Privatization of government activities is a complex and dynamic topic which may yield opportunities for private companies
to receive large contracts to perform those activities. The Bush administration is committed to competitive sourcing and has
directed at least one-half of the Federal positions on agency commercial activity inventories (i.e., 400,000 full time equivalent
positions) be competed. This summary will help explain what government work is eligible for competition, how to participate
in a competition for work currently performed by the government in-house, and how our attorneys can assist companies during
the process.
What Government Work is Eligible for Competition by the Private Sector
Government agencies provide inventories to the Office of Management and Budget of all their activities that are not inherently
governmental (Commercial Activities) as required by the Federal Activities Inventory Reform Act of 1998, (the FAIR Act). After
a period of review, these lists are released to Congress and the public. Each commercial activity will contain codes indicating
whether the commercial activities are eligible for outsourcing or are exempt or subject to a waiver. The final FAIR Act inventories
can be easily searched on the agency's webpages or the OMB webpage if an agency has no web page. Companies can use this valuable
resource to identify areas in which they are interested in competing. This process creates a tension within agencies that
must cut budgets and become more efficient, but are reluctant to eliminate large numbers of agency jobs. Thus, there is also
a process by which companies can challenge activity codes or omissions from the list shortly after the inventories are released.
How to Participate in Competitive Sourcing
Within a reasonable time after the release of the FAIR Act inventory, an agency is required to review the eligible activities
on the list for possible performance by the private sector. The Bush Competitive Sourcing initiative requires agencies to
complete public-private or direct conversion competitions on 5 percent of the full time equivalent employees listed on their
FAIR Act inventories in 2002 (i.e., 42,500 positions), and 10 percent in 2003. Agencies typically use an A-76 study (as described
by OMB Circular A-76) as the competitive process to adhere to these requirements, which is just one form of competitive sourcing.
As a result of the Commercial Activities Panel April 30, 2002 report to Congress, other forms of competition that do not have
the inefficiencies of the A-76 process are being proposed and may be adopted in the near future. Nevertheless, it is still
important to understand the current A-76 process.
Companies may first find out about an A-76 study when an agency publishes a pre-solicitation A-76 study announcement in the
Commerce Business Daily (CBD). This announcement will state that the Government is seeking to identify companies with the
capability and interest to perform the services that are the subject of the procurement. Once this notice is published, the
constraints on the procurement process contained in the Federal Acquisition Regulation (FAR) apply. A second CBD announcement
will be made to issue the actual solicitation (the Request for Proposal or RFP) to which companies can respond with formal
offers. The heart of the RFP is a Performance Work Statement (PWS) which describes the work to be performed and the performance
standards to be met.
The actual competition occurs in two phases. Private sector company offers are compared against the RFP and the "best-value"
commercial vendor is selected (Phase I -- private-private). Next, the best-value private proposal is compared with the Most
Efficient Organization (MEO) proposal (Phase II -- public-private). The MEO is the Government's proposed organization to perform
the work, which is often quite different (smaller) than the organization that was performing at the beginning of the A-76
study. After the MEO technical proposal is conformed to that of the best-value private offer and the MEO's price adjusted
accordingly, the sole criteria for the Phase II outcome is cost. If the private company's cost proposal is at least 10 percent
lower than the MEO's cost proposal (or saves $10 million over the performance period), then the private company will be selected
to perform the Commercial Activity. These competitions currently take about two years to complete.
The outcome of the A-76 study may be appealed first through the internal agency appeal authority and then through the Government
Accounting Office. Recent statistics show that while only 20% of GAO protests are typically successful, 50% of A-76 protests
have been sustained because the agency failed to comply with guidelines outlined in the A-76 Supplemental Handbook in the
Phase II -- public-private selection.
Competitive Sourcing Counseling
Whether a client is an experienced government contractor that has been awarded a contract under an A-76 study or a commercial
company seeking to participate in its sourcing competition, our Government Business and Technology attorneys can provide valuable
assistance. Our attorneys stay abreast of the changes and developments that affect strategic sourcing to include the availability
of alternatives to the A-76 process. They can provide help in understanding new legislation aimed to limit which governmental
functions qualify as inherently governmental and thus open up new private sector opportunities. Our attorneys can also help
clients understand the solicitation, evaluation, certification, regulatory, and statutory requirements that apply to offers
under the A-76 process and the FAR. We also can guide companies to minimize the extent to which unnecessary and overly expansive
accounting, intellectual property, e-commerce, and socio-economic requirements are imposed on them. Finally, our experienced
litigators are prepared to help clients challenge the improper agency selection process.
