The Foreign Service Journal, April 2004

worker effort, contracting is, in fact, a pro-competition/anti-mono- poly policy based on seeking the best work for the lowest cost. Although OMB’s circular is often widely criticized as cumber- some and time-consuming to use, many of the required procedures stem from an attempt to make the process as fair as possible to the existing work force, and to give them every opportunity to com- pete for the work. And the fact is that the existing government work force wins about half of the competitions conducted under the A-76 guide- lines by improving their operations and lowering costs. Not Only Cost Savings Admittedly, the chief attraction of competitive con- tracting to the government, and to the taxpayers who fund it, is that it has the potential to save considerable sums of money. Since the program’s origins in the mid- 1950s, much of the competitive contracting conducted by the federal government has been by the U.S. Department of Defense, and the outcomes of all these competitions since the 1970s has been compiled and studied by the CNA Corporation (formerly the Center for Naval Analysis, a not-for-profit corporation created by the Department of Defense decades ago to provide the department with independent research and evalua- tion). In a recent review, CNA found that since 1978 the DOD has conducted 2,300 formal A-76 competitions covering 81,000 civilian and military positions, and overall these competitions led to an average saving of 33 percent over previous costs. Another study of DOD contracting — this one by the U.S. General Accounting Office — found that during the period 1995 to 2000, DOD conducted 286 separate competitions under the guidelines of OMB’s Circular A-76, and estimates that these competitions yielded annual savings of $290 mil- lion. Impressive cost savings were achieved in another agency through competitive contracting. During the tense debate in the U.S. Senate in late 2003 on the issue of whether the FAA should be exempt from the president’s con- tracting program, the U.S. Depart- ment of Transportation released the financial and performance results from the 218 air traffic control tow- ers that have been operating under contract for many years. An April 2000 study of 187 Level 1 towers by DOT’s inspector general found that the agency saved $250,000 per year, per tower, through competitive con- tracting. It also estimated that the potential savings from contracting out the operations of another 71 FAA-operated towers could yield as much as $881,000 per tower, largely as a consequence of the sub- stantial pay raises received by federal tower operators in the intervening years. Subjecting federal offices and services to competi- tion usually also has the beneficial effect of forcing them to take a hard look at their operations, ferret out waste and restructure in a effort to win the contract and retain the business. CNA reported in 1996 that between 1978 and 1994, 48 percent of the A-76 com- petitions conducted by DOD were won by in-house teams that had reorganized to improve performance. These winning bids saved 20 percent over previous costs, compared to the 40-percent savings earned when a private company won the bid, according to CNA. In late 2003, for example, the National Park Service’s Southeast Archeological Center was put out for competition, but the existing staff reorganized the operation, reduced costs by $850,000 per year, and won the contract. In early 2004, following the FAA’s deci- sion to put the half-billion-dollar operation of the flight service stations out for bid, the existing employees teamed with a private sector corporation to submit a joint bid in competition with the nine other private companies competing for the contract. USAID and State: Potential Opportunities? Despite the administration push and demonstrated cost savings, however, the competitive contracting pro- gram is advancing only slowly. More often than not, the most significant obstacle in the federal bureaucra- cy is agency foot-dragging: time-consuming appeals, differences of opinion about what jobs are commercial F O C U S 42 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 4 Ron Utt is a policy analyst at the Heritage Foundation. In fact, the program had its origins in the 1950s, and has received substantial bipartisan support from nearly every president since then.