OMB touts savings potential of ‘best value’ contracting

The Office of Management argued in a report released last week that extending the use of criteria on quality, as well as cost, in bids in public-private competitions for federal work would increase overall savings to the government. But critics of the Bush administration's competitive sourcing initiative have challenged that conclusion.

Agencies that selected contract award winners through so-called "best value tradeoff" competitions, in which both performance and cost factors are weighed in the final bid assessment, have saved about $68,000 per position competed in fiscal years 2004 and 2005, OMB said. In contrast, competitions decided based on cost alone saved $24,000 per position, the report stated.

The budget office said the promise of best value competitions was not just in cost savings, but in new ideas for how to perform work.

"The most significant benefit of the tradeoff process is measured not in dollars alone, but in the transformational improvements that are made possible when the government has the ability to choose the solution that is best in terms of both cost and quality," the report stated.

But critics of the administration's competitive sourcing initiative disagreed with this argument, and with the savings figures presented in the report.

Colleen Kelley, president of the National Treasury Employees Union, said OMB failed to support the estimates and projected savings presented. John Threlkeld, a lobbyist for the American Federation of Government Employees, has previously questioned OMB's methodology for estimating competition costs and savings, arguing that the figures do not fully account for employee time running the competitions and overestimate the wages of federal employees performing the work.

"When the acquisition process is engulfed in scandals and OMB is pressuring agencies to hit numerical privatization targets, now is the worst time to make the A-76 privatization process more subjective and thus more vulnerable to abuse," Threlkeld said of OMB's support for expanding the use of best value contests.

A federal acquisition advisory panel composed of leaders in the procurement community recently decided to recommend dropping governmentwide quotas for performance-based acquisition, a strategy similar to best value contracting in which agencies outline solicitation goals and allow industry to develop innovative responses. That panel found that while performance-based contracting had achieved some successes, further training and refinement were needed to fully achieve its potential benefits.

Threlkeld said A-76 appeal rights will also become more contentious if the government performs more best value competitions. Federal employees currently have limited opportunities to appeal an agency's decision through protests with the Government Accountability Office and Court of Federal Claims.

OMB used the best value report to advocate for the repeal of a portion of the fiscal 2006 Transportation-Treasury Appropriations Act that says agencies can only outsource work when the contractor bid would save at least the lesser of 10 percent of personnel-related costs or $10 million. That requirement inhibits firms from bidding, OMB said.

Chris Jahn, president of the Contract Services Association, an industry group, expressed dismay at congressional mandates for how agencies must conduct competitions. "Will Congress continue to place restrictions on the goose that's laying the golden egg?" he asked. Jahn echoed the report's assertion that firms have been reluctant to compete, saying, "Without competition, there can be no savings."

OMB reported that 63 percent of competitions involving more than 65 full-time jobs had two or more private sector offers in 2005, compared with 47 percent in 2004. Meanwhile competitions with no offers fell from 29 percent in 2004 to 11 percent in 2005.

OMB works with agencies to foster private sector interest in competitions, and the report highlighted techniques such as holding public forums for feedback, establishing dedicated Web sites for communication, and reaching out to industry groups and leaders, as means of encouraging private sector involvement.

"Real competition, when it is present, and with best value trade-offs, when they are appropriately utilized, generates substantial savings and improvements -- certainly much more so than traditional low-bid competitions," said Stan Soloway, president of the Professional Services Council, in response to the report.

"Indeed, the report's data makes clear that we have only touched the tip of the iceberg when it comes to generating meaningful savings and performance improvements through the competitive sourcing process," Soloway said.