OMB: Legislation hampering competitive-sourcing savings

Although competitive-sourcing efforts during the past three fiscal years will likely save the government more than $5 billion, the Office of Management and Budget contends that legislation Congress passed last calendar year will hamper the net benefits of such competitions.

In a series of reports to Congress, OMB's Office of Federal Procurement Policy said public-private competitions for inherently governmental functions in fiscal 2005 are expected to result in net savings, or cost avoidances, of more than $3.1 billion during the next five to 10 years.

"These figures confirm that savings will continue to increase as more competitions are completed, and cost controls and other performance improvements are brought to bear on a larger number of our daily commercial tasks," OMB acting director Clay Johnson III said in a letter to Vice President Dick Cheney.

But OMB said these savings could be restricted in the future because Congress, in the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies fiscal 2006 conference report, precluded agencies from converting work performed by more than 10 employees to the private sector unless the agency proves a contractor could perform the work for an amount equal to or lesser than 10 percent of the personnel-related costs, or $10 million.

In a report on the use of best-value trade-offs in competitive sourcing competitions, OFPP said the law will discourage contractors from competing in these competitions for technical work.

"Developing proposals for these types of needs generally requires a substantial investment of time and money," the report said. "Private sector contractors will be disinclined to make this investment if their proposed solutions are shared with the [agencies' most efficient organization] in order to enable a cost comparison. The likely result is either no private sector participation, or the submission of offers with minimal innovation that basically reflect the status quo."

Colleen Kelley, National Treasury Employees Union, said OMB's call for a repeal of this language is disappointing and shows that the administration is "out of touch" with the American public.

"OMB's determination to undermine that reasonable requirement is disappointing, to say the least, and reflects the administration's insistence on injecting a measure of unnecessary and unwise subjectivity into the spending of taxpayer dollars," Kelley said in a statement.

In a separate report on competitive sourcing results for fiscal 2005, OMB demonstrated the potential savings of competitive sourcing and said agencies are winning the competitions over 80 percent of the time since fiscal 2003.

This figure, though, marks a decline because last fiscal year, the number of government employees winning from 90 percent to 60 percent. This is largely because of a massive Federal Aviation Administration modernization contract awarded to Lockheed Martin Corp. for $1.9 billion, OMB officials said.

But the savings seen from this contract are more important than who wins, Johnson said.

"[T]he decision by the Federal Aviation Administration to rely on a private sector contractor for the modernization of its automated flight service stations will help save taxpayers $2.2 billion through the replacement of antiquated systems and labor intensive processes with state-of-the-art technology, modern facilities, and high-quality service," Johnson told Cheney.

Rob Thormeyer is a staff writer for Washington Technology's sister publication, Government Computer News.