OMB: Competition key to consolidating financial systems

Public-private competitions will become compulsory for federal agencies outsourcing their financial management systems under the Bush administration's lines of business initiative, the Office of Management and Budget said this week in a response to questions from a lawmaker.

OMB is leading an effort to shut down agencies' back-office information technology systems and move the work to a handful of designated federal entities or the private sector. Financial management systems are one such targeted area; others include human resources systems and cybersecurity.

Private sector competition for agency IT work is an important way of keeping prices low and service satisfactory at cross-government service centers, OMB has said. In written responses to questions asked by Rep. Todd Platts, R-Pa., during a March 15 House Government Reform Subcommittee on Government Management, Finance and Accountability hearing, OMB said that competition must occur according to the dictates of Circular A-76, which governs the administration's competitive sourcing initiative to open thousands of federal jobs considered commercial in nature to bids from contractors.

A tailored A-76 approach will apply when agencies switch to a service provider, if their financial management IT function employs more than 10 civil servants, OMB said. Agencies could attempt to avoid private sector competition, but would have to successfully go through a process involving market research, gathering information from companies potentially interested in bidding on their financial management function, and undergoing a formal alternative analysis.

"OMB strongly favors competitive migrations through public-private competition," OMB said in the written responses.

Circular A-76's methodology likely will be modified into a two-step process allowing current employees of an agency that's not a federal service provider to participate in the competition, the responses stated. In the first step, an agency would competitively evaluate in-house work against a designated federal service provider. The winner of the initial competition then would compete with private contractors in the second step for the agency's financial management work.

OMB plans on releasing agency draft planning and implementation guidance for public comment May 12; Government Executive obtained a preliminary version.

The General Services Administration, which is the lead agency managing the financial management line of business, already has released those documents to 12 selected private sector companies. GSA invited some companies that had responded to an initial request for information on financial management OMB released in 2004 to submit preliminary comments on advance copies of the guidance.

Some industry sources said the process amounts to circumvention of the public review and comment period.

"The government is doing a pre-public comment period with selected vendors," said an industry vice president, on condition of anonymity.

Another industry source defended the action. GSA is saying "come back to us now with your comments, concerns, questions, so when we do come out with this, we've done it right," this source said.

A GSA official said the agency went to the 12 companies to identify and help plug holes in the preliminary draft guidance.

"It was our attempt to get a more complete document to go out to public review based on the set of vendors that fully responded," said Mary Mitchell, deputy assistant administrator for technology and strategy, and the financial management line of business program manager. "I just don't see how seeing a rough draft of that is going to give any competitive advantage to anyone."

The draft guidance is lacking in important areas such as information on establishing accountability, funding sources and how federal service centers will invest in new infrastructure, the industry vice president requesting anonymity said. The financial management line of business is "a theory that the government had not been able to operationalize," the source said.

Shared services make sense and offer such potential for cost savings that eventually the government will figure out how to do it, the source added. But, "it's taking a long time to even come up with even the conceptual plan. As a taxpayer, that's like, 'Wow, come on.' "

Mitchell said many of the governance issues surrounding service centers will be addressed in a separate document, issued by OMB before May 12.