Cracking The Code

s civilian agencies weigh the prospects of opening up their commercial-type functions to competition from private firms, they're all asking the same question: "Isn't there someone who can show us the way?"

Office of Management and Budget Circular A-76 directs agencies to target activities that could be performed by private firms for competitive sourcing. But it's up to each agency to identify which activities fit the criteria and then determine how to set up competitions. Rather than resorting to trial and error, agency officials could figure that out more quickly and with better results through someone like Jerry Stark, the former head of the Marine Corps commercial activities program.

Stark, who retired from the Navy in January, spent much of his 34-year career focusing on the business of outsourcing. Having been involved in hundreds of contracting studies, he's developed his own ideas about how competitions should be run. Here's his step-by-step strategy:

• Conduct an activity-based costing analysis. By linking costs and activities, agencies can assess their workloads by area, pinpointing factors that drive costs and the potential for savings from competitions. This linkage also creates a baseline for measuring performance improvements.
• Create an inventory of all of the jobs performed by the agency. From this list, agencies can identify commercial-type positions that lend themselves to competitions. OMB, for example, has identified administrative support services; grants management; and research, development, testing and evaluation activities as potential areas for outsourcing.
• Seek strong leadership. Management 101 dictates a strong leader for the success of virtually any innovation. It's no different here.
• Develop a consistent approach. Agencies often rely on contractors to help them set up the competitions and to develop performance requirements and work statements. Developing a template and refining it increases the likelihood of success.
• Create a strategic plan that highlights the key areas to be explored for potential outsourcing. Such a plan also would bring together agency partners with a stake in the outcome at the beginning of the effort.
• Identify areas that are likely to be quick successes. For the program to catch on, its benefits need to be real and reasonably immediate. Many have criticized the time it takes to complete outsourcing studies. However, as in other complex undertakings, there's a learning curve. The more studies an agency completes, the more efficient it will get. Starting with projects that promise to be the easiest often makes a lot of sense.
• Work with the human resources staff early on. Ask personnel officials to look for tools to ease the hardships caused by outsourcing jobs. For example, buyout authority can make retirement more attractive to those who are eligible to retire and at risk of losing their jobs. Contracting and program staffs must work together, taking advantage of each other's skills and expertise.
• Communicate frequently and fully with everyone involved. The same advice applies in any performance-based activity. Agency officials must be available to answer questions and to assuage fears.
• Lay out a plan to oversee the process, from planning the acquisition to monitoring the performance of whoever wins the competition. Make sure that enough people are available to oversee the entire effort. As in any performance-based operation, effective monitoring and measurement are critical.

Government officials must be "willing to step up to the plate and defuse the mythology," Soloway says. Conducting these competitions is not a "life or death" matter, though some officials would like to treat them as such. Leaders must deal fairly and directly with their workforces and with all bidders, explaining right from the start how the process will work and the roles everyone will play. Soloway says the best way to do that, as Stark recommends, is through frequent and straightforward communications.

Where many of these efforts fall apart is in the lack of planning. "Poor upfront planning drives bad outcomes," Soloway says. As in any other type of contracting effort, a good acquisition strategy is key to success.

The messages from Stark and Soloway are surprisingly similar, even though they come from opposite sides of the fence. The bottom line: Know where you are, know where you're going, and be as open as possible about how you're going to get there.

For more information on competitive sourcing, go to the Defense Department's Share A-76! Web site at http://emissary.acq.osd.mil/inst/share.nsf.

Another source is the fall 2001 Public Contract Law Journal article, "The Crossroads of the A-76 Costs Debate: Cost Comparisons and Some Attractive Alternatives." In the article, attorneys Stephen Sorett, Brad Bender and Lorraine Mullings of the Washington office of Reed Smith LLP, describe innovations such as the Transitional Benefits Corporation model that Sorett developed. It presents an interesting concept for allowing outsourced federal employees to keep and continue to accrue their health and retirement benefits if they are transferred to the private sector.