strategic sourcing," to restructure and streamline defense operations.
"It is clear that commanders and directors who use both strategic and competitive sourcing programs will become more efficient resource managers and leaders in the future," Jacques Gansler, undersecretary of Defense for acquisition, technology and logistics, wrote in a memo last month introducing the strategic sourcing guidance.
Competitive sourcing involves public-private competitions under Office of Management and Budget Circular A-76. While Gansler said DoD isn't backing away from contracting out jobs under A-76, strategic sourcing is an all-inclusive tool that allows managers to privatize or eliminate jobs not covered under the circular.
"The strategic sourcing approach encompasses all functions or activities that could be reengineered or consolidated regardless of whether they are inherently governmental, military essential or commercial activities-and competition must remain an integral part of this overall strategy," Gansler wrote.
The move to reach beyond public-private competitions to achieve savings goals comes at a time when A-76 is under attack from all sides.
On Wednesday, an official with the American Federation of Government Employees told a Senate subcommittee that while Clinton administration officials tout public-private competitions publicly, they fail to administer them for most contracts. The result, he said, is that federal employees aren't given a chance to compete for billions of dollars worth of contractor-provided services.
In prepared testimony, Joe Flynn, national vice president for AFGE's fourth district, told the Senate Subcommittee on Defense Appropriations that the government's attitude towards contracting out is hypocritical.
"OMB Circular A-76 is really a sideshow. Most government work that is performed by contractors is never subject to public-private competition," he wrote.
Flynn cited work being contracted out at Kirtland Air Force Base in New Mexico as an example of how managers can use loopholes to get around public-private competitions. At Kirtland, the Defense Department is outsourcing more than 600 jobs to a Native American firm under a provision in this year's defense appropriations bill that allows direct contracting out-without competition-to any firm that is 51 percent Native American owned.
"The installation has scrapped an OMB Circular A-76 competition in favor of a non-competitive, sole-source arrangement with a firm from out-of-state," Flynn said. AFGE has filed suit in U.S. district court to halt the award of the Kirtland contract.
Federal contractors argue that the A-76 process actually favors government employees.
The Professional Services Council, a trade association representing contractors that provide professional and technical services to agencies, has proposed a new model for publi-private competitions. Under the model, agencies would be required to document their full costs, including overhead, and competitions would be run by independent managers with oversight from a public-private advisory committee. Currently, the government applies a formula to derive overhead costs that PSC says is flawed and gives an unfair advantage to the government.