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STATEMENT BY
THE HONORABLE MICHAEL W. WYNNE
PRINCIPAL DEPUTY UNDER SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS

BEFORE THE
SUBCOMMITTEE ON READINESS
HOUSE ARMED SERVICE COMMITTEE
UNITED STATES HOUSE OF REPRESENTATIVES

CONCERNING
OUTSOURCING, PRIVATIZATION AND A-76 ISSUES

 

Chairman Hefley, Mr. Ortiz and distinguished members of the committee; I am pleased to have this opportunity to appear before you today to discuss the Department's competitive Sourcing program and upcoming plans relative to the proposed revision to OMB Circular A-76.

The Department must continue to do business better, faster and at reduced cost to maintain our focus on readiness.  In order to focus on what we do best - - our core mission activities - - we must become more efficient in our support, or non core, services.  When subjected to competition, our workforce, as dedicated as they are, as well as other service providers, can and do provide support services at not only a lower cost, but with greater speed and efficiency. 

The Department of Defense has, by far, the most experience in the federal government in competing its support Services using the public-private competition process defined by OMB Circular A-76.  During the Fiscal Years 2000 through 2002, we completed approximately 570 A-76 competitions with about 56,000 positions, and we are scheduled to complete A-76 competitions on an additional 15,000 positions by the end FY03.   The 570 completed A-76 competitions have resulted in either a contract or in-house decision that will generate over 5 billion dollars in savings (cost avoidance) over the life of the contracts, normally about 5 years.  Furthermore, our studies verify these savings are real and persist over the entire performance period.  These savings and efficiencies are most often attributed to the A-76 process, but in reality they are a result of the competition, not the specific process.

In fact, the old A-76 process was often lengthy, complex and frustrating for all involved.  That very frustration is, in part, an evolutionary outgrowth of many attempts, over time, to address legitimate concerns to protect the interests of all participants:  government employees, private sector competitors, federal managers and taxpayers.  But, as many witnesses testified during the hearings of the Commercial Activities Panel, the old A-76 process had become too lengthy, adversarial and distrusted by all participants.

The Office of Management and Budget (OMB) has now issued a proposed revision to OMB Circular A-76 to address recommendations made by the Commercial Activities Panel in May of last year.  We believe the proposed revision offers promising and overdue improvements to the A-76 process, especially with respect to aligning it more closely with procedures already used under the Federal Acquisition Regulations. The proposed revisions were published in December for review, and we have supplied comments as have all interested parties.  Let me mention a few key aspects of the proposed revision:

• We support the intent of the proposed 12 month time limit. The length of the existing process must be reduced to minimize the anxiety and uncertainty concerning the outcome. Our experience indicates some our larger and more complex competitions may take longer and we understand flexibility exists to identify, upfront, those that would exceed 12 months.

• We also support the concept of the Agency Tender Official (ATO) to represent the government bid. We are working to decide at what level this official will be provided.  Additionally, the Department's General Counsel has expressed concern with what the appropriate source of legal advice to the Agency Tender Official should be to maintain appropriate separation between the government bid and the source selection process.  Numerous new responsibilities like these are created by the new process and must be worked out once the Circular is finalized.

• We recognize that accurately costing the government proposal remains a major challenge under the proposed new process. The Commercial Activities Panel recognized the Department's costing model as an example for use in all federal competitions and we have continued to improve this important tool. OMB's proposed revision to Circular a-76 is completely consistent with our costing model but will require updates to our software to reflect changes in the process, as well as terminology change.  We are working closely with OMB and other federal agencies to ensure these updates can be promptly completed following release of the final revision to the Circular.

• One of the proposed competitive procedures would authorize agencies to conduct cost-technical tradeoffs, to select the source that would provide the best value in public/private competitions.  Just as we seek to conduct these tradeoffs in our normal private sector acquisitions, we would like to employ them in the A-76 process as well.  The Department is limited in this regard by our statutory requirement to make decisions on a cost only basis.  We have submitted a proposal seeking legislative seeking relief from the restriction of USC 10 2462.  All too often we receive little or no private sector interest when we compete our commercial activities because our solicitations invite low cost proposals using old business processes.  This discourages innovation in both public and private sector proposals.

We will continue to collaborate with OMB as they finalize the Circular and expect the final version to provide a fresh start in our attempts to use public private competition to improve our support services.

The Department has long been the leader in the federal government in competing commercial functions with the private sector under OMB Circular A-76 and fully supports the President's Management Agenda for competitive sourcing.  OMB identified for DoD a long-term competition goal for 226, 000 positions (50% of the FY2000 FAIR inventory of 452,000 positions).  DoD is on track to meet our interim 15% goal of completing A-76 competitions on 67,800 positions by the end of FY 2003.  The remaining 35% will be met using both A-76 competitions and "Alternatives to A-76" developed in conjunction with our core competency review initiated by our Business Initiatives Council.  The BIC is charged with changing our business processes to improve mission effectiveness and reduce costs.   While the Department continues to conduct A-76 competitions, we believe the Department and taxpayers are best served by employing a wide range of business tools designed to make our operations more efficient.  The respective Military Departments are developing plans for submission with the FY 2005 program to meet the long term President's Management Agenda targets.  The Army's "Third Wave" initiative is an example of one such effort to explore various alternatives to A-76. The Army expects to have their core and non-core functions identified by April 2003 and will then determine specific implementation plans.

We are not standing still.  As problems are identified, we are proactive in streamlining our process and improving our tools.  Our knowledge management website "Share A-76" is an established tool for identifying and analyzing best practices and lessons learned from competitive sourcing studies receiving approximately 12,000 hits from visitors both inside and outside the Department.  The Defense Commercial Activities Management Information System (DCAMIS) is a real time web-based tool we use to track execution of our competitive sourcing program.  It gives us the ability to answer questions and make management decisions using actual execution data.  We continue to seek process improvements from lessons learned and best practices. 

Mr. Chairman and Committee members, thank you again for the opportunity to address these important issues with you today and I am happy to answer any questions you may have.