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STATEMENT OF ANGELA B. STYLES
June 26, 2003
Chairman Davis, Congressman Waxman, and Members of the Committee, I appreciate the opportunity to appear before you today to provide an update on our competitive sourcing initiative and discuss the recently released revisions to OMB Circular A-76. Two years ago, almost to the day, I outlined for your Technology and Procurement Policy Subcommittee the Administration's vision of a market-based government that embraces the ideals of competition, innovation, and choice. I am pleased to say that we have made significant progress since that June 2001 hearing towards fulfilling our vision and transforming agencies' mindset from one that resists competition to one that welcomes the value competition generates. Of particular note, OMB has:
I am particularly gratified by the improvements we have made to the policies and procedures for conducting public-private competitions. These changes, which are reflected in the recently issued revisions to Circular A-76, give federal managers the means to bring about improved program performance and lower costs for their agencies. Today, I would like to discuss some of the market-based, results-oriented changes we have made to Circular A-76. I will then briefly mention the additional management steps we are taking to ensure the success of competitive sourcing over the longer term.
Revisions to Circular A-76
Despite the commitment of our federal managers, overall use of competitive sourcing has been weak. This underutilization is not surprising. For a long time, the acquisition community has argued that the benefit derived from public-private competitions could be much greater if performance decisions were made within more reasonable timeframes, processes were more accommodating to agency needs, and greater attention was given to holding sources accountable for their performance. To address these and other shortcomings, Circular A-76 has been revised to provide a number of results-driven features. Let me highlight a few of them for you.
1. Time limits for completing competitions. Timeframe standards have been incorporated into the revised Circular to instill greater confidence that agencies will follow through on their plans and ensure the benefits of competition are realized. Under the revised Circular, a standard competition must generally be conducted within a 12-month period: beginning on the date the competition is publicly announced and ending on the date a performance decision is made. A "standard competition" is the general competitive process required by the revised Circular when an agency selects a provider based on formal offers or tenders submitted in response to an agency solicitation. The revised Circular provides that the agency's competitive sourcing official (CSO) -- i.e., the official within the agency responsible for implementing the Circular -- may extend the 12-month period by 6 months with notification to OMB. Streamlined competitions, which I will describe in a moment, must generally be completed within a 90-day period.
Agencies will be required to publicly announce, through FedBizOpps, the beginning of competitions, performance decisions made at the end of a competition, and any cancellation of an announced competition. Announcements of competition and performance decisions must also be publicized locally.
I should emphasize that the new competition timeframes are not intended to truncate planning. Effective agency planning is a critical prerequisite for sound sourcing decisions and is especially important for agencies that lack experience in conducting public-private competitions. OMB deliberately structured the Circular so that timeframes, for either standard or streamlined competitions, will not begin to run until preliminary planning has been completed.
2. More accommodating processes. The revamped Circular is designed to better accommodate agency needs in the conduct of source selections. Options available to the agencies include the following:
Of course, streamlined procedures, like other parts of the Circular, must be read in conjunction with existing law. Consider, for example, a situation where an agency need could be met by a service that the agency, if it chose to contract with the private sector, would be required to procure from a nonprofit agency employing people with severe disabilities under the Javits-Wagner-O'Day (JWOD) Act. In this case, the nonprofit agency would be the sole representative of the private sector in the agency's comparison of costs between the public and private sectors. While an agency could not directly convert activities to performance by a nonprofit JWOD agency under the revised Circular, the Circular's streamlined competition form would provide an easy method of demonstrating that the nonprofit could provide the service in a more cost-effective manner than the government provider and at a fair market price, as the law expects when an agency contracts with a nonprofit JWOD agency.
3. Post-competition accountability. During the revision process, we heard numerous complaints regarding weaknesses in post-competition oversight. Among other things, the old Circular required post-competition reviews only for 20 percent of the functions performed by the government following a cost comparison. As a result, even where competition has been used to transform a public provider into a high-value service provider, insufficient steps have been taken to ensure this potential translates into positive results.
Under the revised Circular, agencies will be expected to implement a quality assurance surveillance plan and track execution of both standard and streamlined competitions in a government management information system. Irrespective of whether the service provider is from the public or private sector, agencies will be expected to record the actual cost of performance and collect performance information that may be considered in future competitions.
4. Balanced and fair practices. If we are to achieve good results from public-private competitions, we must facilitate the type of robust participation that will bring market pressures to bear, and embrace even-handed practices that result in performance by the best source, irrespective of the sector. The revised Circular seeks to improve public trust in sourcing decisions by reinforcing mechanisms of transparency, fairness, and integrity. In doing so, we have paid particular attention to the new features of the Circular, hoping to reassure critics that changes are intended to improve results, not weaken a source's ability to demonstrate its capabilities. These safeguards include the following.
Ensuring the long-term success of competitive sourcing
Mr. Chairman, as you can see, OMB, in concert with our sister Executive Branch agencies, have taken significant steps to improve the processes agencies use for determining whether a commercial activity will be performed by a public or private source. While these changes should make public-private competitions more manageable and effective, OMB recognizes that better guidance is only one ingredient for success. Agencies need a knowledgeable and committed management support structure to implement the Circular if competitive sourcing is to become an institutional force for better program performance over the long term. For this reason, we are taking a number of actions to make sure agencies have the necessary support structures in place.
First, we are requiring agencies (including the Military Departments) to establish a program office that will be responsible for the daily implementation and enforcement of the Circular. Effective oversight will serve to enhance communications and facilitate sharing of experiences within the agency so agencies may reinforce their successes and make adjustments where shortfalls occur. This type of communication may be especially helpful to government providers, many of whom have told us they have the capability to be highly competitive but lack the private sector's insight and experience in competing for work.
Second, the Federal Acquisition Council (FAC) has created a working group to address common agency needs. Last week, for example, the working group hosted a government-wide conference to acclimate agencies to the principles and new processes of the revised Circular. A number of private consultants participated on a panel to offer their ideas on effective planning. In the coming months, the working group will assist in facilitating the posting of lessons learned and best practices on SHARE A-76!, a Defense Department management system used to disseminate knowledge, information, and experiences about public-private competitions. Through SHARE A-76!, agencies will be able to routinely use current experiences to inform and improve competition practices and decision making. The working group's efforts, like others sponsored by the FAC, should help agencies to better understand and successfully implement the Administration's vision for a market-based government.
Third, OMB intends to meet with managers at the "scorecard" agencies over the coming months to understand what, if any, agency-unique challenges management faces and how we can help them in meeting these challenges. The faster challenges are identified and addressed, the sooner agencies will be in a position to take routine advantage of the improved competition processes and the benefits they will generate. To determine if the initiative is taking hold, we will look behind the competition plans for evidence of sound strategic planning, quality and timely competitions, and the like. These are important indicia of the likely long-term success of competitive sourcing.
While there is a certain comfort level in maintaining the status quo, our taxpayers simply cannot afford -- nor should they be asked to support -- a system that operates at an unnecessarily high cost because many of its commercial activities are performed by agencies without the benefit of competition. For this reason, the Administration has called upon agencies to transform their business practices and increase the amount of government-performed commercial activities that are subject to competition. In doing so, we have provided tools for meeting this objective in a responsible and fair manner. I appreciate the Committee's ongoing interest in competitive sourcing and hope the acquisition community will give these tools a reasonable chance to take hold as we work together to bring lasting improvements in the performance of government.
This concludes my prepared statement. I would be pleased to answer any questions you may have.