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Competitive Sourcing: Health Benefits Cost Comparison Had Minimal Impact, but DOD Needs Uniform Implementation Process

GAO-06-72 Published: Dec 09, 2005. Publicly Released: Dec 09, 2005.
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Highlights

Competitive sourcing is a management tool where federal agencies conduct competitions between federal employees and private companies to determine the best source to provide commercially available services. Concerns have been raised in the Congress that differences in the costs of federal and private health insurance benefits could disadvantage the federal workforce in public-private competitions. A health benefit cost comparability provision in the 2005 Defense Appropriations Act prohibited any advantage for private offerors that provide no health benefits or contribute less for them than the Department of Defense (DOD) contributes for its civilian employees. Legislation is pending to extend the provision for another year. GAO, in response to a mandate, determined (1) how DOD implemented the provision, and (2) what impact the provision had on DOD's fiscal year 2005 competitive sourcing program.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To align DOD's competitive sourcing program more fully with governmentwide policy contained in Circular A-76 and the sourcing principles of the Commercial Activities Panel, if the health benefit cost provision is extended, the Secretary of Defense should direct the Deputy Under Secretary of Defense for Installations and Environment to require use of a uniform and consistent process for the DOD components in evaluating the health benefits costs of private sector offerors in public-private competitions.
Closed – Implemented
Since this report was issued, Congress extended the health benefit cost provision through fiscal year 2006 (section 8014 of the Defense appropriations act, Public Law 109-148). In May 2006, the Director for Defense Procurement and Acquisition Policy and the Deputy Undersecretary of Defense for Installations and Environment issued a competitive sourcing program policy memorandum that requires the use of a uniform process throughout DOD for evaluating health insurance costs in proposals from the private sector in public-private competitions. Effective immediately and consistent with GAO's recommendation, DOD components must comply with this policy and associated procedures when performing public-private competitions of commercial activities involving more than 10 DOD civilian employees. The procedures detailed in the new policy include provisions for soliciting required information from private sector offerors on employer-sponsored health insurance plans, computation of the ratio of the private sector offeror's health insurance contribution to its direct labor costs, and contract file documentation.

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Topics

Competitive procurementCost analysisHealth care costsHealth insuranceSource selectionPublic-private competitionsCompetitive sourcingHealth benefitsPrivate sectorContract performance