Can Small Business Compete...
Small business access to government contracts continues to be a touchy issue in the nation’s capital. The intractable nature of the procurement process and culture has tormented small business advocates for years.
Could a recently overhauled program designed to allow private firms to compete with government for the public services it provides be one solution?
It’s called “competitive sourcing” – a process for determining whether a commercial activity performed by the government, in-house, can be more efficiently delivered by the private sector. The Office of Management and Budget (OMB) recently announced an overhaul of the program, which shortens and simplifies the process through which private firms compete for such business.
According to the OMB, “hundreds of billions of dollars each year” are spent on commercial services performed in-house by government divisions and employees. Such services include software consulting, laundry services, eyeglass-making, research and lab work, fee collection at National Parks, landscaping and many others that can be performed by the private sector.
Though private businesses will be fully encouraged to compete for an array of work, government providers still have a good shot at winning these competitions. Data from OMB reveals that 60% of the competitions are won by the agency’s government provider. Even when the government wins, however, competitions result in lower costs.
“It is an established fact that fair competition can save taxpayers an average of 30 percent, whether the work is ultimately done in-house or by outsiders. Whoever wins the competitions, we can be confident that taxpayers will,” said former OMB Director Mitch Daniels in unveiling the overhauled process.
OMB’s program revamp streamlines a process that has discouraged the private sector from participating in these public-private competitions. The revisions aim to fix the complexity of the process, and shorten the period of time it takes to hold a competition. In the past, when competitions did occur, they sometimes took up to four years. The changes also encourage department and agency managers to vastly expand public-private competitions.
The overhaul of the competitions process stems from Circular A-76 – a set of government policies and procedures that are supposed to guide the federal government in determining whether public or private sources will undertake its commercial activities and services. The roots of A-76 date back to 1955, when the federal government seemed to express concern about “mission creep.” The original Bureau of the Budget’s Bulletin 55-4 stated that the federal government would “not start or carry on any commercial activity” that the private sector could do.
The A-76 circular has been changed several times over the years, with the last major revision in 1983. The Clinton Administration revised it somewhat in 1996, enhancing the number of Department of Defense (DoD) competitions. The DoD now conducts the most competitions of all the federal agencies. The latest revisions to A-76 eliminate the 18-page definition of what is “inherently governmental.” It limits the length of time of the competition – reducing it to a maximum of one year.
Naturally, government workers are concerned about the initiative as it may threaten jobs. But OMB contends that government workers have built-in advantages, and are still expected to win many of the competitions. The new A-76 process is not privatization or outsourcing because the government still retains ownership and control of the commercial activity.
If government holds the competitive upper hand in these public-private competitions, do small, private contractors really have a shot at business?
According to OMB, the studies they point to reveal that when the private sector does win one of these competitions, a small, women-owned or minority-owned business wins 60 percent of the time. That beats the current system-wide federal procurement score, where women-owned firms received 2.86 percent of federal contracts in 2002, despite a 5 percent goal. Small businesses in total won 22.6 percent of federal contracts just missing a 23 percent goal. Small disadvantaged businesses exceeded a 5 percent goal by winning 6.67 percent of federal contracts.
Learning from current barriers to acquiring federal contracts, “competitive sourcing” may work well if the officials responsible for implementing each agency program are fully committed, at the get-go, to making small businesses a meaningful part of the contracting mix. Small business participation will only occur if:
• The competitive sourcing bid process is transparent and truly simple.
• Bidding opportunities are easily accessible and not hard to find.
• The work/contract requirement is written in “plain English”.
• Small businesses have access to contract decision makers – not just small business representatives in agencies that help them navigate the process.
• Results show small business actually win. (The Competitive Sourcing Official (CSO) in each agency may consider compiling a yearly report on each public-private competition, the outcome and rationale for awarding the “win.”)
• Small businesses feel they have a fair shot at winning – CSOs must be independent, neutral parties and their jobs must be structured to reflect this.
• Congress conducts regular oversight, oversight, oversight – one or two hearings a year won’t change a thing.
• There is agency accountability. OMB must use both the carrot and stick – publicly acknowledge and award agencies for doing good work and hold those accountable that are not.
The whole point of competitive sourcing is for government to be more accountable to taxpayers when it comes to spending their hard-earned money. Small business can help if the government is truly committed to making them part of the solution.
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Karen Kerrigan is chair and founder of the Small Business Survival Committee.
