1

The Results to Date

November 15, 2004

““Competitive Sourcing”:Competitive Sourcing”:The Results to DateThe Results to Date

The Honorable Jacques S. GanslerProfessor and Roger C. Lipitz Chair

Center for Public Policy and Private EnterpriseSchool of Public AffairsUniversity of Maryland

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The Results to Date

November 15, 2004

The Changing Role of GovernmentThe Changing Role of Government

DoerManager of Doers

Competitive Sourcing• A-76 Competitions

Outsourcing Privatization Public/Private Partnerships

What is the proper role for the government? A shift from “the provider of goods and services” to the “manager of

the provider of goods and services” Government does only those functions which are “inherently

governmental;” or which it can do most efficiently and effectively.

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The Results to Date

November 15, 2004

The President’s AgendaThe President’s Agenda

Presidential Management Agenda (2002)5% or more of FTE slots in FAIR 200210% additional competitions in 200350% of FAIR by 2005

Subsequently, OMB backed off of the “quantitative objectives,” but not of the intent

“Government should be market-based – we should not be afraid of competition, innovation, and choice. I will open government to the discipline of competition.”

George W. Bush

“Government should be market-based – we should not be afraid of competition, innovation, and choice. I will open government to the discipline of competition.”

George W. Bush

FAIR Feb. 2001 identified 849,389 positions for competition* (approximately 50% of the 1.7 million “eligible” federal positions).

FAIR Feb. 2001 identified 849,389 positions for competition* (approximately 50% of the 1.7 million “eligible” federal positions).

*Many areas were defined by agencies as not included in the Federal Activities Inventory Reform (FAIR) Act (e.g. military positions in jobs that were “not inherently governmental”). Also, this excludes 320,000 DoD jobs now being done by military, but are going to be eligible for competitive sourcing (as of 1/26/04)

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The Results to Date

November 15, 2004

The Critical IssueThe Critical Issue

The issue is competition (not public sector vs. private sector)

Competition creates incentives for higher performance at lower costs (vs. public or private monopolies)

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The Results to Date

November 15, 2004

Current Processes for Competitive SourcingCurrent Processes for Competitive Sourcing

Meet fierce resistance (unions, Congress, civilian workforce, even military)

Although recognized as a not very effective process (per Congressionally-mandated A-76 Commission, and general observations by all participants), $5 billion* in savings were generated at DoD between 1997 and 2001

Recent, but still untested revisions to A-76 include:– 12 month time limit (can be extended by 6 months)– Elimination of direct conversions (use accelerated

process)– Establishment of firewalls (to prevent Conflict of Interest)– Use of “Best Value” for awards

Meet fierce resistance (unions, Congress, civilian workforce, even military)

Although recognized as a not very effective process (per Congressionally-mandated A-76 Commission, and general observations by all participants), $5 billion* in savings were generated at DoD between 1997 and 2001

Recent, but still untested revisions to A-76 include:– 12 month time limit (can be extended by 6 months)– Elimination of direct conversions (use accelerated

process)– Establishment of firewalls (to prevent Conflict of Interest)– Use of “Best Value” for awards

Basis for resistance must be addressedBasis for resistance must be addressed

*Government Executive, March 31, 2003

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The Results to Date

November 15, 2004

ConcernsConcernsPerformance will Deteriorate.

– Industry will focus on profits not public needs– Industry won’t be flexible to changing need (e.g. surges)– Government more experienced in these jobs (so better)

Costs will be higher. – Government employees are paid less – And they don’t charge a fee

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted.Large numbers of government employees will

be involuntarily separated (RIFed).Loss of control by government management

Performance will Deteriorate. – Industry will focus on profits not public needs– Industry won’t be flexible to changing need (e.g. surges)– Government more experienced in these jobs (so better)

Costs will be higher. – Government employees are paid less – And they don’t charge a fee

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted.Large numbers of government employees will

be involuntarily separated (RIFed).Loss of control by government management

7

The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

8

The Results to Date

November 15, 2004

Performance Improvements 1Performance Improvements 1stst – –Then Cost SavingsThen Cost Savings

NAVAIR Auxiliary Power Unit Logistics Support Program (a public/private partnership utilizing COTS software) [Caterpillar software, Honeywell management]: Reliability of each carrier-based aircraft’s APU has been

increased by more than a factor of ten. Reliability exceeded guarantees by more than 25%. Dramatic improvements achieved in mean time between failures

(Mean Number of Flight Hours Between Unscheduled Removal (MFHBUR))

• 300% on P-3 Platform

• 45% on FA-18A/B/C/D

• 15-25% on S-3 and C-2 platforms

• For Afghanistan, surged 50% to fill all demands

Program savings are difficult to quantify (no baseline)

NAVAIR Auxiliary Power Unit Logistics Support Program (a public/private partnership utilizing COTS software) [Caterpillar software, Honeywell management]: Reliability of each carrier-based aircraft’s APU has been

increased by more than a factor of ten. Reliability exceeded guarantees by more than 25%. Dramatic improvements achieved in mean time between failures

(Mean Number of Flight Hours Between Unscheduled Removal (MFHBUR))

• 300% on P-3 Platform

• 45% on FA-18A/B/C/D

• 15-25% on S-3 and C-2 platforms

• For Afghanistan, surged 50% to fill all demands

Program savings are difficult to quantify (no baseline)

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The Results to Date

November 15, 2004

Performance Improvements 1Performance Improvements 1stst – –Then Cost Savings (cont)Then Cost Savings (cont)

US Navy’s Sailor Arranged Move (SAM)—allows sailors to choose their own moving companies vice being centrally controlled by the Military Traffic Management Command.– Customer satisfaction increased from 23% to 95% – Damage claims dropped from one in four to one in 12 moves

British Telecom privatized in 1984– Call failure dropped from 1 in 25 to 1 in 200– Now 96% of public phones work vice 75%

Indianapolis Waste Water Treatment—city partners with private water supply utility.– Employee accidents fell 70%, effluent violations fell 86% – First year of operations partnership cut costs by 40% saving $12.5

million

US Navy’s Sailor Arranged Move (SAM)—allows sailors to choose their own moving companies vice being centrally controlled by the Military Traffic Management Command.– Customer satisfaction increased from 23% to 95% – Damage claims dropped from one in four to one in 12 moves

British Telecom privatized in 1984– Call failure dropped from 1 in 25 to 1 in 200– Now 96% of public phones work vice 75%

Indianapolis Waste Water Treatment—city partners with private water supply utility.– Employee accidents fell 70%, effluent violations fell 86% – First year of operations partnership cut costs by 40% saving $12.5

million

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The Results to Date

November 15, 2004

Performance Improvements 1Performance Improvements 1stst – –Then Cost Savings (cont)Then Cost Savings (cont)

Competitive Sourcing of Public Transportation—Transportation authorities award contracts to the lowest responsible and responsive provider—public or private.

Competitive Sourcing of Public Transportation—Transportation authorities award contracts to the lowest responsible and responsive provider—public or private.

City Year Performance Improvement

Denver 88-95 Service levels increased 26%

San Diego 79-96 Service levels increased 47%

Indianapolis 94-96 Service levels increased 38%

Las Vegas 93-94 Service levels increased 243%

Los Angeles 80-96Service reliability increased 300%, complaints reduced by 75%

Savings have ranged from 20% to 60% compared to the costs of non-competitive services replaced

Savings have ranged from 20% to 60% compared to the costs of non-competitive services replaced

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The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

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The Results to Date

November 15, 2004

Results of A-76 DoD Cost Comparisons:Results of A-76 DoD Cost Comparisons:1978 - 19941978 - 1994

510 $470 27%733 $560 36%

Marine Corps 39 $23 34%806 $411 30%

Defense Agencies 50 $13 28%

2,138 $1,478 31%Total

Competitions Completed

ArmyAir Force

Navy

Average Annual Savings ($M)

Percent Savings

510 $470 27%733 $560 36%

Marine Corps 39 $23 34%806 $411 30%

Defense Agencies 50 $13 28%

2,138 $1,478 31%Total

Competitions Completed

ArmyAir Force

Navy

Average Annual Savings ($M)

Percent Savings

Defense Reform Initiative Report, Nov 1997

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The Results to Date

November 15, 2004

Results of A-76 Cost Comparisons: Results of A-76 Cost Comparisons: FY 1995 - 1999FY 1995 - 1999

DoD completed 286 A-76 studies– 138 involved competitions between public and private

sectors• 40% won by private sector

– 148 direct conversions• 134 moved to private sector

DoD reported savings of 39%– GAO reported savings number imprecise

• But agreed that “savings from A-76 studies are substantial and sustained over time.”

• Baseline savings looked at personnel costs only, studies did not account for cost of study

– Results consistent with CNA studies reporting total saving on order of 31%

DoD completed 286 A-76 studies– 138 involved competitions between public and private

sectors• 40% won by private sector

– 148 direct conversions• 134 moved to private sector

DoD reported savings of 39%– GAO reported savings number imprecise

• But agreed that “savings from A-76 studies are substantial and sustained over time.”

• Baseline savings looked at personnel costs only, studies did not account for cost of study

– Results consistent with CNA studies reporting total saving on order of 31%

DoD Competitive Sourcing,GAO-01-20,December 2000

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The Results to Date

November 15, 2004

Results of A-76 Cost Comparison: Results of A-76 Cost Comparison: FY 1997 - 2001FY 1997 - 2001

DoD completed 314 cost comparison A-76 studies– 36,987 positions competed

– Reduced number of positions by 35% to 24,136

– 40% of competitions (49% of positions) won by private sector

DoD completed 314 cost comparison A-76 studies– 36,987 positions competed

– Reduced number of positions by 35% to 24,136

– 40% of competitions (49% of positions) won by private sector

Source: DoD CAMIS Data

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The Results to Date

November 15, 2004

FY 97 FY 98 FY 99 FY 20FY 01

0

2000

4000

6000

8000

10000

12000

14000

16000

A-76 Cost Comparisons FY 97-01

MEO Positions Actual Positions Competed

Results of A-76 Cost Comparison: Results of A-76 Cost Comparison: FY 1997 - 2001FY 1997 - 2001

Source: DoD CAMIS Data

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The Results to Date

November 15, 2004

DoD Savings by Size 1978 -1994DoD Savings by Size 1978 -1994

Size Total Studies* Avg. % Savings* % with 0 Savings**

1 to 10 796 22% 37%

11 to 30 633 29% 14%

31 to 45 142 32%9%

46 to 75 94 30%

76 to 100 42 34% 3%

101 to 15036 42%

4%

151 to 200 9%

201 to 25031 41%

5%

> 251 0%

Total 1774 34% 22%

*Anne Laurent, “Award-Winning Acquisition,” Government Executive Magazine, Annual Procurement Preview, August 2000** Trunkey R. Derek, Robert F Trost, Christopher M. Snyder, “Analysis of DoD’s Commercial Activities Program,” Center for Naval Analysis, Dec 1996 (Note: This study had a slightly different data base, over the same time period)

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The Results to Date

November 15, 2004

Results from Recent IRS Competitions*Results from Recent IRS Competitions*

Number of FTEs

Competed

Winner FTEs Proposed

Reduction

Area Distribution Centers

400 MEO 160 60%

Campus Center Operations and Support

278 MEO 60 78%

The government employee MEO won both competitions with dramatic proposed savings

The government employee MEO won both competitions with dramatic proposed savings

*The source selection results were released in Aug 2004

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The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

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The Results to Date

November 15, 2004

CNA Study of Long-Run Costs of Competitive CNA Study of Long-Run Costs of Competitive SourcingSourcing

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Savings Rate for 16 Completed Activities

Expected Savings

Observed Savings

Effective Savings

Weighted Averages

Expected Savings (as bid by winner – government or private) 35%

Observed Savings (realized results, including scope & quantity changes) 24%

Effective Savings (realized results on same scope & quantity) 34%

Weighted Averages

Expected Savings (as bid by winner – government or private) 35%

Observed Savings (realized results, including scope & quantity changes) 24%

Effective Savings (realized results on same scope & quantity) 34%

Long run Costs and Performance Effects of Competitive SourcingCNA, February 2001

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The Results to Date

November 15, 2004

A-76 A-76 RealizedRealized Results (on Facilities – Related Results (on Facilities – Related Maintenance And Repair Costs)*Maintenance And Repair Costs)*

$0.00

$0.50

$1.00$1.50

$2.00$2.50

$3.00$3.50

$4.00$4.50

Control A-76(Government

Wins)

A-76(Contractor

Wins)

$3.95$4.23

$2.28

Contractor workforces had more than 40% lower costs

With government wins, workforces were not held to stringent cost/performance standards and rarely had to recompete

Conclusion: When government wins the workforce must meet the cost/performance in the A-76 proposal, and they must regularly recompete

*LMI Insights, Fall 2002

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The Results to Date

November 15, 2004

RAND Study of Realized Results (Six Cases)RAND Study of Realized Results (Six Cases)

The expected savings ranged from 41 to 59 percent for contractor wins, and from 34 to 59 percent for in-house wins. RAND found that the contract savings were sustained over time. No cost data was kept for the in-house wins, so direct comparisons could not be made. However, the final headcounts were comparable to the MEO’s bid (authorizations are a pretty good proxy for personnel costs).

The expected savings ranged from 41 to 59 percent for contractor wins, and from 34 to 59 percent for in-house wins. RAND found that the contract savings were sustained over time. No cost data was kept for the in-house wins, so direct comparisons could not be made. However, the final headcounts were comparable to the MEO’s bid (authorizations are a pretty good proxy for personnel costs).

34%

59% 59%

51%

45%41%

0%

10%

20%

30%

40%

50%

60%

Personnel Savings Observed in Competitively Sourced DoD Activities

In-house

Contract

Case 1 3 4 5 62

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The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

23

The Results to Date

November 15, 2004

Impact on Small BusinessImpact on Small Business Between 1995 and 2001 DoD conducted 784 public-private competitions

79% of all contracts awarded were to small businesses*

Additionally, many of the large contracts had requirements for a significant share to go to small businesses as sub-contracts.

Navy-Marine Corps Intranet and NSA Intranet mandate a 35% for small business set-aside

10% must be used for Direct Labor Costs

Between 1995 and 2001 DoD conducted 784 public-private competitions

79% of all contracts awarded were to small businesses*

Additionally, many of the large contracts had requirements for a significant share to go to small businesses as sub-contracts.

Navy-Marine Corps Intranet and NSA Intranet mandate a 35% for small business set-aside

10% must be used for Direct Labor Costs

Advertising competitions on the world-wide-web has significantly increased small business participation. For example, NAVSEA’s Seaport e-business portal set a goal of assigning 35% of subcontracted work to small businesses. Also, seven of the 20 multiple award contract (MAC) holders were small businesses.**

Advertising competitions on the world-wide-web has significantly increased small business participation. For example, NAVSEA’s Seaport e-business portal set a goal of assigning 35% of subcontracted work to small businesses. Also, seven of the 20 multiple award contract (MAC) holders were small businesses.**

*Michael Wynne testimony, 13 Mar 02

**David C. Weld, SeaPort: Charting a New Course for Professional Services Acquisition for America’s Navy, IBM Endowment for the Business of Government, June 2003

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The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees

will be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees

will be involuntarily separated (RIFed). The government will lose control

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The Results to Date

November 15, 2004

Effects on Employees—Effects on Employees—GAO Examined Three A-76 Studies

One in-house win, two contractor wins

2190 billets before (1079 military & 1111 Civilian)

One in-house win, two contractor wins

2190 billets before (1079 military & 1111 Civilian)

All military transferred Civilian workforce reduced to 348

All military transferred Civilian workforce reduced to 348

Effects of A-76 Studies on Federal Employees Employment, Pay, and Benefits Vary

GAO-01-388, March 2001

26.5%

65.5%

8.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Transferred Voluntarily Retired orSeparated

Involuntarily Separated

Effects of Federal Employees

26% of these took jobs with the contractor

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The Results to Date

November 15, 2004

Effects on EmployeesEffects on Employees

CNA Study*– DoD programs found to be very effective in minimizing

involuntary job losses– 40% of employees targeted for RIFs from depot maintenance

facilities found other DoD or federal jobs; many other hired by winning contractor; and others chose to retire

– Only 3.4% were actually RIFed Department of Interior**

– Smart planning allowed for 475 positions to be competed without anyone losing their job

CNA Study*– DoD programs found to be very effective in minimizing

involuntary job losses– 40% of employees targeted for RIFs from depot maintenance

facilities found other DoD or federal jobs; many other hired by winning contractor; and others chose to retire

– Only 3.4% were actually RIFed Department of Interior**

– Smart planning allowed for 475 positions to be competed without anyone losing their job

*CNA Report CAB 96-62, Case Studies in DoD Outsourcing, Jan 1997**Government Executive, March 31, 2003

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The Results to Date

November 15, 2004

Effects on EmployeesEffects on EmployeesAnalysis of almost 1200 DoD “studies” (competitions) demonstrates that only a small percentage of federal employees are involuntarily separated as a result of competitive sourcing.

(Forthcoming Gansler & Lucyshyn IBM Center for the Business of Government Report, Competitive sourcing: What Happens to Civilian Employees)

Analysis of almost 1200 DoD “studies” (competitions) demonstrates that only a small percentage of federal employees are involuntarily separated as a result of competitive sourcing.

(Forthcoming Gansler & Lucyshyn IBM Center for the Business of Government Report, Competitive sourcing: What Happens to Civilian Employees)

Winning Bid Involuntarily Separated

Retired Transferred to other gov’t job

Temporary employees terminated

Unfilled civilian authorizations

Total positions reduced

In-House 647 1,893 5,128 339 839 8,846Contract 2,680 5,373 5,845 1,475 633 16,006ISSA 0 0 1 0 0 1Total positions reduced

3,327 7,266 10,974 1,814 1,472 24,852

As % of positions reduced

13% 29% 44% 7% 6% 100%

As % of civilian FTEs competed

5% 11% 16% 3% 2% 38%

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The Results to Date

November 15, 2004

ConcernsConcerns

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

Performance will Deteriorate. Costs will be higher, since government

employees are paid less and they don’t charge a fee.

Promised Saving (from the competitions) will not be realized over time.

Small Businesses will be negatively impacted. Large numbers of government employees will

be involuntarily separated (RIFed). The government will lose control

29

The Results to Date

November 15, 2004

Loss of ControlLoss of Control

In reality, the senior government managers now have far greater control

– They can use the competitive market to reward or replace, based on measured performance and costs (vs. their lack of control—or visibility—in the presence of a government monopoly)

In reality, the senior government managers now have far greater control

– They can use the competitive market to reward or replace, based on measured performance and costs (vs. their lack of control—or visibility—in the presence of a government monopoly)

But the government has the full responsibility to manage the contract and the contractor (or they will lose control)

* Based on the multiple surveys at the state and local level (F.S. Savas, Privatization and Public Private Partnerships, Chatham House, 2000, p. 285)

“The greatest impediment to privatization by contracting is the fear of loss of control [by government managers].”*

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The Results to Date

November 15, 2004

Perceptions that PersistPerceptions that Persist

Performance will deteriorateUsing government employees will cost lessPromised cost savings (from the competition) won’t

be realized over timeSmall businesses will be negatively impactedLarge numbers of government employees will be

involuntarily separated (RIFed)Loss of control by government management

Performance will deteriorateUsing government employees will cost lessPromised cost savings (from the competition) won’t

be realized over timeSmall businesses will be negatively impactedLarge numbers of government employees will be

involuntarily separated (RIFed)Loss of control by government management

The empirical data refute all six of these perceptions

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The Results to Date

November 15, 2004

Implementation Issues In 2002 – 2003Implementation Issues In 2002 – 2003(found by GAO study Feb 2004)(found by GAO study Feb 2004)

Consistent Inventories of jobs to be competed Focus on Performance and Efficiency vs. number of jobs Skilled personnel to run the competitions Adequate resources to run the competitions Agency Strategic Approach to competitive sourcing Changing OMB and Congressional competition rules

Consistent Inventories of jobs to be competed Focus on Performance and Efficiency vs. number of jobs Skilled personnel to run the competitions Adequate resources to run the competitions Agency Strategic Approach to competitive sourcing Changing OMB and Congressional competition rules

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The Results to Date

November 15, 2004

Competitive Sourcing 2002 and 2003Competitive Sourcing 2002 and 2003**

HHS

Interior

Jobs contracted out Jobs won in-house

Overall, for 17,000 full-time positions competed, 76% were

won in-house

Overall, for 17,000 full-time positions competed, 76% were

won in-house

1,515

1,210

1,757

968

HHS

Interior

2,483 positions studied

2,967 positions studied

* GAO report, Competitive Sourcing, GAO—04-367, Feb 2004

9,993 positions studied

7,826

2,167

Defense

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The Results to Date

November 15, 2004

Competitive Sourcing in FY 2003Competitive Sourcing in FY 2003

# OMB Report on Competitive Sourcing Results FY 2003, May 2004

In-house organizations win 89% of competitive sourcing studies “Studies” completed: 662* (570 streamlined, 92 standard) FTEs studied: 17,595

Average incremental cost per FTE studied: $5,000**

Results: estimated savings from completed competitive assessments***

Gross: $1.19 billion (over three to five years) Net: $1.1 billion (over three to five years) Annualized gross savings: $237 million Annualized net savings per FTE: $12,000

* excludes direct conversions; includes 4 standard competitions completed in the first quarter of FY 2004.** these are one time expenses *** aggregate cost and savings figures were derived from agency calculations made in accordance with the general methodologies described in OMB Memorandum M-04-07.

In-house organizations win 89% of competitive sourcing studies “Studies” completed: 662* (570 streamlined, 92 standard) FTEs studied: 17,595

Average incremental cost per FTE studied: $5,000**

Results: estimated savings from completed competitive assessments***

Gross: $1.19 billion (over three to five years) Net: $1.1 billion (over three to five years) Annualized gross savings: $237 million Annualized net savings per FTE: $12,000

* excludes direct conversions; includes 4 standard competitions completed in the first quarter of FY 2004.** these are one time expenses *** aggregate cost and savings figures were derived from agency calculations made in accordance with the general methodologies described in OMB Memorandum M-04-07.

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The Results to Date

November 15, 2004

Federal Acquisition Council/OMB Release “Best Federal Acquisition Council/OMB Release “Best Practices” Guide*Practices” Guide*

The Federal Acquisition Council (FAC), with OMB, published a “best practices” guide to help agency officials manage their competitive sourcing efforts in the most strategic and results-oriented manner possible. The guide finds that competitive sourcing works best when agencies:

Conduct thorough preliminary planning and strategically group -related activities

Take advantage of competition to reorganize and enhance the efficiency of in-house activities

Link competitive sourcing decisions to human capital considerations

Utilize tailored management tools to keep managers focused on results

Seek the assistance of able contractors to provide technical support and business acumen.

The Federal Acquisition Council (FAC), with OMB, published a “best practices” guide to help agency officials manage their competitive sourcing efforts in the most strategic and results-oriented manner possible. The guide finds that competitive sourcing works best when agencies:

Conduct thorough preliminary planning and strategically group -related activities

Take advantage of competition to reorganize and enhance the efficiency of in-house activities

Link competitive sourcing decisions to human capital considerations

Utilize tailored management tools to keep managers focused on results

Seek the assistance of able contractors to provide technical support and business acumen.

*FAC/OMB, Managers Guide to Competitive Sourcing, February 20, 2004

35

The Results to Date

November 15, 2004

Why is More Not Being Done?Why is More Not Being Done?

There is limited analysis and even that receives low visibility.

Opponents are highly proactive

There is little education and training.

There is limited analysis and even that receives low visibility.

Opponents are highly proactive

There is little education and training.

The Congressionally-mandated A-76 commission and the May 2003 OMB new circular are a major step forward (e.g. reduced time to compete; award on “best value”; track governmental costs)

Yet fierce resistance (in Congress, from the Unions, and the workforce persists)

Implementation is critical

36

The Results to Date

November 15, 2004

The Timing Is RightThe Timing Is Right

President and OMB pushing Agencies are short of moneyGovernment has people problems

(retirements and skill mix)

President and OMB pushing Agencies are short of moneyGovernment has people problems

(retirements and skill mix)

37

The Results to Date

November 15, 2004

A Helpful StepA Helpful Step

More education and research needs to be done on government efforts to outsource, competitively source, privatize, and form public-private partnerships to:

Greatly improve the process (in both time and costs)Collect and analyze lessons learnedDevelop a comprehensive data base of realized resultsProvide guidance on the best approach (i.e. competitive

sourcing, privatization, outsourcing, Public/Private partnership, etc.) for each application

Identify the most effective strategies to train for, plan, and conduct successful competitions, transitions, and subsequent management

Analyze best practices and available tools for achieving “soft landings” for government workers impacted

More education and research needs to be done on government efforts to outsource, competitively source, privatize, and form public-private partnerships to:

Greatly improve the process (in both time and costs)Collect and analyze lessons learnedDevelop a comprehensive data base of realized resultsProvide guidance on the best approach (i.e. competitive

sourcing, privatization, outsourcing, Public/Private partnership, etc.) for each application

Identify the most effective strategies to train for, plan, and conduct successful competitions, transitions, and subsequent management

Analyze best practices and available tools for achieving “soft landings” for government workers impacted

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The Results to Date

November 15, 2004

Results show that, no matter who wins the competition, performance has improved and

the cost savings average at least 30%

Results show that, no matter who wins the competition, performance has improved and

the cost savings average at least 30%

SummarySummary