The government yesterday revised its policy for purchasing services from the private sector, making several controversial changes that could make it easier for private firms to compete head-on for jobs now held by 186,000 federal workers.
The revisions to the Office of Management and Budget's Circular A-76, which dictates how and when agencies can hire private firms, initially could save $1 billion per year either by making agencies perform tasks more efficiently or forcing them to turn them over to private companies, the OMB said. Within five years, the changes could save the government up to $5 billion annually, it predicted.
The government has identified about 11,000 "commerical tasks" now done by federal workers that could be handled by private firms. The jobs are considered not "inherently governmental," and include such services as building maintenance, security services and key-punching.
Under the new rules, which were published in yesterday's Federal Register and take effect immediately, agencies must review all commercial tasks by Sept. 30, 1987, to determine if private firms could do them more cheaply. The OMB originally planned to propose the rules more than a year ago, but had to delay them when federal workers protested a draft version.
In order to make the competition fair, the OMB has created a controversial cost-comparison method to allow an agency to compete with private firms based on what it estimates its cost could be, rather than what its actual costs are, an OMB spokesman said.
For example, if an agency now performs a task with 50 workers, but felt it could do the same job with only 40, it would be allowed to compute its personnel costs based on the lower figure. If a private firm wanted to take over the job, it would have to prove that it could do it for at least 10 percent less than the agency's projected cost.
If the contractor beat the government's price, the agency would be required to turn over the job. If the government won, it would be required to cut its work force to 40 employes. Either way, the OMB said, the cost of the program would be cut.
The OMB agreed to give agencies the right to estimate "the most efficient and cost-effective" way to perform a job, after several officials complained it was unfair to force agencies to compete with the private sector without first letting them try to make their operations more efficient.
The new rules will allow agencies to "contract out" services currently being done by 10 or fewer employes without performing a cost-comparison study, which can take up to two years and cost several thousand dollars, OMB said. Previously, an agency wasn't required to make a cost comparison if the service cost less than $100,000 per year.
Some critics complained that the switch will allow agencies to turn over jobs that involve millions of dollars a year without a comprehensive review. But the OMB said that 75 percent of the commercial activities subject to the A-76 program are in the Defense Department, which is required by law to conduct a cost study before turning over a job, regardless of its size. The OMB said that 92 percent of the jobs involving fewer than 10 persons at other agencies are worth less than $250,000 each annually.
The OMB said it is still developing a policy that will require contractors to give qualified federal employes the first shot at jobs with the contractor if they are displaced. Some government studies have estimated that up to 400,000 federal employes could be displaced by such contracting, but the OMB said it has identified fewer than 200,000 jobs that might be eliminated.
The OMB also changed its rules to require nonprofit groups, such as universities and state and local governments, to add an amount equal to the taxes that would be paid by the lowest tax-paying bidder to make their bids more comparable with the bids of private firms.