Government Contractors: An Overview of the Federal Contracting-Out Program

GAO discussed federal contracting-out policies and programs. GAO noted that: (1) federal agencies spend about $108 billion annually on service contracts; (2) the Office of Management and Budget's Circular A-76 policy, which governs contracting-out decisions, is time-consuming, difficult to implement, and disruptive, and adversely affects federal employees' morale and productivity; (3) managers and operational workers, rather than trained management analysts, usually conduct the required A-76 cost studies, without adequate workload data and cost accounting systems; (4) displaced federal employees may not be able to obtain other federal employment under the current downsizing environment; (5) an inventory of both in-house and contracted activities, with good cost data, could provide a basis for establishing cost and performance benchmarks to evaluate the effectiveness of contracting-out decisions and could help to streamline the A-76 process; (6) congressionally imposed restrictions on the A-76 process and limited management flexibility hinder agencies from performing work in the most cost-effective manner; and (7) any revisions to the A-76 process should seek to preserve the benefits of fair competition while addressing the impediments to its effective implementation.