# Presentation: 519315

## President’s Management Agenda

**Competitive Sourcing**
**March 5, 2002**
**Tom Luedtke**
**Assistant Administrator for Procurement**

## What We Must Do

- Understand the purpose
- Understand the process
- Understand “Inherently Governmental”
- Accurately Code Commercial Activities
- Face the Facts of Life

## Understand the Purpose

**“...****when a commercial function performed by the public sector undergoes competition, that competition results in significant economic savings to the taxpayer...**
**	****Competition results in better value and improves performance by bringing viable, responsive, innovative and cost-effective competitors (public and private) to the table.”****	****	****	**
**	****	****	****	****	****Angela Styles**
**	****	****	****	****	****Administrator OFPP****	****	****	**

## Understand the Process

_**Centers:**_
- Inventory _activities_ (not just FTE)
- Characterize/Code the activities
- Plan competitive sourcing plans
- Implement OMB Approved Plan
_**HQ:**_
- Approve inventories and plans
- Submit integrated product to OMB

## Inherently Governmental

- 	Requires the exercise of discretion in applying Governmental authority or the use of value judgment in making decisions for the Government.

## Commercial Activities

- Anything not inherently governmental
- Codes:
- A – Specifically excluded from 			competition by Administrator
- B – Subjected to “competition”
- C - Exempt from OMB Circular A-76

## Category C: Most Flexibility

- The problem is to get the right people, the right skills, the right knowledge at the right place and at the right time (e.g. R&D, core capabilities).
- A cost comparison would be inappropriate.  The decision to convert to or from in-house or contract performance is not a cost-based decision.

## Facts of Life

- Integrity of coding is essential
- Center Directors are the key players
- We all must promote competition
- Categorize activities as commercial unless they are unequivocally inherently governmental
- R&D and Engineering, per se, are not inherently governmental
- Competitive Sourcing expends resources
- Workforce resistance

## Facts of Life: Human Capital

- NASA has a loyal, high-quality workforce
- Competition may cause redundancy
- Plan Human Capital Management:
- Right of First Refusal of Employment
- Re-training opportunities
- Relocation
- Early Outs
- Buy Outs
- RIF

## Competitive Sourcing: Near Term Schedule

- Inventory Guidelines and Call Letter 	Feb 27
- Issue OMB Update 				March 15
- Weekly guidance/issues telecons	thru	Apr 25
- Center inventories and Competitive
- 	Sourcing Plans (CSP) to HQ 		May 1
- Discussions with Individual Centers	May 2-31
- HQ review/adjustment			June 1
- Agency CSP 					June 14
- Begin Executive Review of CSP		June 17
- OMB submission 				June 30

## Competitive Sourcing

- Back-Up Charts

## Understand the Purpose

- Statement of Angela B. Styles, Administrator OFPP, Office of Management and Budget before the House Subcommittee on Technology and Procurement Policy – June 28, 2001
- “If there is one point to communicate today, it is this Administration’s commitment to public-private competitions, or what we commonly refer to as the Competitive Sourcing Initiative. Without regard to whether the public or private sector wins a competition, when a commercial function performed by the public sector undergoes competition, that competition results in significant economic savings to the taxpayer. Indeed, experience demonstrates that the use of public-private competition consistently reduces the cost of public performance by more than 30 percent.”
**“****Competition results in better value and improves performance by bringing viable, responsive, innovative and cost-effective competitors (public and private) to the table.”**

## Inherently GovernmentalFunction

-     A function that is so intimately related to the public interest as to require performance by Federal Government employees. Consistent with the definitions provided in section 5 of the FAIR Act and Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, these functions include activities that require either the exercise of discretion in applying Governmental authority or the use of value judgment in making decisions for the Government.

## Accurately Code Commercial Activities

**A - Specifically exempt by the agency**
**B - Subject to the cost comparison or direct conversion**
**C - Specifically exempt by Congress, Executive Order or OMB**
- D - In process of being cost compared or converted directly
- E - Retained in-house as a result of a cost comparison
- F - Review is pending force restructuring decisions
- G - Function is prohibited from conversion because of legislation
- H - Waiver issued
- I - Being performed in-house as a result of a cost comparison resulting from a decision to convert from contract to in-house performance

## Category A

-    Indicates that the function is performed by Federal employees _and_ is specifically exempt by the agency from the cost comparison requirements.

## Category A - OMB Clarification:

*    *This Reason Code is designed to permit the _Agency Head _to identify specific commercial activities as those that he/she does not believe should be subjected to privatization, outsourcing, reinvention or competition.  Certainly, these are core mission activities that are commercial in nature.  Many core activities may however, be achieved through contract support and may also be found in either Reason Code “B” or “C.”  **Functions assigned Reason Code “A” are commercial functions that the Agency Head has determined must remain in-house.**  A justification of each use of Reason Code “A”, by function code will accompany the Inventory as a part of the Annual Management Report.

## Category B

-    Indicates that the activity is performed by Federal employees _and_ is subject to the cost comparison or direct conversion requirements of the OMB Circular A-76 and its Supplemental Handbook.

## Category B - OMB Clarification

*   *This Reason Code should be applied to any Function or Activity where the decision as to who should perform the work is a quality and cost based decision and the agency would expect that this decision would be based upon the results of a direct conversion competition (when authorized), or a cost comparison, conducted in accordance with OMB Circular A-76 and its Supplemental Handbook.

## Category C

-    Indicates that the activity is performed by Federal employees, but it has been specifically made exempt from the provisions of the OMB Circular A-76 and its Supplemental Handbook by Congress, Executive Order or OMB.

## Category C - OMB Clarification

-    This Reason Code should be applied to any Function/Activity where the decision as to who should perform the work is generally not a cost-based decision and a cost comparison would be inappropriate.  This code applies to the Supplemental Handbook’s exemption from the cost comparison requirements of the Circular for national defense related activities, direct patient care, core and research and development activities.  Here the decision to convert to or from in-house or contract performance is not a cost-based decision.  The problem is to get the right people, the right skills, the right knowledge at the right place and at the right time.  These activities are currently performed by Federal employees, but, they do not enjoy the cost comparison protections afforded by the Circular; cost is a secondary consideration.

## Milestones

- Issue inventory guidelines 	Feb 27
- OMB Supplemental Guidance?	March 15
- Center submittals to HQ 		May 1
- OMB submission 			June 30

## References

- WEB Sites
- _http://www.whitehouse.gov/omb/procurement/fair-index.html_
- _http://__www.whitehouse.gov/omb/circulars_
- _http://__www.govexec.com/outsourcing_
- _http://emissary.acq.osd.mil/inst/share.nsf_
- Headquarters Points of Contact
- Ron Lentz, 202-358-1064	_rlentz@hq.nasa.gov_
- Joe LeCren, 202-358-0431 	_jlecren@hq.nasa.gov_
- Craig Conlin 202-358-1180	_cconlin__@hq.nasa.gov_