New A-76 rules draw skepticism

Brad Wootten, a senior consultant at PEC Solutions Inc. of Fairfax, Va., said people in the market are "still digesting" the new Office of Management and Budget A-76 circular. The changes try to address complaints from government and industry that the old process was unfair and too cumbersome.

David Spence

"For IT procurements, the recognition that the cheapest choice is not always the best choice is welcome and highly appropriate." ? Booth Jameson, director of global government affairs for the U.S. Government unit of Electronic Data Systems Corp.

Olivier Douliery

Angela Styles, administrator of the Office of Federal Procurement Policy

Industry wary; IRS, Energy ready for competition

A few months ago, Lou Ray wouldn't touch an A-76 competition with a 10-foot pole. Industry just didn't have a fair shot at winning, he said.

Now that the White House has issued the final, revised rules for conducting public-private competitions of government work, Ray is willing to reassess his views. But, like many executives of information technology companies, he's not convinced the changes go far enough to level the playing field between government and industry.

"I think the improvements need to be given a chance to see what they produce, but I'm not totally confident they have the answer yet," said Ray, president and chief executive officer of Matcom International Corp. in Alexandria, Va.

"Historically, there was no way to know if the government said they'd put 10 people on [a job] and then they put 20 on it [after winning]. The new rules say they will watch this more closely. But this is new," he said.

The new Office of Management and Budget Circular A-76, issued May 28, attempts to address industry and government complaints that the old process was unfair, too complicated and too lengthy. Angela Styles, administrator of the Office of Federal Procurement Policy, said the new process should encourage more private firms to participate in public-private competitions.

The Bush administration has made a management priority of what it calls "competitive sourcing," that is, allowing the private sector to compete for government work. The administration eventually wants 850,000 commercial jobs performed by government employees to be competed among the public and private sectors to see who can best provide services ranging from desktop support to food service.

The new circular is the first major A-76 revision since 1983. Major changes include:

  • A 12- to 18-month time frame for conducting competitions. Previously, competitions took as long as four years.

  • Permission for agencies to consider "best value"-- rather than lowest cost -- when choosing a winning bidder, particularly on IT competitions. However, cost must account for 50 percent of the source-selection decision in most cases.

  • Elimination of a provision that allowed agencies to convert 10 or fewer full-time positions to the private sector without competition.

  • Elimination of two-phase competition under which the government bidder was guaranteed a place in the final competition. Now government and industry compete directly, and both government and private-sector bidders can be excluded if their proposals are deficient.

"Everybody is still digesting [the new circular]. It looks to me that it's a significant improvement," said Brad Wootten, a senior consultant at PEC Solutions Inc. of Fairfax, Va. Previously, Wootten managed the Army's A-76 program; at PEC, he helps government agencies compete under the circular.

Improvements to the circular mean a more level playing field for industry, he said. Agencies will benefit from a formal government structure that will help them share best practices and better manage their competitions.

The IT community likes the tighter deadlines under the new circular, said Booth Jameson, director of global government affairs for the U.S. Government unit of Electronic Data Systems Corp. of Plano, Texas.

"For IT procurements, the recognition that the cheapest choice is not always the best choice is welcome and highly appropriate," he said.

Industry executives said the best-value process is needed because complex IT systems should not be purchased based on lowest cost.



But some industry representatives said the requirement that cost account for 50 percent of the source-selection decision in best-value procurements is too high.

"If you are modernizing a whole IT system, any kind of selection process that emphasizes cost over anything else is not going to yield the kind of innovative solutions IT companies would like to offer the government. I think IT companies offering these modernization solutions will probably think twice about leaping into the market," said Agnes Dover, a partner with Hogan & Hartson LLP in Washington and an adviser to the Information Technology Association of America of Arlington, Va.

[IMGCAP(3)]Styles, in a speech earlier this month, said the 50 percent cost factor was a compromise that got "a very good measure without stepping away from a firm belief that we really think cost is important. Cost started off at 95 percent, so being about equal is a pretty good compromise."

Federal employee unions also object to the new best-value provisions, saying the de-emphasis on cost creates a process that can be arbitrary and subject to abuse.

"The administration is so pro-contractor that it is wrong to give contracting officers subjective factors to award contracts," said John Threlkeld, legislative representative for the American Federation of Government Employees. AFGE represents 600,000 federal and District of Columbia workers.

"Contractors, and to a lesser extent the administration, characterized the old A-76 process as based on a low-bidder mentality that does not allow agencies to make qualitative improvements. We don't think that is true," Threlkeld said. "Agencies can say what services they want and the features that are included. We never believed there was need for a best-value process."

Some industry executives are also concerned about a requirement that the lesser of 10 percent of the government's personnel costs, or $10 million, must be added to the non-incumbent's bid on competitions of more than 65 positions, Jameson said. In most cases, the private-sector bidder will be the non-incumbent.

"It seems inconsistent," Jameson said, "saying lowest cost may not be the best solution, but saying there still has to be 10 percent cost differential. We are interested in seeing how the new revision works in practice."

Wootten, however, said the 10 percent differential is a logical offset of the cost to convert from in-house to contractor performance.

[IMGCAP(2)]Agencies typically use the A-76 process to compete two types of IT work: desktop support services, called seat management, and network and systems administration, said Lee Cooper, vice president and general manager of sales for the U.S. Federal Government Group of Unisys Corp. in Blue Bell, Pa.

While desktop support is usually competed separately, network and systems administration are often included in large-scale facilities management competitions that include everything from food service to aircraft maintenance, he said.

"There is a large amount of IT in those deals, even though it might even only be 15 to 20 percent of the contract," he said.


The Internal Revenue Service is conducting a pilot A-76 competition for seat management services that covers 238 positions in various divisions. Through the pilot competition, the agency will get a sense of providers' capabilities; then agency officials will decide whether an additional 1,800 seat management jobs will be competed, an agency spokeswoman said.

"That's an example of an agency moving forward in an aggressive way, trying to figure out how to implement a new process," Cooper said. "Unisys would be interested in going after that work."

At the Energy Department, more than 600 IT jobs at 14 headquarters organizations and at 19 sites nationwide will be studied under A-76. The agency will also study its IT outsourcing contracts with the private sector to see if they could be done more efficiently.

A draft performance work statement should be available for review by October or November, followed by a request for proposals, according to the department.

Like Cooper, Ray said he will watch new A-76 competitions closely. The private sector must win at least half of the time, or it won't be feasible to participate, he said.

"If the government wins, say, 66 percent to the time, this is a nonstarter, because it says that one-third of the work is being divided up by all the private-sector bidders," Ray said. "I will track very carefully what the win percentages are. I don't want to be the bleeding edge of the sword. I'm going to leave that for somebody else."

Staff Writer Gail Repsher Emery can be reached at Government Computer News Staff Writer Jason Miller contributed to this story.

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