Despite falling far short of the goal of total number of jobs, public-private competitions for jobs in fiscal 2007 will save taxpayers $325 million in the next five years, according to a report released late last week by the Office of Management and Budget (OMB).

 
The concept of competitive sourcing goes back to the mid-1950s and has existed in its current form, known as A-76 for the designation of OMB Circular A-76 "Performance of Commercial Activities," since 1983. In 2003, President George W. Bush issued a revised Circular A-76. He said, "Government should be market-based - we should not be afraid of competition, innovation, and choice. I will open government to the discipline of competition."

Under A-76, activities that provide goods and services can be classified as either commercial or governmental in nature. Governmental functions are not suitable for performance by private sources by law, while commercial activities are functions that provide goods or services available from private sources.  

A-76 operates on the theory that opening these activities up to competition will lead to lower costs and greater productivity whether the contract is ultimately won by the government agency or a private contractor. According to an Internal Revenue Service primer (pdf) on A-76, competitive sourcing results in savings of more than 20% for work that stays in-house and more than 30% for work outsourced to the private sector.

The OMB report touts the competitive sourcing program as a success, despite the fact that the total number of jobs competed for is down and far short of the goal number. Agencies held 132 competitions for almost 4,000 jobs in 2007, down from 183 competitions for 6,600 jobs in 2006. The president's management agenda called for 18,000 jobs to be competitively sourced in 2007.

Federal employees continue to win the majority of A-76 competitions, though the number is down. A full 73% of the work was awarded to federal employees in 2007, compared to 87% in 2006 and an 83% average over the last 5 years.

Employee unions oppose competitive sourcing and backed new rules that go into effect in 2008. These new rules allow federal workers to protest the outcome of the competitions and exclude federal benefits from cost comparison.

The OMB report also shows that the private sector does not have great interest in competing for federal work. Only 49 percent of the work competed for in 2007 had two or more private-sector bidders. The report blames this on the new rules and says "the administration will continue to urge Congress to eliminate restrictions on competitive sourcing."