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Competitive Sourcing

Competitive sourcing is one of the five key elements of the President's Management Agenda. The objective of the initiative is to ensure that the American people receive the best possible value for their tax dollars. In order to accomplish this goal, the initiative uses a strategy that requires federal agencies to identify commercial-type activities performed by government employees and determine whether these activities are best provided by the private sector, by government employees, or by another agency through a fee-for-service agreement. In general, the competitive sourcing initiative intends to leverage the competitive forces of the market economy to improve government efficiency.

Competitive sourcing relies on a competitive process for awarding activities to qualified parties. Competitive sourcing is not the same as outsourcing, which assumes that the private sector can perform activities more efficiently than the government and does not allow a government organization the opportunity to compete. In contrast, competitive sourcing allows government organizations to compete for work based on the assumption that both the government and the private sector can deliver commercial services efficiently and cost-effectively.

Under The Federal Activities Inventory Reform Act (FAIR), P. L. 105-270 , federal agencies are required to identify the activities performed by their employees. By June 30th of each year, agencies must submit to the Office of Management and Budget (OMB) an inventory of all of the activities that an agency performs-inherently governmental activities as well as commercial activities-and the reasons for certain designations. Only federal employees can perform inherently governmental functions, which means that those functions cannot be subject to competition. Determining whether or not a function is inherently governmental is a difficult task. Usually, the amount of discretion used in performing the duties of the position is an important consideration. Agencies must justify their inherently governmental classifications in writing.

OMB reviews the inventory and may request additional justification for certain classifications. Once the inventory is finalized, OMB places a notice in the Federal Register announcing the availability of the agency's inventory on the agency's web site. If an interested party disagrees with the designation of an activity, a challenge may be filed. Interested parties include affected employees, unions, executive steering committees and any other stakeholders.

OMB Circular A-76 (Revised May 29, 2003) sets forth the procedures that federal agencies must use for the competition of commercial activities. The Circular authorizes two types of competitions: the streamlined and the standard. A streamlined competition may be conducted for activities that involve 65 or fewer full-time equivalents (FTEs). In general, streamlined competitions must be completed within 90 calendar days. In certain cases, an extension of 45 calendar days may be approved. As long as the new method is more cost effective, streamlined competitions are not required to save a specific amount of money. This is in contrast to a standard competition, where a private sector bidder must show a savings of at least 10% or $10 million (whichever is less) in order to win the competition. Standard competitions are generally conducted for activities that involve 65 or more FTEs. The competition may take up to 12 months to complete, with the possibility of an OMB approved six-month extension.

Regardless of who wins the competition, the winning bidder will be responsible for complying with the requirements in the Performance Work Statement (PWS). The PWS specifies all of the requirements that must be met in order to successfully perform an activity for the government. If a government organization wins the competition, new methods of performing certain functions may be needed in order to ensure that all of the PWS requirements are met. In this way, the competitive sourcing initiative improves post-competition management and accountability.

Finally, the competitive sourcing initiative does not have specific personnel reduction goals. The objective is to determine who can deliver the best value to the taxpayers. The competition process may change the number of staff needed to deliver a product or service. However, the magnitude of the change is a result of the competition. Changes are not made based on predetermined expectations.

President's Management Agenda

OMB Circular A-76 (Revised May 29, 2003)

The Federal Activities Inventory Reform Act (FAIR), P. L. 105-270

DOL 2003 FAIR Act Inventory (Release pending)

DOL 2002 FAIR Act Inventory

DOL 2001 FAIR Act Inventory

Frequently Asked Questions

Departmental Competitive Sourcing Policy (Release pending)

Training Presentations (Release pending)

Contacts (Release pending)

Competitive Sourcing Links

USDA Competitive Sourcing
NASA Competitive Sourcing