New rules should make competition routine in government, says OMB

Pledging to make public-private competition a routine part of how government does business, Office of Management and Budget officials unveiled their long-awaited overhaul of the government's job competition process on Thursday.

The new process, contained in a revised version of OMB Circular A-76, sets tight deadlines for job competitions and requires competition winners-be they contractors or federal employees-to meet performance standards. For the first time, it requires federal employees that win competitions to compete for their jobs again, perhaps as little as three years after the initial contest. And it includes a "best value" competition method that allows agencies to decide certain competitions on the basis of noncost factors.

At a Washington press conference, OMB Director Mitch Daniels said the new process would bring competition to large portions of the federal workforce that until now have been isolated from market pressures. "Because of the bulkiness and complexity of the A-76 process as this administration found it, we've had far too few competitions and far too few competitors," he said. "Every day that went by under the old system, taxpayers were paying more for poorer service than they deserved."

Angela Styles, the administrator of OMB's Office of Federal Procurement Policy and the architect of the new A-76 process, said the rules would jumpstart the administration's competitive sourcing initiative, which aims to put 425,000 federal jobs up for competition with private sector organizations.

"I think we'll see a lot of agencies that have been waiting on these rules come out and make an announcement [on new competitions] very shortly," she said. Styles said that only "a couple" agencies would meet OMB's Sept. 30 deadline for finishing competitions on 15 percent of their commercial jobs.

Like OMB's draft rewrite of Circular A-76 released in November, the final document is comprehensive, containing guidance on everything from defining "inherently governmental" work to calculating the cost of overhead in competitions. But observers were struck by the systematic nature of OMB's reforms, which will make recurring A-76 competitions a way of life for 425,000 federal workers.

In-house teams that win competitions generally will have five years before the next competition, although agencies could set a three-year performance period as well, said Styles at Thursday's briefing. Teams that perform extremely well could receive a three-year extension, meaning federal employees could have up to eight years between competitions, according to Styles.

Donald Kettl, a professor of public affairs and political science at the University of Wisconsin-Madison, said the requirement that workers face regular competition challenges the idea of a career federal service.

"The bedrock of the civil service has long been neutral competence and strong expertise, grounded in a career service," said Kettl. "Staging regular competitions . . . would undermine the commitment to a career service, especially if the scope of services and the standards for competition shift over time and, in the process, put more federal workers at risk."

Putting civil servants through recurring competition makes them more like contractors, but contractors and federal employees are treated differently under U.S. law, noted Dan Guttman, a fellow with the National Academy of Public Administration.

"Both the Clinton/Gore reinventing government [initiative] and the Bush management agenda aim to render civil servants more 'contractor like,' but do so with little or no reflection on the fact that our longstanding laws do not now provide for the blurring of the boundaries between official and contractor status," said Guttman.

Kettl also noted that regular competition-the stated purpose of OMB's initiative- has improved efficiency in state and local governments and in New Zealand, which experimented with a form of competitive sourcing in the 1990s.

Carl DeMaio, president of the Performance Institute, an Arlington, Va.-based think-tank, said government must put serving the taxpayer before the comfort of its own employees.

"We need to respect the need for a stable environment for employees, but we also need to put the taxpayer's interest at the forefront," he said. "When you've balanced the two out, the taxpayers must come first."

OMB hopes the new A-76 will make competition easier on employees. While the circular requires agencies to finish competitions in 12 months, it encourages agencies to handle much of the behind-the-scenes work that goes into a competition before publicly announcing it. In the past, the Defense Department often announced competitions before it had done key planning, according to Styles.

"They'll go out and make an announcement [that] we're going to compete 1,000 people," she said. "Well, they scared those people to death and they didn't really do their planning before they made that announcement."

By sticking with the 12-month deadline, OMB defied comments from nearly every Cabinet agency and the General Accounting Office, which urged the budget office to extend the 12-month deadline in public comments to the draft circular. The final circular does allow agencies to get a six-month extension to the 12-month deadline without approval from OMB.

Other differences from the draft circular include:

• The new circular replaces the current method for appealing A-76 decisions with a process based on Part 33 of the Federal Acquisition Regulation. The new process allows in-house employees to elect a representative to appeal on their behalf in internal agency protests. The General Accounting Office still must decide whether to accept A-76 appeals from employee groups; to date it has not.
• OMB also tweaked the "best value" competition process, referred to as the "tradeoff" process in the final circular. The new "best value" method requires agencies to base at least half of their evaluation on cost, unlike the draft circular, which contained no such requirement. "Cost is very important to us," said Styles. In another departure from the draft circular, the new A-76 gives the bidder currently performing the work -- usually an in-house team of federal employees -- a 10 percent cost advantage in "best value" competitions. This switch prompted criticism from some contractor representatives. "That 10 percent differential is clearly a bias in favor of the incumbent [bidder]," said Stan Soloway, president of the Professional Services Council, an Arlington, Va-based contractors' association.
• In-house teams will no longer enjoy a 10 percent cost advantage in "streamlined" competitions, which involve 65 or fewer employees. While some observers believe this change makes it harder for civil servants to win small competitions, Styles said it was necessary to give managerial flexibility to agencies.

  "When you're looking at 65 and under, agencies should have the flexibility to make the right decision for the taxpayer," she said.

• The final circular eliminates direct conversions, a process in which federal jobs have been shifted to the private sector without public-private competition. Effective Thursday, agencies must now follow OMB's new streamlined method for all competitions involving 65 or fewer federal employees, including situations involving 10 or fewer employees. Two exceptions are the Defense Department and the Bureau of Indian Affairs at the Interior Department, which have special statutory authority to use direct conversions in certain cases. "We can't change a statute," said Styles on Thursday.
• With OMB approval, agencies can gain exemptions from provisions in the new circular. This may allow agencies to still conduct direct conversions if they can make the case to OMB, according to Soloway.