Commentary

Reason.org
May 4, 2002

Federal Panel Recommends Overhaul of Federal Privatization Process
By Adrian Moore

Over the objections of public employee unions, the federal Commercial Activities Panel released its final report on April 30th, recommending a radical overhaul of the federal privatization process to make it easier for agencies to conduct competitions to see if services should be provided by government workers or private firms.

Two years ago, Congress ordered the General Accounting Office to convene an expert panel to recommend changes in how the federal government conducts public-private competitions and outsourcing. The report did what many who watched the process expected and recommended scrapping the OMB Circular A-76 process for competitions and replacing it with the best-value competition process based on Federal Acquisition Regulations Part 15.

The report was much awaited by federal agencies, because President Bush has set ambitious goals for federal agencies to use competitions to improve services. The President's Management Agenda is a set of initiatives designed to improve the management of federal agencies by adopting performance-based criteria for decision making and action, and ultimately tying performance to budget appropriations. The Agenda includes a set of goals for “competitive sourcing,” the most important of which is asking federal agencies to subject 50 percent of all commercial positions identified in their annual FAIR Act inventories to competition from the private sector over the next four years. That is over 400,000 positions

The competition approach recommended by the panel allows performance-based, best-value competitions in a way the old A-76 process does not, giving federal agencies and the Office of Management and Budget a basis for using performance criteria to drive competitions and outsourcing decisions. Such a flexible competition process, mixing low cost and improved quality under a best value outcomes structure, is exactly the way best practices in competition and outsourcing are going in the private sector and among state and local and overseas governments.

A supermajority of the panel (8 out of 12 members) endorsed the report and most of the recommendations only require administrative actions. The head of the Office of Federal Procurement Policy, Angela Styles, says they have already begun acting on the panel's recommendations and that new federal competition guidelines will be ready within a year.

The most significant legislative changes recommended are repealing a statute that prohibits the Department of Defense from using the kind of best value competition approach the panel recommends.

Not surprisingly, the public employee union members of the panel did not endorse the report and have vowed to fight the changes it recommends, beginning in Congress to stop any effort to remove the restrictions on the Defense department.

The panel's report has not ended any debate, but has moved it to the next phase. Many in Congress and elsewhere who have equivocated on federal privatization issues may now come down off the fence and chose sides. Now the fun begins.

Adrian Moore is Vice President of Reason Foundation.