The Lowdown on the New Federal Competition Circular

Guidelines encourage competitive sourcing

Today the Office of Management and Budget released the long awaited revision of the A-76 circular, the regulations that guide competitive sourcing for the federal government. The new guidelines streamline and rationalize the process, bringing them in-line with the broader evolution of government contracting and existing federal acquisition regulations.

Some of the major changes in the A-76 circular:

  • Previously competitions were taking up to 4 years in some cases; the new guidelines allow for a 12 month timeline for standard competitions. The clock starts ticking from the moment agencies make a public announcement (a new requirement as well) at Note however, that a 6-month extension can be granted, but only by OMB for complex competitions. If the in-house bid fails to meet the timeline, they will be removed from the competition, another significant change in policy. Along those lines, the new guidelines disallow interagency waivers from competitions – only OMB can grant such waivers.
  • A shift to a more “best-value” approach, removing the low-cost selection in the old guidelines. This approach attempts to incorporate what we do as shoppers do everyday of our lives, we understand that the cheapest isn’t always the best choice. Best-value selection allows other factors like performance and quality be factored into the decision. Often outsourcing decisions are based on buying something different from the services traditionally provided in house. Best-value selection allows these differences to be properly weighed in context of goals and desired outcomes. The new guidelines will require that cost be weighted as much as the total of all other factors, or 50 percent.
  • Requirement that in-house winning teams be held to a performance agreement similar to a contract. If the in-house team wins and they do not perform to promised level or have cost overruns, it can lead to exclusion or points against them in the next round of competition. This makes the process more equal – it isn’t fair to require one level of certainty from one bidder and not the other. Before now, MEO’s were rarely held responsible for cost overruns, and poor performance-essentially the consequences of performance failure did not exist in the MEO.
  • The new circular removes direct conversions, where agencies could simply contract for activities where fewer than 10 FTE’s were involved. However, new language has been inserted allowing for a new streamlined competition. Agencies can use the new process for 65 and fewer FTE’s. Essentially they’ll conduct a cost comparison which could be as simple as calling potential bidders for a price, and filling out a single one-page form.
  • Agencies will now have to submit an inherently governmental inventory with their commercial inventory, and both will be published for the first time. And both lists can be challenged. Along those lines, the new guidelines allow the challenging of the designation of “Commercial Reason Code A,” where an agency has chosen not to compete a commercial activity. There are roughly 850,000 commercial activities identified by the FAIR inventory list, about 500,000 of those were designated as Reason Code A. The challenge mechanism will force agencies to provide written justification and be more diligent in their reporting.

While the new guidelines signal a significant improvement over the original A-76 guidelines, OMB unfortunately removed language that would have required Inter-Service Support Agreements (ISSAs) opened to competition.

Ultimately, the revisions encourage department and agency managers to significantly expand their use of competitive sourcing. The new guidelines make competitions easier while also reducing the time it takes to conduct them. The guidelines take effect immediately.

Geoffrey Segal is director of privatization and government reform at Reason Foundation.