Competitive Sourcing Initiative

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The Competitive Sourcing Initiative was initiated by the Bush administration in spring 2001, when "the Administration announced its intention to open the commercial activities performed by the government to the dynamics of competition between the public and private sectors. Soon thereafter, the President's Management Agenda (PMA) designated this effort, known as competitive sourcing, as a major initiative. This designation reflected the Administration's commitment to market-based government, where competition drives improved performance and efficiency of federal programs." [1]

Projected to Fail

Steven L. Schooner predicted in a 2004 article published in the Public Contract Law Journal that "the Bush administration's competitive sourcing initiative will fail. Granted, the number of government employees will continue to shrink, while the number of contractor personnel serving the Government will methodically increase. But the Government's unwillingness to appreciate the policy's costs leads to the corresponding failure to identify, obtain, and invest appropriate resources needed to properly effectuate the policy. The Government simply lacks sufficient qualified acquisition, contract management, and quality control personnel to handle the outsourcing burden. Because the Government is ill-positioned to successfully out-source in a manner that generates higher quality services, lower prices, greater efficiency, or, ultimately, better government, an aggressive outsourcing policy will further expose long-standing problems in service contracting, including poor planning, inadequately defined requirements, insufficient price evaluation, and lax oversight of contractor performance. All of which lead to disquieting expectations for the Government's future."

What is Competitive Sourcing?

According to the U.S. Department of Labor's web page on "Competitive Sourcing", the objective of the Initiative is "to ensure that the American people receive the best possible value for their tax dollars. In order to accomplish this goal, the initiative uses a strategy that requires federal agencies to identify commercial-type activities performed by government employees and determine whether these activities are best provided by the private sector, by government employees, or by another agency through a fee-for-service agreement. In general, the competitive sourcing initiative intends to leverage the competitive forces of the market economy to improve government efficiency.

"Competitive sourcing relies on a competitive process for awarding activities to qualified parties. Competitive sourcing is not the same as outsourcing, which assumes that the private sector can perform activities more efficiently than the government and does not allow a government organization the opportunity to compete. In contrast, competitive sourcing allows government organizations to compete for work based on the assumption that both the government and the private sector can deliver commercial services efficiently and cost-effectively.

"Under The Federal Activities Inventory Reform Act (FAIR), P. L. 105-270 , federal agencies are required to identify the activities performed by their employees. By June 30th of each year, agencies must submit to the Office of Management and Budget (OMB) an inventory of all of the activities that an agency performs-inherently governmental activities as well as commercial activities-and the reasons for certain designations. Only federal employees can perform inherently governmental functions, which means that those functions cannot be subject to competition. Determining whether or not a function is inherently governmental is a difficult task. Usually, the amount of discretion used in performing the duties of the position is an important consideration. Agencies must justify their inherently governmental classifications in writing.

"OMB reviews the inventory and may request additional justification for certain classifications. Once the inventory is finalized, OMB places a notice in the Federal Register announcing the availability of the agency's inventory on the agency's web site. If an interested party disagrees with the designation of an activity, a challenge may be filed. Interested parties include affected employees, unions, executive steering committees and any other stakeholders.

"OMB Circular A-76 (Revised May 29, 2003) sets forth the procedures that federal agencies must use for the competition of commercial activities. The Circular authorizes two types of competitions: the streamlined and the standard. A streamlined competition may be conducted for activities that involve 65 or fewer full-time equivalents (FTEs). In general, streamlined competitions must be completed within 90 calendar days. In certain cases, an extension of 45 calendar days may be approved. As long as the new method is more cost effective, streamlined competitions are not required to save a specific amount of money. This is in contrast to a standard competition, where a private sector bidder must show a savings of at least 10% or $10 million (whichever is less) in order to win the competition. Standard competitions are generally conducted for activities that involve 65 or more FTEs. The competition may take up to 12 months to complete, with the possibility of an OMB approved six-month extension.

"Regardless of who wins the competition, the winning bidder will be responsible for complying with the requirements in the Performance Work Statement (PWS). The PWS specifies all of the requirements that must be met in order to successfully perform an activity for the government. If a government organization wins the competition, new methods of performing certain functions may be needed in order to ensure that all of the PWS requirements are met. In this way, the competitive sourcing initiative improves post-competition management and accountability.

"Finally, the competitive sourcing initiative does not have specific personnel reduction goals. The objective is to determine who can deliver the best value to the taxpayers. The competition process may change the number of staff needed to deliver a product or service. However, the magnitude of the change is a result of the competition. Changes are not made based on predetermined expectations."

Proponents of Competitive Sourcing

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