Government Operations:

Proposed Revisions to OMB Circular A-76

GAO-03-391R: Published: Jan 16, 2003. Publicly Released: Jan 16, 2003.

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This report contains GAO's assessment of the Office of Management and Budget's (OMB) efforts to revise OMB Circular A-76, which prescribes policies and procedures agencies must use when considering the transfer of commercial activities between the public and private sectors. The proposed revision was issued for public comment on November 19, 2002. GAO found the proposed revision consistent in many ways with the sourcing principles and recommendations adopted by the Commercial Activities Panel. There are several areas, however, where the proposed revisions to the Circular are not consistent with the principles or recommendations of the Commercial Activities Panel. Specifically, these include the absence of a link between sourcing policy and agency missions, unnecessarily complicated source selection procedures, certain unrealistic time frames, and insufficient guidance on calculating savings.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: We recommend that the proposed revision require that any streamlined cost comparison be based on a reliable estimate of the efficiencies likely to be realized through the creation of an in-house MEO. Should the cost comparison indicate that continued agency performance of the function would be more advantageous to the government than other alternatives, the agency should be required to develop and implement the MEO.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: The revised OMB Circular A-76 introduced a streamlined competition process for commercial activities that involve 65 or fewer civilian Full-time Equivalent. The streamlined process permits agencies to use undefined market research instead of seeking a private offer, encourages in-house employees to develop a most efficient organization (MEO), and permits agencies to conduct an expedited cost comparison within 90 calendar days (may be extended to 135 calendar days) to determine if the agencies' performance would be more advantageous than that of the private sector. Prior to these Circular revisions, the rules allowed for the use of a streamlined process, but did not permit in-house employees to restructure operations. On May 25, 2005, The Office of Management and Budget, released a report entitled "Report on Competitive Sourcing Results in Fiscal Year 2004." It states that agencies are making an effort to give in-house providers the opportunity to develop an MEO and identify better and more cost effective business practices as part of the competitive sourcing process. OMB cites data indicating that half of the agencies that conducted streamlined competitions under revised OMB Circular A-76 gave in-house providers the opportunity to develop an MEO. OMB also reports an increase in the use of standard competitions requiring the in-house team to use business re-engineering processes.

    Recommendation: We recommend that the time frames be revised to be more realistic (perhaps 15 to 18 months overall) and that OMB ensure that agencies provide sufficient resources to comply and the new A-76 requirements.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: The OMB Circular A-76 final version requires agencies to complete all "standard competitions" within 12 months from public announcement to performance decision, unless the Competitive Sourcing Official extends the time to a maximum of 18 months before the competition announcement. While the periods themselves were not extended, the timeframes do not include the agencies' preliminary planning period before announcing the competition. In essence, the agencies have more flexibility to prepare for the competition. Competitive Sourcing Officials may extend the time period for completing a streamlined competition where the agency is developing a most efficient organization (MEO) and can also extend the standard competition if it is expected to be complex. With regard to resources, OMB, in its fiscal year 2003 report to Congress on competitive sourcing results, stated that successful application of competitive sourcing requires a workforce with the skills to run competitions in a strategic manner, conduct a transparent selection process, and properly manage the resulting contract or letter of obligation. On April 15, 2005, OMB announced new efforts to improve the collective capabilities of the federal acquisition workforce. OMB issued a policy letter "Developing and Managing the Acquisition Workforce" that establishes the government-wide framework for creating a federal acquisition workforce with the skills necessary to deliver best value supplies and services, find the best business solutions, and provide strategic business advice to accomplish agency missions. OMB also issued policy letter 2005-08, emphasizing the importance of the Federal Acquisition Workforce, creating new training and development requirements for civilian agencies. The letter broadens the definition of the acquisition workforce, aligns requirements to ensure that the federal acquisition workforce has common training standards, and advances the new partnership between the Federal Acquisition Institute and the Defense Acquisition University. This partnership will enhance the capabilities of the federal acquisition workforce thus ensuring that the acquisition professionals have the necessary program manager and contracting skills to comply with the A-76 requirements.

    Recommendation: We recommend that the phased evaluation approach be revised to simplify the process and ensure the protection of certain proprietary and highly competition-sensitive information.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Not Implemented

    Comments: The Office of Management and Budget Circular A-76 did not simplify the phase evaluation process, nor did it add language to ensure the protection of certain proprietary and highly competition-sensitive information. The phased evaluation source selection approach has two phases: in the first phase, the agency solicits offers on the basis of the technical acceptability of phase one offers and tenders, and under the second phase, the agency makes the performance award decision based on the lowest cost of all offers and tenders determined to be technically acceptable. This phased process continues to be used and appears to address limitations related to DOD's need to conduct A-76 competitions based on cost.

    Recommendation: We recommend that the revised Circular include additional guidance concerning any requirement that an agency's trade-off decision be "quantifiable."

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: OMB Circular A-76 deleted from the trade-off source selection process, the requirement that an agency's performance decision to select other than the lowest cost be "quantifiable".

    Recommendation: Given that many of these options can result in improved efficiency and enhanced performance, we recommend that the Circular continue to encourage agencies to consider these and other alternatives.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: The scope section of OMB Circular A-76 final version encourages agencies to use alternatives to standard or streamlined competitions, including public-private partnerships and high performing organizations. Including these alternatives, approaches can result in improved efficiency and enhanced performance, and improve government-wide policy decisions to use the private sector for commercially available goods and services.

    Recommendation: In our view, the administration needs to avoid arbitrary targets or quotas, or any goal that is not based on considered research and analysis.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: The revised OMB Circular A-76 introduced a streamlined competition process for commercial activities that involve 65 or fewer civilian Full-time Equivalent. The streamlined process permits agencies to use undefined market research instead of seeking a private offer, encourages in-house employees to develop a most efficient organization and agencies to conduct an expedited cost comparison within 90 calendar days (may be extended to 135 calendar days) to determine if the agencies' performance would be more advantageous that that of the private sector. Prior to these Circular revisions, the rules allowed for the use of a streamlined process, but did not permit in-house employees to restructure operations. The fiscal 2005 defense authorization bills passed by both houses of Congress include provisions that would limit the Department of Defense competitive sourcing initiative by eliminating the use of the streamlined process now in the OMB Circular A-76. Differences between the two versions must be resolved during conference.

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