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STATEMENT
OF ANGELA B. STYLES
ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY
BEFORE THE
SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY
COMMITTEE ON GOVERNMENT REFORM
UNITED STATES HOUSE OF REPRESENTATIVES
SEPTEMBER
27, 2002
Mr. Chairman and Members
of the Subcommittee, I appreciate the opportunity to be here today to discuss
the competitive sourcing initiative, the final report of the Commercial
Activities Panel, and the pending release of the revised OMB Circular A-76.
As you know, the Administration
is committed to making fundamental changes to the way we manage the federal
government. These changes are guided by a firm belief that the federal government
should be results-oriented, citizen-centered, and market-based. Whether
reducing purchase card fraud, expanding e-government, linking agency performance
with results, or competing commercial jobs with the private sector, we are
making progress on management issues.
Progress is particularly
notable on each of the five government-wide initiatives included in the
President’s Management Agenda: (1) strategic management of human capital;
(2) competitive sourcing; (3) improved financial performance; (4) expanded
electronic government; and (5) budget and performance integration. To ensure
transparency and accountability for performance and results, we have employed
a simple “traffic light” grading system. In the FY 2003 budget,
26 departments and agencies received baseline evaluations. Reflective of
the fact that the chosen government-wide initiatives targeted areas with
the most apparent deficiencies -- and the greatest opportunities for improved
performance -- the initial baseline evaluation showed a lot of poor scores.
After eighteen months
of hard work by the departments and agencies in each of these areas, I am
heartened by the progress I am starting to see. The competitive sourcing
scores for progress included in OMB's Mid-Session review tell a different
story from that revealed by the initial baseline. The initial sea of red
has been replaced by thirteen green, four yellow and four red progress scores.
Departments have begun to effectively use competitive sourcing as a tool
to manage. Agencies are taking a very hard look at how they fulfill their
missions and they are asking the right questions: what are employees doing
that is inherently governmental? What are they doing that is commercial?
Is this mix right for mission success? They are also asking what their private
contractors are doing for the agency and whether the agency is managing
those contracts well. These questions are rather fundamental, but ones that
must be asked if we are to have any chance of doing a better job of managing
our most important federal resources – people and dollars.
The Competitive Sourcing Initiative
Each time I testify or
give a speech, I like to begin the discussion with some of the basics to
ensure we all have the benefit of the same historical perspectives. Competitive
sourcing is a government-wide initiative to encourage competition for the
performance of government activities that are commercial in nature. Using
Office of Management and Budget (OMB) Circular No. A-76 (“Circular
A-76”) departments and agencies have been asked to “determine
whether commercial activities should be performed under contract with commercial
sources or in-house using Government facilities and personnel.” Competitive
sourcing is a means to an end, with the means being competition (generally
public-private competition) and the end being better management of our government
and better service for our citizens.
As of June 2000, there
were 850,000 people in the federal government performing jobs that are commercial
in nature – jobs that people also perform in the private sector. Despite
the fact that many of these jobs are as basic as mowing the lawn or serving
food, few if any of these 850,000 jobs have been exposed to the rigors of
competition. Frankly, the federal government has not spent much time managing
resources to determine if the same or a higher quality service can be provided
to our citizens at a lower cost.
The competitive sourcing
initiative asks agencies to manage resources by building the infrastructure
necessary to institutionalize public-private competition. Competitive sourcing
asks agencies to make some difficult choices. These choices affect real
jobs, held by dedicated and loyal career civil servants. In many respects,
this initiative comes down to one simple reality: very few people, whether
they are working in the private sector or the public sector, like to work
under the pressure of knowing that their work is on the line if they do
not figure out how to perform it more efficiently and effectively. But,
the fact that this initiative requires hard choices and a lot of hard work
makes it an initiative that can bring about fundamental and lasting improvements
to the way the federal government is managed.
Key to the success of
any private sector company is the regular evaluation of whether necessary
services should be provided in-house by company employees or by another
company. A number of different factors are part of this determination, including
the mission of the company, cost differential, performance, continuity of
service, and the potential for quality improvements. As many technology
companies have realized over the past decade, the decision to “buy”
rather than “make” has meant that company employees are truly
focused on the mission of the company -- in the case of technology companies
-- making the next generation technology. Mirroring the sourcing decisions
of the private sector, the competitive sourcing initiative strives to focus
the federal government on mission -- delivering high quality services to
citizens at the lowest possible cost.
Our Goals
The aggregate government-wide
goal, established at the outset of the initiative, envisions the competition
of 425,000 full-time equivalent employees (FTEs) -- i.e., 50 percent of
commercial FTEs. Recognizing the need for significant analysis and review
to establish individual agency competition plans, no timeframe has been
established for the achievement of this long-term goal. Instead, OMB established
a two-year ramp-up goal to compete 127,500 jobs (15 percent of commercial
FTEs).
Let me be clear about
the application of this aggregate government-wide goal. It is not intended
as an arbitrary quota, such as the ones that were put into effect through
most of the 1990’s when the workforce was reduced by 324,580 FTEs.
In fact, the President’s Management Agenda includes an important Human
Capital initiative to encourage agencies to address the dual challenges
of arbitrary cuts already taken and the looming wave of retirements government-wide.
Like you, Mr. Chairman,
I have always opposed arbitrary FTE cuts and caps. As this Subcommittee
has heard me say before, competitive sourcing is not about outsourcing or
downsizing the workforce. To the contrary, it is about creating incentives
and opportunities for efficiency and innovation through competition. This
initiative has one main bottom line: to ensure that government service is
provided by those best able to perform in terms of cost and quality, be
that the private sector or the government itself.
Thus, as we work with
agencies and evaluate their progress, the real issue is whether an agency’s
plan first builds an infrastructure for public-private competition and then
implements competitions over the long-term. While OMB will presume that
an agency has built such an infrastructure if it competes 15 percent of
its commercial FTEs, we have been careful not to apply this goal in a rigid
or arbitrary manner. Indeed, after extensive review of agency competition
plans and significant agency consultation, OMB approved agency plans for
less than 15 percent competition, focusing on agencies that had experienced
significant FTE cuts or high service contracting to FTE ratios. As part
of this process, OMB also asked several agencies to consider appropriate
opportunities for in-house organizations to compete for work currently under
contract with the private sector. As a matter of reality, many agencies
will have built an infrastructure well before 15 percent of commercial FTEs
have been competed.
Improving the Public-Private Competition Process
Conducting a public-private
competition is not easy and the current process has its share of detractors.
We are the first to acknowledge that OMB Circular A-76 needs an overhaul.
The Circular is virtually unreadable, internally inconsistent, repetitive,
vague, lengthy, and universally disliked. It should be no surprise that
there is a cottage industry of people and groups trying to translate the
Circular into English. Since I was confirmed in May 2001, I have spent an
extensive amount of time studying potential process improvements, including
participation on the Commercial Activities Panel.
There are two key aspects
of the Commercial Activities Panel Report (the “Report”). First,
the Report is fair. Second, the Report confirms what we knew all along:
public-private competition improves government performance and saves taxpayer
dollars over the long term. The Report also recognized that there are no
silver bullets. If we want a fair, equitable, and transparent decision process,
we must have checks and balances and accountability on all sides.
In June, I established
an interagency working group to consider specific changes for improving
the Circular -- changes will be published for agency and public comment
in the Federal Register. At this point, I can assure you that the Circular
will be shorter, consistent and understandable. I do not want to publish
a new Circular that takes a team of experts to understand, and an industry
of consultants to implement. Achieving consensus among the key stakeholders
will remain a challenge, but the Administration is committed to working
with agency managers, federal employees, federal employee unions, and the
private sector to make significant and lasting process improvements. While
maintaining equity, fairness and transparency, we must do a better (and
faster) job of making sourcing decisions.
Rest assured, we will
not institute an immediate wholesale replacement of the existing competition
procedures. The new system will need to be tested and there will be trial
and error. We will try to take the best elements of private/private source
selections and the best elements of the current A-76 process. Among other
things, this means:
- Reducing time
to complete competitions: Currently A-76 competitions take 2-4 years
to complete. Managers should be held accountable for lengthy competitions
that hurt morale and scare off non-government bidders. The interagency
working group has discussed setting caps on the length of time the government
and the private sector have to participate in competitions.
- Giving managers
flexibility to achieve best value for the taxpayer: The interagency
working group has developed a “one-step” integrated approach
for certain functions, including information technology, that follows
the existing FAR Part 15 rules, including the use of cost/technical
tradeoffs.
- Demanding accountability:
We must find ways to make the in-house winners of competitions more
accountable to perform over time as promised.
- Centralizing oversight
responsibility and providing training: We need to encourage greater
use of centralized and trained management teams to conduct A-76 competitions.
- Eliminating the
appearance of all conflicts of interest: We must ensure that there is
not even an appearance of a conflict of interest in the conduct of A-76
competitions.
- Helping agencies
with costing analysis: The DoD costing model “Compare” is
being made available to all agencies
Conclusion
Federal employees are
some of the Nation's most highly trained and dedicated employees. At the
same time, I applaud the service and support that federal contractors and
their employees provide to our citizens. We could not meet current requirements
and the many challenges we face in fighting terrorism and protecting our
nation without the creativity and innovation that the private sector brings
to the table. Our task is to ensure that we take full advantage of the best
capabilities that each sector has to offer in each specific situation.
Working with you and
members of Congress, we are asking federal agencies to reconsider how they
accomplish their missions. We are also asking them to test assumptions about
the best provider through the competitive process. Mr. Chairman, competitive
sourcing is laying the groundwork for improved mission performance through
quality service at the lowest possible cost. Like any other effort that
seeks to fundamentally transform the way we do business, this initiative
has its challenges. If we are steadfast in our commitment to competition,
which lies at the heart of competitive sourcing and the recommendations
of the Commercial Activities Panel Report, we will no doubt deliver the
quality service our taxpayers deserve.
This concludes my prepared
statement. I would be pleased to respond to any questions that you might
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