Public vs. Private: May the Best Contractor Win | Citizens Against Government Waste

Public vs. Private: May the Best Contractor Win

The WasteWatcher

The government should not compete with its citizens; it should rely on the private sector for commercially-available goods and services.  This is a common-sense idea: allow individuals, small businesses, and entrepreneurial companies to contract with the government, instead of creating duplicative and expensive government-run agencies and programs. 

While this may sound like a novel proposal, the idea made its debut as federal policy in 1955 during the Eisenhower Administration.  The 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 perform.  Since 1966, this policy has been expressed in the Office of Management and Budget’s (OMB) Circular A-76, which sets forth guidelines and procedures for determining whether an activity should be performed by federal employees or contracted out to the private sector.  

Unfortunately, things went terribly awry somewhere between Eisenhower and Obama.  Over the years, the size of the federal bureaucracy has exploded.  According to the U.S. Office of Personnel Management, the federal government currently employs 1.6 million executive branch, non-postal, full-time, permanent employees.  Of these positions, more than half, or some 850,000 jobs, are “commercial” in nature.  They include engineering, laundry, computer support, custodial services, fee collection, eyeglass-making, and landscaping, to name just a few.  Less than 10 percent of these 850,000 commercial government positions have ever been subject to outside competition.

It is clear that the grossly swollen government is in need of some trimming.  The Department of Defense, the Government Accountability Office (GAO), and the Center for Naval Analysis have all found that competitive bidding leads to cost savings of more than 30 percent, not to mention improved performance and overall effectiveness.

Government competitions, however, have recently been suffering a slow death.  A provision that was quietly slipped in to the fiscal year 2009 Omnibus Appropriations Act placed a government-wide moratorium on new job competitions for federal work until September 30, 2009.  The bill not only killed Circular A-76, it also stipulated that federal agencies must establish guidelines to both keep new projects in-house and bring back government work currently being performed by private contractors.  

In an effort to overturn this misguided policy, Sen. John Thune (R-S.D.) and Rep. John Duncan, Jr. (R-Tenn.) recently introduced S. 1167 and H.R. 2682, the Freedom from Government Competition Act of 2009.  The companion bills provide a formal process to review commercial government activity, ensuring fair market competition that will ultimately save taxpayers billions.  The legislation codifies a “Yellow Pages” test that will subject government products and services to competition with main street businesses that can produce the same results.  This will ensure that agencies employ the most cost-effective option for providing government services.  If these reviews are completed within the next five years, taxpayers could save up to $28 billion annually.

Legislators who protect extraneous government jobs out of fear of political backlash should be reminded that competition does not mandate outsourcing.  It does, in fact, establish a real competition between public and private sectors, forcing each party to streamline operations and present their best offers.  If federal employees can provide the best value to taxpayers, the job will be in-sourced.  In 2004, agencies completed 217 competitions between the public and private sector involving more than 12,500 full-time equivalent positions.  Government employees won 91 percent of these competitions, and still generated a net savings of $1.4 billion over three to five years.

The recent abolition of OMB Circular A-76 has left many scratching their heads.  Lawmakers should be making an effort to cut costs wherever possible, especially at a time when the economy is floundering and the national debt is $11.4 trillion and growing.  The government spends billions each year on projects that, if subject to competition, could be completed at a lower cost without affecting quality.  The American people deserve the most cost-effective option, because they are, after all, the ones who perpetually foot the bill.

Erica Gordon

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