Summary

Federal agencies are required to use the procedures contained in OMB Circular A-76 in determining whether commercial services should be performed by government personnel or through contracts with private-sector entities. In general, the circular instructs agencies to base these decisions on competitions among public and private-sector entities conducted in accordance with the Federal Acquisition Regulation (FAR). Under the FAR, agencies have broad discretion in establishing the criteria they will use to select the winners of these competitions. An agency may decide, for example, that selection of the lowest priced, acceptable offer would best meet its needs. The FAR advises that this may be appropriate when requirements are clearly defined and the risk of unsuccessful performance is minimal. On the other hand, the FAR says that it may be in the best interest of an agency to provide for selecting other than the low offer when requirements are less definite, development work is required, or the risk of unsuccessful performance is high. An evaluation scheme that allows for considering the relative importance of both price and technical factors (such as an offeror's management capability, experience, or ability to apply new technology) is commonly known as the "best value" tradeoff process. The use of best value permits tradeoffs between price and non-price factors, allowing acceptance of other than the lowest-priced proposal. Although the FAR allows agencies to use different source selection approaches, public-private competitions at DOD must comply with section 2461 of title 10 of the U.S. Code. That section requires that before a function being performed by 10 or more DOD civilian personnel may be converted to performance by a contractor, DOD must determine that performance of the function by a contractor, rather than by DOD employees, will result in savings to the government over the life of the contract. In essence, section 2461 prevents DOD from using the best value tradeoff process to award a contract that would cost the government more than continued performance by the government. The pilot authority in section 336 temporarily permits DOD to use the best value tradeoff process in competitions for IT services to award contracts at costs that may be higher than government performance, when doing so would provide DOD the greatest overall benefit.

According to defense officials, the pilot authority in section 336 has not been used for a variety of reasons, ranging from the lack of suitable candidate competitions to the absence of departmentwide guidance. The Office of the Secretary of Defense (OSD) Office of Housing and Competitive Sourcing identified 12 competitions (1 Navy, 1 Defense Logistics Agency (DLA), 5 Air Force, 5 Army) that involved IT services during the pilot program period by querying the Defense Commercial Activities Management Information System (DCAMIS). Presented below are the reasons the authority of section 336 was not used in those 12 competitions. The Navy reported that for the DCAMIS-identified IT services competition it conducted after the enactment of section 336, it determined that achieving the best value for the Navy did not require any trade-offs between price and non-price factors, such as the application of new technology. DLA officials told us that its DCAMIS-identified competition involved only two IT services positions out of a total of 102 positions it was competing. Accordingly, DLA did not believe that a best value approach was justified since the two IT services positions comprised just a small fraction of the positions it was competing. Air Force officials told us that the service did not participate in the pilot because the DOD Competitive Sourcing Official did not authorize its use. In its written response to our question, the Air Force said that although section 336 of Public Law 108-136 allows DOD to create a pilot program, the statute gives no authority to the component services. Accordingly, the Air Force position is it has no authority under the statute to conduct a best value tradeoff source selection. An Army official advised us that using a best value tradeoff process on an Army Corps of Engineers IT competition that started in 2004 would have complicated an already complex competition, and the Army therefore chose not to use the pilot program authority. That competition involved about 1,300 positions at 50 different locations. The Army's competitive sourcing official told us that since that time the Army has not used the pilot authority because it received no OSD guidance regarding the use of best value tradeoffs in IT competitions. The Army stated that, absent OSD guidance on using the pilot program, the advice from OSD to the services and defense agencies has been to use low-price, technically acceptable acquisition strategies.