With Automatic Spending Cuts Looming, the Federal Government Should Use Contracting

The federal government is prohibiting cost-effective partnerships with the private sector

Fifty-seven years ago this month, January 15, 1955, President Dwight Eisenhower promulgated a federal policy that is as relevant today as it was the day it was issued, if not more so. In 1955 Bureau of the Budget Bulletin 55-4 stated, “The Federal government will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels

While that document still exists, now found in Office of Management Budget Circular A-76, that policy statement does not as the Bush Administration removed it in 2003. And now the current one calls for public-private cost comparisons to determine whether federal employees or private contractors should carry out governmental activities that are commercial in nature.

Regrettably, even that common sense proposition is now dead. Congress enacted a provision in the recent “megabus” appropriations bill to prohibit agencies from beginning or even announcing “a study or public-private competition regarding the conversion to contractor performance of any function performed by Federal employees pursuant to Office of Management and Budget Circular A-76 or any other administrative regulation, directive, or policy.”

As a result of the congressional “Super Committee’s” failure to reach a consensus on budget reductions pursuant to the federal debt limit Congress voted for last August, sequestration, or automatic spending cuts, will kick in with across-the-board cuts in January 2013. And there may be additional defense spending cuts as well. President Barack Obama and Defense Secretary Leon Panetta unveiled a defense strategy earlier this month that they say will make the U.S. military, in the president’s words, “agile, flexible, and ready for a full range of contingencies and operations.”

When federal managers in civilian agencies and commanders in military operations are asked to make these needed budget reductions, they should not be prohibited from assessing whether or not the use of private contractors would help improve efficiency and lower costs for taxpayers.

More than 850,000 federal employees are engaged in commercial activities that duplicate, and in some cases compete with, private enterprise, including small business. These activities include non-governmental activivites ranging from architecture to zoology as well as: audits, buses, construction, debt and bill collections, engineering, equipment repair and maintenance depots, food service, furniture, information technology, laboratories, landscaping, laundry and dry cleaning, office products, mapping, meeting planning, marketing research, roofing, motorcoaches, printing, public storage, surveying, tax preparation, transportation and utilities.

A government that does virtually everything that can be found in the old Yellow Pages is a government that is simply too big to succeed.

Further compounding the problem is the Obama administration’s implementation of “insourcing” – the practice of giving federal employees work that was once carried out by contractors. This policy was designed to save money, but then-Defense Secretary Robert Gates eventually backed off of insourcing when such savings were not realized.

Undersecretary of Defense for Acquisition, Technology and Logistics for the Clinton administration Jacques Gansler said it best, “The surest way to reduce and hold down procurement costs is through competition, whether among commercial providers or between commercial providers and in-house government alternatives. For the latter cases, no matter who wins, the savings have been more than 30 percent.”

Or, as former New York Governor Mario Cuomo once said, “It is not a government’s obligation to provide services, but to see that they are provided.”

It is time to renew the Eisenhower policy, lower the cost of government, create private sector jobs, and have federal employees execute functions only government can perform.

John M. Palatiello is President of the Business Coalition for Fair Competition (