The $416.2 billion fiscal 2005 defense appropriations measure overwhelmingly passed by the House and Senate and signed by the President includes a controversial provision that will curb competitive sourcing.  The provision, which is supported by federal employee unions and strongly opposed by industry groups, would eliminate use of streamlined procedures recently incorporated in the revised Office of Management and Budget Circular A-76 that provides the ground rules for public-private competitions.  Streamlined competition is a shortcut procedure for contracting out commercial type activities involving 11 though 65 full time equivalent (FTE) positions without a most efficient organization (MEO).  The MEO is the in-house personnel’s opportunity to revamp its staffing and operations to be more competitive and without an MEO the in-house personnel is forced to pit its status quo against the best offers of the private sector.

The appropriations bill will require that public-private competitions for functions performed by more than 10 federal employees include an MEO and the private sector offeror must beat the MEO cost by the lesser of 10 percent or $10 million (currently, the so-called minimum cost differential applies only to competitions involving more than 65 FTEs).  Further, contractors should “not receive an advantage for a proposal that would reduce costs” by either (1) not making an employer-sponsored health insurance plan available or (2) offering an employer-sponsored health benefits plan that requires employers to contribute less toward the premium or subscription share than the amount DOD provides its civilian employees.

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