U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

2004 Presidential Award for Management Excellence

Department of Treasury - Internal Revenue Service

Competitive Sourcing
Innovative and Exemplary Practices

Committed to using competitive sourcing to improve performance, IRS conducted its first full and open standard competition to evaluate work performed at three Area Distribution Centers (ADCs) and to recommend improvements. The ADCs comprise 550,000 square feet of combined leased warehouse space staffed by 400 full-time equivalent employees. These workers provide warehousing, inventory, and management services for more than 12,000 publications and process some 5 million customer orders annually. A bid solicitation for the competition, developed in partnership with the National Treasury Employee Union (NTEU), resulted in seven proposals: six from well-known private sector organizations and one from an in-house team called the Most Efficient Organization (MEO), which won the competition.

The MEO’s winning proposal projected a decline in business for the ADCs resulting from taxpayer preference for online access to forms and publications as well as electronic filing. The proposal recommended consolidating the ADCs to one facility, implementing state-of-the-art information technology, and reshaping the workforce. The MEO proposal projected a 63 percent reduction in the workforce and a net savings of $82.7 million over five years. In addition, the proposal and subsequent MEO activities focused on several key areas:

• Forming a performance work statement (PWS) team with representatives from the NTEU and ADC employees.
• Acquiring appropriate, just-in-time competitive sourcing training for PWS and MEO team members.
• Providing timely information about the competition and expected outcomes to ADC employees.
• Providing a wide variety of support services (both career and emotional) to employees affected by the reduction in force, including an outplacement program developed with the local and state Departments of Labor.
• Forming partnerships with the Department of Treasury and the Treasury Inspector General for Tax Administration for advice and program review.
• Informing external stakeholders—Congress, Department of the Treasury, the Office of Management and Budget, and the media—at key milestones.
• Capturing lessons learned and creating templates and toolkits for future work teams.

IRS projects final implementation in the spring of 2005 and has established plans for post implementation progress and accountability reviews to ensure a successful transition to the MEO, which will operate much like a contractor. A government program manager’s office will oversee implementation of the MEO and administer a quality assurance plan.

Several organizations have cited this competitive sourcing program study as an example of government best practices, including the Government Accounting Office, Department of the Treasury, University of Maryland School of Public Policy, the IBM Endowment for Business and Government, and the Federal Acquisition Training Council.