Industry positive about new A-76

But govt. employee unions blast White House's draft for public-private competitions

"I am convinced someday...the only people left on the federal payroll will be the instectors general." -- Bobby Harnage, president of the American Federation of Government Employees

Henrik G. de Gyor

"(Best value) doesn't give you carte blanche to do anything you want," says Michael Mutek, senior vice president and general counsel at Raytheon Technical Services Co.

Olivier Douliery

Information technology industry executives are hopeful that the Bush administration's move to a new process for competing federal work will give them a better chance to win competitions with public-sector bidders.

Proposed changes to the public-private competition process, known as A-76, also will shorten the time required to conduct the competitions, making them more attractive to industry, IT officials said.

But federal union executives argued that the new process, which would allow agencies to award contracts based on "best value" rather than lowest cost, would lead to widespread outsourcing of federal work.

"I am convinced someday ... the only people left on the federal payroll will be the inspectors general," said Bobby Harnage, president of the American Federation of Government Employees, a union in Washington representing 600,000 employees.

The old procedure for conducting public-private competitions, laid out in Office of Management and Budget Circular A-76, was criticized by public and private bidders as too time consuming and costly. Industry executives said they could not justify tying up their funds and personnel bidding jobs when it could take as long as three years to determine a winner.

A new draft Circular A-76, published Nov. 14 at www.omb.gov, requires most competitions to be completed within a year. It also imposes new procedures on public-sector bidders for calculating costs, requiring them to include in their proposals costs such as fringe benefits and facilities expenses, which industry executives said they've always included, putting them at a competitive disadvantage.

Renato DiPentima has participated in A-76 competitions in the public sector when he was deputy commissioner for systems at the Social Security Administration, and in the private sector at SRA International Inc. of Fairfax, Va., where he is president of the company's consulting and systems integration business.

"In the public sector, we tried to do a legitimate job [with A-76 competitions], but looking back, I think there is some truth to the fact that we probably would not have included all of the same costs, because you don't look at it the same way," he said.

Cost calculations submitted by private-sector bidders include fringe benefits, office space, leave, health care -- everything it takes to support an individual employee, DiPentima said. Government organizations bidding in A-76 competitions did not always calculate all these costs into their proposals.

"If the only thing I did is say this person has the salary of $65,000, the cost might be double that when you add in your overhead," DiPentima said.

DiPentima said he's looking for an A-76 process that is realistic and allows for good comparisons between public- and private-sector bids.

"As an industry, if A-76 competitions come out, we'll have to participate in them, and see if we believe the process is fair and valuable. It will be this time next year before we are convinced one way or another," he said.

The new circular also does not require private-sector bidders to go through two competitions for the same job. Under the old process, private-sector bidders competed among themselves in a best-value process, which allows awards to be based on factors other than lowest cost, such as technical performance. The winner then was pitted against the public-sector bidder in a lowest-cost competition. Under the new circular, all bidders will face off in one competition.

The new circular will encourage more private-sector participation, said Michael Mutek, chairman of the government affairs committee of the Professional Services Council.

"In the past, many companies were skeptical because of the cost of playing the game," and so many chose not to spend their bid and proposal money on A-76 projects, he said.

According to Angela Styles, administrator of OMB's Office of Federal Procurement Policy, the draft circular mirrors the recommendations of the Commercial Activities Panel, a group of government, industry, academic and federal employee union representatives who spent a year studying ways to improve the A-76 process. The panel called for the government to replace the process with procedures based largely on the Federal Acquisition Regulation.

The panel agreed on 10 principles to guide federal sourcing decisions, including ensuring fairness throughout the process and choosing service providers based on quality as well as cost.

Comptroller General David Walker, who was panel chairman, said the General Accounting Office would conduct an independent review to determine whether the circular is consistent with the panel recommendations and whether the recommendations are being implemented.

Rep. Tom Davis, R-Va., said he anticipates holding hearings on the circular next year and working with the administration to implement it. Davis is chairman of the House Government Relations subcommittee on technology and procurement policy.

Under the new A-76 process, IT work will be competed under a procedure based on the Federal Acquisition Regulation, which allows for best value to be considered in award decisions. Styles said the FAR-based process initially would be limited to competitions for IT work, any type of new work that has never been performed by federal employees and any work being expanded at least 30 percent.

Davis and IT industry officials said best value consideration for IT outsourcing is particularly important. Best value fosters creative and innovative proposals, which is particularly appropriate with IT services, Mutek said.

Stan Soloway, president of the Professional Services Council, which represents technical and professional services firms serving the government, said he is generally pleased with the planned changes.

But Soloway, who also served on the Commercial Activities Panel, said he's concerned that the circular's definition of IT doesn't go far enough and, therefore, some solutions that should be purchased on a best-value basis will instead be bought on lowest cost.

"A lot of what the government buys is driven by IT -- logistics, facilities management," but might not be called IT, he said.

"There are also a host of other requirements that are complex enough that you would not want to buy them on the cheap: engineering, research and development," he said. "We are very concerned this is so limiting."

Melissa Wojciak, staff director for the House Government Relations subcommittee on technology and procurement policy, said limiting the use of best value is the right thing to do initially, however.

"We generally support best value across the board, but we are transitioning from an entirely different process that exists today. So throughout that transition, I think it's appropriate for the administration to go slow, to test it," she said.

Federal employee union executives took a different view of best value. They argued that soon every job will be subject to best-value competition and then outsourced.

"They're doing away with the cost basis of any decision. Allegedly [best value] can only be applied on a limited basis, but loopholes allow it to be used on almost anything," said Wiley Pearson, a policy analyst for the AFGE union. Agencies can request permission from OMB if they want to use the FAR-based process on other work besides that outlined in the new circular.

Mutek said agencies would still have to give good reason for a waiver. "[Best value] doesn't give you carte blanche to do anything you want. You still have to justify it," said Mutek, who is also senior vice president and general counsel at Raytheon Technical Services Co. in Reston, Va.

Union executives also said new work would not be competed among the public and private sectors, as the new circular allows.

"You let me know when that happens, and I will buy you lunch," said AFGE Harnage. "They have had the ability to do that before, and they haven't done it."

Ultimately, the quality of training for federal employees conducting A-76 competitions will determine the success of the new process, government and industry officials said.

"This revision is a major change, and requires effective training of people. Unless it is implemented effectively, it is of no value," Mutek said.

OMB will accept comments on the draft circular until Dec. 19 and asked that they be sent to A-76comments@omb.eop.gov. Styles said the final circular would be issued soon thereafter. *

Staff Writer Gail Repsher Emery can be reached at gemery@postnewsweektech.com.

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