The Office of Management and Budget May 29 issued final revisions to its principle guidance governing the way federal agencies go about determining whether a commercial activity should be performed by the public or private sector.  The revisions to OMB Circular A-76 are intended to implement the President’s Management Agenda for a “market-based government” by creating procedures to open the nearly 850,000 full time equivalent positions that have been identified as commercial activities currently performed by government employees that are potentially obtained from the private sector. The stated purposes of these changes are to significantly expand the likelihood that federal agencies will be forced to conduct more private-public competitions and to materially reduce the timeframe for these competitions.

The changes (1) require that competitions be conducted according to FAR-based competitions using one of four methods (sealed bid, lowest price/technically acceptable, phased two step or trade off) (2) allow competitions under the two step phased approach (e.g. first phase may consider only technical factors while the second may consider cost or price realism) or trade off method to include “best value” criteria as a factor (3) allow agency tenders (the equivalent of a contractor proposal) to be excluded from competitions if the source selection authority identifies a material deficiency that cannot be corrected with a reasonable commitment of resources (4) require all standard competitions including competitions for which a solicitation has not been issued, to be completed within 12 months (rather than the current average of three years) with the possibility of a single six-month extension with OMB approval (5) provide a “streamlined” cost comparison process for functions with 65 or fewer government employee where a 90 day timeframe is established from public announcement to performance decision with the possibility of a 45 day extension (6) require a federal entity that wins an A-76 cost comparison to meet pre-determined performance standards and subject the entity to evaluation and re-competition after a set period (three to five years) (7) make clear that once contracted out such work is not subject to future cost comparisons and (8) create the right to contest an A-76 action using protest procedures found in FAR Part 7.

The final version of the changes excludes an earlier proposal to open up inter-service support agreements (ISSAs) to competition from the private sector where support services like administrative, professional and logistical effort are provided by agencies to one another on a cost reimbursement basis.  While some estimate these services at up to $100 billion, the OMB states they have no idea how many such agreements exist and to incorporate changes to ISSAs would unduly delay needed changes now.  Since industry stands to gain substantially in hopes of more work and federal workers stand to lose jobs, implementation of the revisions have become a hot, controversial topic (Fed. Reg 32134)

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