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CONTRACTING FAIRNESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 8, 2016 

Serial No. 114–68 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DeSAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

JENNIFER HEMINGWAY, Staff Director 

DAVID RAPALLO, Minority Staff Director 

KATIE BAILEY, Staff Director, Subcommittee on Government Operations 

PATRICK HARTOBEY, Counsel 

WILLIE MARX, Clerk 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSIE, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STACEY E. PLASKETT, Virgin Islands 

STEPHEN F. LYNCH, Massachusetts 


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C O N T E N T S 

Page 

Hearing held on July 8, 2016 ................................................................................. 1 

WITNESSES 

Ms. Angela Styles, Partner, Crowell & Moring 

Oral Statement ................................................................................................. 6 

Written Statement ............................................................................................ 8 

Mr. John Palatiello, President, Business Coalition for Fair Competition 

Oral Statement ................................................................................................. 14 

Written Statement ............................................................................................ 16 

Mr. Maurice McTigue, Vice President, Outreach, Mercatus Center 

Oral Statement ................................................................................................. 23 

Written Statement ............................................................................................ 24 

Mr. Donald Kettl, Professor, School of Public Policy, University of Maryland 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 29 

APPENDIX 

January 28, 2015, Letter from Anne E. Rung, Administrator, Office of Federal 

Procurement Policy at White House Office of Management and Budget, 

to Congressman John J. Duncan, Jr. ................................................................. 56 

Written Statement from Congressman Pete Sessions (TX–32) ............................ 57 


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CONTRACTING FAIRNESS 

Friday, July 8, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 9:01 a.m., in Room 

2154, Rayburn House Office Building, Hon. Mark Meadows [chairman of the subcommittee] presiding. 

Present: Representatives Meadows, Mulvaney, Grothman, 

Chaffetz, Connolly, Maloney. 

Also Present: Representatives Duncan and Sessions. 

Mr. MEADOWS. The Subcommittee on Government Operations 

will come to order. And without objection, the chair is authorized 

to declare a recess at any time. 

We’re here today to discuss contracting fairness, in other words, 

when it is appropriate for the Federal Government to contract with 

the private sector and when it is not appropriate to do so. In making these decisions, it’s critically important that the government 

focus on efficiencies and cost. And this is not about eliminating— 

and I want to stress—this is not about eliminating Federal employees. This is about ensuring we as a government are obtaining the 

most cost-efficient and cost-effective solutions when the Federal 

Government buys goods and services. 

The private sector does a lot of things well. It is important that 

the government taps the private sector’s expertise and efficiencies 

as appropriate. Obviously, there are certain things that only the 

government should do, such as making contract award decisions or 

granting a security clearance, et cetera. Finding the right balance 

and promoting public-private competition through the A–76 process 

to gather the data to support valid cost comparisons is the way we 

realize cost savings for the American taxpayer. 

And one of the key areas where I think there are significant 

questions is how to make the cost-effective comparisons between 

the public and the private sector. For example, what are the appropriate cost elements needed to develop a valid cost comparison of 

Federal employees and contracting employees? I would welcome the 

witnesses’ input, all of you, on this particular area. 

And under existing law, the public-private competitions are prohibited, and early in this administration, there was a shift towards 

decreasing the government’s reliance on contractors. Now, that 

may make sense as long as we’re actually saving money. Former 

Secretary of Defense Gates said in 2010, ‘‘As we were reducing contractors, we were not seeing the savings that we had hoped for by 


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insourcing.’’ And given where we are today, we’re holding this hearing to learn from the past efforts in this area and hopefully to 

begin anew this discussion in the lead up to a new administration. 

I want to thank Mr. Duncan for his leadership in this particular 

area, particularly for his bill, H.R. 2044, the Freedom from Government Competition Act. And as we look at that, looking at that particular bill further, this bill would make clear that the policy preference for obtaining goods and services from the private sector, and 

unless there is no private sector option for the goods or services or 

that they are inherently governmental, it addresses that issue. 

I’d like to thank the witnesses here today. 

And I’d like to now recognize the author of that particular bill, 

the esteemed gentleman from Tennessee, my good friend, Mr. Duncan. 

Mr. DUNCAN. Well, thank you very much, Mr. Chairman, for calling this hearing. 

As you mentioned, this is an issue I’ve been working on now for 

over 20 years. Government competition affects small businesses 

every day in every congressional district across the country. I’ve 

had just about every type of business you can think of come to my 

office and talk to me about government competition. These businesses range from high-tech companies like engineering firms and 

low-tech firms such as landscaping companies. This issue affects 

school bus drivers, truck stop operators, uniform companies, mapping companies, hearing aid dealers, and many, many, many others. 

This bill proposes a very simple concept: If a Federal agency is 

providing a good or service that can be provided by the private sector more efficiently and cost effectively, we should contract out for 

that good or service. The activities that are inherently governmental, like national defense and others, are exempted from this 

process. If the Federal agency can provide that good or service at 

a lower cost, we should certainly allow that government agency to 

continue to do so. 

In 1998, I worked with then-Senator Craig Thomas of Wyoming 

on this issue. We were able to get a limited version, a sort of watered-down version of this bill called the Federal Activities Inventory Reform Act. It was called the FAIR Act at that time. And 

that—we actually got that passed into law. This act requires every 

Federal agency to look at what goods and services they are providing and determine if those are inherently governmental or commercial in nature. 

In October of 2014, I wrote to the director of the Office of Management and Budget and asked him how many Federal employees 

were engaged in commercial activities. In January of 2015, I received a letter back from OMB stating that 1.12 million—1.12 million full-time equivalent employees were engaged in activities that 

are commercial in nature. Let me repeat that: There were 1.12 million, 1.12 million Federal employees engaged in activities that 

could be provided by the private sector. 

I would like to ask unanimous consent to submit a copy of that 

letter for the record. 

This bill is—— 

Mr. MEADOWS. Without objection, so ordered. 


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Mr. DUNCAN. This bill is not about contracting out to the private 

sector just for the sake of contracting out. This bill is about getting 

the best service and at the lowest cost for the taxpayers. This bill 

is not about an attack—it is not certainly an attack on Federal employees. I’m a Federal employee, and I have many hardworking 

Federal employees in my district. It has been hard enough, though, 

for small businesses to survive over the past many years, and they 

should not have to compete against their own government to survive. 

The problem of government competition is not a new one. In fact, 

during the Eisenhower administration in 1955, at the very first 

White House conference on small business, freedom from government competition was the number one issue. And that conference 

issued a report that said, quote, ‘‘The Federal Government will not 

start or carry on any commercial activity to provide a service or 

product for its own use if such a product or service can be procured 

from the private sector.’’ And this has been one of the top three 

issues of every White House conference on small business since 

then. 

I understand that Ranking Member Connolly is the cochair of the 

bipartisan Private-Public Partnership Caucus. I chaired the special 

panel on P3s in the Transportation and Infrastructure Committee 

in the last Congress. We had a number of hearings and heard from 

expert witnesses all across the country, and that is a movement 

that we need to really get more into as we proceed over these next 

few years. 

All across the country, States and cities are seeing the advantages of the savings that can be made by taking advantage of the 

private sector. In fact, a friend of mine, Mayor Madeline Rogero of 

Knoxville, who really is one of the most liberal office holders in this 

country today, just announced that she is going to allow private 

company to manage three public properties in Knoxville that are 

used for concerts, fairs, and festivals. And she said that doing this 

will save over $500,000 for the city of Knoxville. If we can save 

money in Knoxville, Tennessee, by relying on the private sector, I 

think we can also do some of that—a little bit more of that here. 

Thank you very much, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman for his foresight and his 

leadership on this particular issue. 

And, obviously, the chair notes the presence of not only the gentleman from Tennessee, Congressman Duncan, but my good friend, 

the gentleman from Texas, the chairman of the Rules Committee, 

Congressman Sessions. And we appreciate your interest in this 

topic and welcome your participation today. 

And I ask unanimous consent that both Congressman Duncan 

and Sessions will be allowed to fully participate in today’s hearing. 

And without objection, it is so ordered. 

I’m going to now recognize Mr. Connolly, the ranking member of 

the Subcommittee on Government Operations for his opening statement. 

Mr. CONNOLLY. I thank the chair. 

And I thank Mr. Duncan for his thoughtfulness and his legislation. 


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I also cochair the Smart Contracting Caucus, and Taiwan and 

Turkey and Korea and Morocco and Georgia, and vice chair of the 

New Dem Coalition, and cochair of the Sustainable Energy and Environmental Caucus. So I’m busy with a lot of caucuses, but none 

less important than this. 

My view on this topic is forged in my experience in local government, 14 years in local government. I knew Mr. Palatiello then 

when he was on the Planning Commission in Fairfax County. And 

what I discovered, sometimes to my surprise, was that presuppositions on this subject are not always borne out. 

I can remember one specific example. When I became chair of the 

county, I was looking for something to privatize. I said—I thought 

to myself, well, surely there are some functions better done in the 

private sector. And the one I kind of focused on was outsourcing 

the vehicle maintenance. We had a very big fleet, vehicle fleet. And 

I thought, well, surely the private sector can do at least mundane 

things, like oil changes and that sort of thing. Jiffy Lube for sure 

can do it cheaper than we can. 

And I had the auditor look at it. I didn’t just take the word of 

county employees. What surprised me, and I think a lot of my colleagues, was actually, no, we—empirically, we did it cheaper and 

the quality of care and service, because that was their mission in 

life, to make sure that vehicle fleet was always in tiptop shape. 

Couldn’t be matched. 

And it was a lesson. It wasn’t that you’re always better off 

insourcing, but it was a lesson in don’t assume and approach this 

in a nontheological way. You shouldn’t be looking at the whole 

issue of outsourcing, or insourcing for that matter, on an a priori 

basis. Look at it on a case-by-case merit basis. Does it make sense, 

does it meet certain criteria in terms of cost, as Mr. Duncan indicated, but also quality. 

I remember John Glenn. I worked—when I first came to the U.S. 

Senate, I worked inter alia with Senator John Glenn. And the story 

was told that when he was in that capsule about to take off and 

circumnavigate the world, somebody asked him after he came back 

down to Earth, you know, what in the world—what must have 

been in your thought, this profound moment? He said, all I could 

think of was I’m sitting in 90,000 pounds of thrust on their little 

capsule provided by the Federal Government’s lowest bidder. 

So quality does matter and common sense matters. And I told 

Labor the same thing as I’m saying here, that we really need to 

not approach this as a theological issue. Insourcing is not better 

than outsourcing, and outsourcing isn’t better than insourcing. 

There’s nothing intrinsically preferable or good about one versus 

the other. And where there is domain expertise, where there is the 

ability to provide quality services at a cost-effective way, that always makes sense. 

There are some inherently government functions that should 

never be, in my view, outsourced. Federal oversight of contracts 

that it lets, for example. Most people I know in the Federal contracting world think that would be highly inappropriate to 

outsource, that that ought to be managed by the government. And 

it puts them in an awkward position when it is outsourced, because 

they want to bid on contracts and sometimes it’s the competition 


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or even the collaborator who they’re evaluating or they’re monitoring and managing. 

So I’m glad for the hearing, but I’m always going to look askance 

at anything that smacks of theology on this subject. 

And with that, Mr. Chairman, I yield back. 

Mr. MEADOWS. I thank the gentleman. 

I will hold the record open for 5 legislative days for any member 

who would like to submit a written statement. 

We’ll now recognize our panel of witnesses. And I’m pleased to 

welcome Mr. John Palatiello, president of the Business Coalition 

for Fair Contracting; Mr. Maurice McTigue, vice president of outreach at the Mercatus Center; and Mr. Donald Kettl, professor at 

the School of Public Policy at University of Maryland. 

And I would like to now recognize the gentleman from Texas, 

chairman of the Rules Committee, Mr. Sessions, to introduce our 

last witness. 

Mr. SESSIONS. Mr. Chairman, thank you very much. It’s a great 

delight for me to be back with not only you but Chairman Duncan 

as he spoke very clearly about his work not only in this committee 

but across Congress for government efficiency. 

I must say, I was delighted to hear Mr. Connolly speak very 

clearly about how important government efficiency and the people’s 

money is. 

Today, I show up really to introduce Mrs. Angela Styles. Mrs. 

Styles is a person who, like the other gentlemen who have been on 

this panel today, is a distinguished alumnus, not only of the United 

States Congress as a former staffer, but she worked at OMB, in the 

Office of Management and Budget, and served under a great 

Texan, George W. Bush, and served not only with distinction for 

the President to try and ensure government efficiency, but was 

there with a role to make sure that it was done for the benefit of 

the American people, and as Mr. Connolly said, in the none be it 

theological way. 

The people of the United States want and need a government 

that works properly, that takes every dollar that it needs but not 

a penny more, and ensures that its services are second to none. 

Angela not only served at OMB, but the General Services Administration. She is a graduate of the University of Virginia and the 

University of Texas Law School. She is a person who is a mom on 

the side, but more importantly, a dedicated public servant in her 

role as a partner with Crowell & Moring. 

So I wanted to come here today when I knew that Angela would 

be here and to let her know that her words of wisdom, her insight 

from out in public service and in the private sector does matter to 

us. 

Lastly, Mr. Chairman, I’d like to say that we are also passing on 

much of which we do to the next generation. And we have Meredith 

Milton, who is here from Parker County, Texas. She goes to the 

University of South Carolina. And she is one of our interns who 

came to Washington with the viewpoint of government efficiency 

and government oversight. 

So I wanted you to know that, just as I was in your chair some 

15 or 18 years ago trying to learn much about how we can make 

the government more efficient, you now are that person in the role, 


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along with Mr. Connolly, and Meredith is looking out at you and 

will learn much. And I hope that there are other students who go 

through our schools, who come to Washington to learn we have to 

have a government that can work effectively and efficiently to meet 

the needs of the American people. 

Mr. Chairman, the last thing I’d like to say is I’d like to add to 

the record the statement that I brought and came with. And I want 

to thank you for allowing me to be here. And I yield back my time. 

Mr. MEADOWS. Without objection, so ordered. 

Mr. MEADOWS. I thank the gentleman for his remarks and his introduction, but his longstanding conservative passion to making 

sure that the government is accountable and efficient. And so with 

that—— 

Mr. CONNOLLY. Let the record show, Mr. Chairman, progressives 

care about it too. 

Mr. MEADOWS. No, no, no. It was not meant to be a slight. 

Mr. CONNOLLY. No, no, I know. 

Mr. MEADOWS. If I said that you had a conservative bit, you 

might not get reelected, so—— 

Mr. CONNOLLY. Right. And by the way, I wanted to thank Mr. 

Sessions for his brilliant remarks, and I hope he’ll approve my next 

amendment when I’m up in the Rules Committee. 

Mr. SESSIONS. We’ll do our best to hear you out fully, Mr. Connolly, and you know that. 

Mr. MEADOWS. Well, welcome to all. Pursuant to committee 

rules, all witnesses will be sworn in before they testify, so I’d ask 

that you please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony that you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

Let the record reflect that all witnesses answered in the affirmative. Thank you so much. 

In order to allow time for discussion, please limit your oral testimony to 5 minutes. Your entire written statement will be made 

part of the record. Many of our members will be coming and going 

today, but I can tell you that they have staff that will be following 

up on that. 

And so at this point, I would like to recognize you, Ms. Styles, 

for 5 minutes. 

WITNESS STATEMENTS 

STATEMENT OF ANGELA STYLES 

Ms. STYLES. Thank you very much. Chairman Meadows, Congressman Connolly, Chairman Duncan, members of the subcommittee, I really appreciate the opportunity to be here today, 

particularly, Chairman Sessions, for that very kind introduction. I 

have to say, he has been a friend and a mentor throughout my entire career, and I wouldn’t be here today without him. And as a native of Dallas, I certainly know there are many issues on his mind 

today, so thank you very much for the kind introduction. 

As a former administrator for Federal procurement policy at the 

Office of Management and Budget from 2001 to 2003, I had the 

unique opportunity to lead the most significant effort by the FedVerDate Sep 11 2014 09:55 Sep 26, 2016 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\21324.TXT APRIL

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eral Government to open commercial activities performed by the 

government to the dynamics of competition between the public and 

private sectors. 

I applaud this subcommittee for shining a bright light on the 

commercial activities performed by public sector employees. These 

activities have long been insulated from competition or even, frankly, review at all. 

In my written testimony, I tried to address the bipartisan history 

behind public-private competition and the demonstrated benefits of 

market-based government. It isn’t just about saving money or moving jobs to the private sector, as you heard Congressman Connolly 

say; it’s about improving the performance of our government for its 

citizens. It is a travesty, a true travesty of public governance that 

public-private competition has been stalled for 8 years, and every 

attempt to create a true infrastructure for competition has been 

struck down by special interests. 

The Bush administration competitive sourcing initiative forced 

Federal Government personnel to critically examine their processes 

and determine how they could improve the delivery of services to 

remain competitive. Not surprisingly, as the competition increased, 

so did the pressure to save Federal jobs. 

A series of legislative actions resulted in a full moratorium on 

public-private competition by 2008. Once in office, the budget request from the Obama administration asked for the continuation of 

the prohibition. The legislative moratorium shunned market-based 

government, competition, innovation, and choice. Taxpayers and 

citizens were the losers. Not only are we paying more for Federal 

employees to perform commercial services, taxpayers are not benefiting from improved service delivery that derives directly from 

competition. 

Second, anybody that questions the true benefits of competition 

is diluting themselves. The cost savings have been proven out over 

40 years. My written testimony provides several real examples and 

citations to significant studies. There are thousands more examples 

to be studied if you need more evidence. 

Most significantly, I’d like to point out testimony from 2002 given 

by Comptroller General David Walker. The testimony was given 

after studying public-private competition with a panel of experts 

for over a year, and this is what he said: ‘‘The panel concluded that 

the current A–76 process has been used to achieve significant savings and efficiencies for the government. Savings result regardless 

of whether the public or private sector wins the cost comparison. 

This is because competitive pressures have served to promote efficiency and improve the performance of the activity studied.’’ 

In standing up the Bush administration competitive sourcing initiative, we made great strides in creating infrastructure, people 

and processes for competition. Sadly, the people have moved on 

over the years. But on a positive note, the processes in place for 

competition remain. There is a place to start in the executive 

branch. 

Now, H.R. 2044, the Freedom from Government Competition Act 

of 2015, would reverse the 8-year drought. The 8 years that not a 

single commercial activity performed by the Federal Government 

has faced an iota of scrutiny. But this moment, it’s really only ConVerDate Sep 11 2014 09:55 Sep 26, 2016 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\21324.TXT APRIL

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gress that has the ability to allow and then encourage the executive branch to take full advantage of the best capabilities that both 

sectors have to offer. 

This concludes my prepared remarks. 

[Prepared statement of Ms. Styles follows:] 


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Mr. MEADOWS. Thank you, Ms. Styles. 

Mr. Palatiello, you’re recognized for 5 minutes. 

STATEMENT OF JOHN PALATIELLO 

Mr. PALATIELLO. Thank you, Mr. Chairman. And I realize when 

I say ‘‘Mr. Chairman,’’ that’s inclusive of everyone on this panel 

who has at one time or another been a chairman. 

I’m president of the Business Coalition for Fair Competition, and 

we support the yellow pages test. It’s a very simple process that 

says if you can find firms in the yellow pages of the phone book 

that are providing a good or a service and a government agency 

that’s providing that same good or service, then that government 

activity ought to be subjected to a review, a government—a private 

competition to break up what’s, in effect, in in-house monopoly, 

subject it to market competition and get a better value for the taxpayer. 

This is a test that has been successfully applied on a very bipartisan basis by mayors and governors and county executives across 

the country. Unfortunately, the Federal Government does not have 

such a process in place today, and that’s for two reasons: First, 

Congress has failed for more than 80 years to enact legislation to 

codify such a process to set the ground rules. Additionally, Congress has imposed a very unfortunate moratorium on OMB Circular A–76, which has guided this process administratively since 

1955. 

As Mr. Duncan pointed out, the Federal Government today has 

a total workforce of 2.6 million employees, not including our men 

and women in uniform and the Postal Service. Of that, 1.2 million 

are in functions that are commercial in nature. This is the aggregate of all of the FAIR Act inventories. So in other words, 43 percent of the Federal workforce is in commercial positions, and only 

a handful of them have ever been studied to determine whether the 

in-house function is performing as efficiently as it could. 

When these studies are conducted, the literature shows that the 

average saving is 30 percent, regardless of whether the activity 

stays in-house or gets contracted. When applied to all 1.12 million 

positions, the annual potential savings are as much as $35 billion. 

You asked with regard to best practices, Mr. Chairman, and I 

would point to the 3DEP, or Three-Dimensional Elevation Program 

of the U.S. Geological Survey, in Reston, Virginia, in; Mr. 

Connolly’s district. Over a period of some 20 years, USGS has successfully transitioned from being an in-house mapping production 

agency that, quite frankly, the private sector felt duplicated and 

competed with them, to where the USGS now uses the private sector for a majority of its mapping data acquisition and processing, 

and focuses its employees on standards, coordination, and other inherently governmental activities. 

Perhaps the most successful thing the Federal Government has 

done in its 240-year history, in my view, was the original GI Bill. 

My late father was a D–Day veteran. He was a beneficiary of that 

program. After World War II, Congress provided every eligible veteran an opportunity to buy a home and get an education, but the 

government did not start in-house homebuilding and did not start 


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Federal schools. The GI Bill was essentially a voucher program, a 

contracting program. 

The government used the private sector, let our veterans go out 

into the market and get what they needed to return to civilian life. 

That’s a bipartisan best practices model I believe the government 

should emulate again today. 

You also asked in your invitation, Mr. Chairman, to examine the 

impact on the private sector from decreased competition. In its last 

study of A–76, the Small Business Administration found that of 

companies that received these procurements, 71 percent were small 

business. So it is clear that the moratorium on A–76 harmfully and 

disproportionately impacts small and small disadvantaged businesses. 

As has already been stated, this is not about eliminating Federal 

employees. Let’s put that myth to rest here today. What this is 

about is lower cost, better service, but also access to expertise, better quality, improved risk management, innovation, better meeting 

of peak demand, and timeliness. 

We have a couple of recommendations that we would like to 

share with the committee. First, we do support Mr. Duncan’s bill, 

the Freedom from Government Competition Act. Second, the moratorium on A–76 should be repealed. Third, insourcing should be 

ended or at least there should be a requirement for a reverse A– 

76 to study whether it is more cost effective to bring something 

back in-house. We think the establishment of a Federal entity to 

review commercial activities. 

Mr. Connolly will remember that for about 15 years, Virginia had 

the Commonwealth Competition Council; was very effective. And 

we believe that there needs to be an enhancement to Federal agency contract management and improvement of the acquisition workforce. 

Mr. Chairman, today, the Federal Government has become too 

big to succeed. In an effort to be all things to all people, it cannot 

effectively provide its core services. The Federal Government is 

spread out too thin, carrying out too many activities best left to 

free enterprise. Using the private sector for commercially available 

products and services will help focus the government on its core inherently governmental activities, those things that the American 

people expect from Uncle Sam, and it will improve the effectiveness 

of those important government activities. 

Thank you for the invitation. It’s a pleasure to be here. I’ll be 

happy to take your questions. 

[Prepared statement of Mr. Palatiello follows:] 


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Mr. MEADOWS. Thank you for your testimony. 

Mr. McTigue, you’re recognized for 5 minutes. 

STATEMENT OF MAURICE McTIGUE 

Mr. MCTIGUE. Chairman Meadows, Ranking Member Connolly, I 

am honored to have been invited to present testimony in front of 

you today on the issue of competition in government operations. 

Before I became a member of parliament in New Zealand, I was 

a farmer. Farmers really understand the value of competition. 

When you take your stock to market, if there are plenty of hot buyers, the prices are good. If there is only one buyer, you have a bad 

day. So I am an enthusiast for competition. 

Competitive sourcing in government should really be based upon 

what delivers the best prices with the best goods and services from 

the best suppliers using the best technology. This is the only acceptable rationale, in my view, for competitive sourcing. I agree 

with Mr. Connolly, it should not be about ideology; it should be 

about what’s going to provide the best services for the consuming 

public. 

Governments have had mixed results with competitive sourcing. 

One of the reasons, in my view, is that the rules often don’t allow 

the competition to occur, so the rules must be written in such a 

way that the competition can occur. 

Some of the other things that have been failures in the process 

in the past, the first, not accurately defining what best means. Best 

does not mean cheapest. And best should be able to be defined for 

every competition, because best when you’re delivering social services will require certain components that are very difficult to provide if you just use the normal commercial criteria. Not writing 

good specifications for the bidding process is often one of the failures in competitive sourcing. That’s a professional contract management requirement, and agencies need to have that capability or 

they need to buy that capability if they’re going to embark in competition. 

No departures from the contract is a really important criteria, 

because competitive sourcing often gets a bad name by people being 

able to lowball their bid knowing full well that they’ll get a departure from the contract, which will allow them to readjust the price 

at a later date. That discredits the whole of the process and makes 

everybody consider it to be unfair. 

There should be fixed terms for the contracts, so no automatic renewals, so that the bidding process can be repeated over and over 

again. The competition has to be seen to be fair. It needs to be fair 

to the public sector bidders, and it needs to be fair to the private 

sector bidders. 

When I arrived in the United States in 1997, Al Gore was in the 

middle of his reinventing government process, and I attended many 

forums on just exactly that. There were two outstanding mayors 

that presented at many of those forums: Mayor John Norquist from 

Milwaukee, a Democrat; and Mayor Stephen Goldsmith from Indianapolis, a Republican. Both of them used competitive sourcing to 

help rescue their city budgets. 

Their experiences saw successful bidders come from the private 

sector and the public sector. Their experience showed that at the 


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next iteration of those contracts they often saw them turn around. 

What they got from that, though, was a big win for the citizens in 

that those cities received better services at better prices. 

I just want to now quote an example from New Zealand, which 

is a variation on this process. One of the things that the New Zealand Government did was that it allowed governments—government departments to compete to provide goods and services with 

each other. We call it internal markets. 

But a department that had a very high quality legal department 

could sell those services to another department or they could combine to buy payroll services or HR services, accounting, data collection. They might buy that from the private sector or the public sector, but they were looking at how you can utilize competition to improve the quality of those services. This needs to be a strictly contractual undertaking with legally enforceable contracts. It might 

surprise you, but when government departments deal with each 

other, they frequently cheat, so you need to be able to stop the 

cheating if the competition is going to remain fair. 

In conclusion, the success with this process should be measured 

in terms of improved services, greater innovation, technological superiority. It shouldn’t be measured in terms of this group got it or 

that group got it. I hope this initiative is adopted as part of cost 

efficiencies and service improvement. 

Thank you for the chance to testify, and I’d be very happy to take 

your questions. 

[Prepared statement of Maurice McTigue follows:] 


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Mr. MEADOWS. Thank you for your testimony. 

Professor Kettl, you are now recognized for 5 minutes. 

STATEMENT OF DONALD KETTL 

Mr. KETTL. Thank you very much, Mr. Chairman and Mr. Meadows and Ranking Member Connolly. It’s a great pleasure to have 

a chance to be able to appear before you this morning. 

And it’s also a great privilege to have a chance to continue the 

conversations with Mr. Grothman. For years in Wisconsin, we 

worked hard to try to improve government performance, and it’s 

just such a great privilege and opportunity to be able to continue 

that conversation here today. 

The primary point of my testimony is to focus on the best lessons 

for procurement and acquisitions from the private sector. And what 

the private sector teaches us is that effective procurement and contracting requires a smart buyer, a buyer that, first, knows what it 

is that the buyer wants to buy; second, that the buyer knows how 

to try to choose a good supplier and providing the highest quality 

of goods and services at the lowest and best prices; and finally, 

making sure that the supplier provides what it is that, in fact, the 

buyer wants to go out and purchase. 

Those are the important lessons of the private sector, and those 

are the things that government needs to do and do even better. 

And what I want to suggest, there are five ways of going about 

doing that. First is to recognize that contracts for commercial products are an essential part of this and have become, in fact, a more 

important part of government’s strategy; that, at this point, contracting represents two-fifths of all Federal discretionary spending. 

And commercial items, as a percentage of all contracting, has actually gone up significantly in the last 5 years from 21.3 percent of 

all Federal contracts to 25.2 percent in the last figures in 2015. So 

that, in fact, we have an increasing trend of more commercial products being part of government contracting, even though government contract spending as a whole has declined for a variety of 

reasons. But it’s clear that we are, in fact, focusing significant attention on the purchase of commercial products. 

The second item, though, is that we need to focus, essentially, on 

the management of contracts and contractors, because contracts— 

and we learned this from the private sector—do not manage themselves. We can look over a series of issues in the last few years, 

whether it’s the Office of Personnel Management’s challenges in 

trying to manage the employee background checks, problems in 

Medicare where about one out of every $10 spent on Medicare is 

spent on programs that—and on payments that are judged improper, where a company, in the last year, paid a $146 million fine 

for false claims filed for supplies to—for our troops in Afghanistan. 

It’s clear that contracts don’t manage themselves, and good Federal 

management is essential to ensure that we get our money’s worth 

for the money that we spend. 

The third point is that, in fact, strong contract management can 

reap big success. I’ve recently completed a study of GAO’s high risk 

list of the programs in the Federal Government most prone to 

fraud, waste, abuse, and mismanagement. And there are two 

things that are important coming out of that study. The first is 


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that half of all the programs in the high risk list have been identified as having problems in contract management. That’s the bad 

news. The good news is that over the last 25 years, 24 areas have 

been taken off that list, and of the 24 areas, half of them have been 

taken off because of improvements in contract management, so that 

effective contract management is essential to try to deal with the 

underlying problems. 

There are several issues and examples throughout the Federal 

Government where that’s, in fact, happened. NASA is a premier example, as is the DOD’s effort in improving supply chain management, and I’d be happy to discuss that more in the question period 

as well. 

The fourth point is that all of this depends on an effective cost 

comparison system; that is, if we want to try to buy from the best 

and the cheapest supplier, we need to know who that is. And the 

problem, unfortunately at this point, is that, as GAO has shown in 

a series of studies, our current cost comparison systems are simply 

inadequate. We do not have a good methodology for making good, 

sustained, effective comparisons about who it is who’s cheaper. 

The problems are many in part trying to assess the relative 

value of the salaries, assessing fringe benefits, looking at overhead 

rates, total life-cycle costs, capacity, transparency, flexibility questions. These are all eminently solvable problems, but at this point 

we’re handicapped in making comparisons because we do not have 

a common and accepted methodology for how to go about doing 

that. 

What we most need if we’re going to try to advance our efforts 

to try to improve increased contracting out for commercially available products is to have a system where we know and can have 

confidence in the cost comparisons that we’re making. And one suggestion that I would make, in fact, is the Federal Advisory Committee that would look carefully into this question so that we know 

that, in fact, we’re getting our money’s worth. 

The fifth point is that new and enhanced strategies for improving 

the effectiveness of contract management could vastly improve our 

ability to be able to get our money’s worth. And that means, in particular, focusing on human capital inside government and improved 

category management to try to improve the government’s ability to 

be able to buy as one and reduce the level of duplication and to improve relationships with those who supply goods and services to 

government. 

So, Mr. Chairman, that concludes my remarks, and I’d be very 

happy to try to answer any questions that the committee may 

have. Thanks so much. 

[Prepared statement of Mr. Kettl follows:] 


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Mr. MEADOWS. Thank you, Professor Kettl. 

The chair recognizes the gentleman from South Carolina, Mr. 

Mulvaney, for 5 minutes. 

Mr. MULVANEY. I thank the chairman. 

I thank everybody for participating. Reminds me of my days on 

Small Business, which I miss from time to time. 

Ms. Styles, let’s start with you and we’ll just go down the aisle. 

I want to talk with you a little bit about the history, because I was 

not aware until recently of the demise of the A–76 competition program. Tell me, why did the administration say they wanted to discontinue or suspend this program? 

Ms. STYLES. Well, I mean, it’s largely about Federal jobs. It’s protecting the Federal jobs. It’s the labor unions, the Federal employee 

labor unions protecting those jobs. It’s as simple as that. 

Mr. MULVANEY. But the argument was made, right, it was supposed to save money? Correct? 

Ms. STYLES. Yes. 

Mr. MULVANEY. How did that work out? 

Ms. STYLES. Not so well. 

Mr. MULVANEY. Tell me about that. 

Ms. STYLES. Well, it’s very clear from history, and it’s very clear 

from 40 years of history and studying A–76 and studying the competition, there are cost savings. Could there be better ways to 

measure, as Professor Kettl pointed out? Absolutely. But there’s 

just a lot of—there have been dynamics for 40 years about the politics of this and whether you want the Federal jobs to stay in place 

or whether you want those jobs to go to the private sector. 

And so you see, you know, it’s back and forth or it’s a pendulum, 

however you want to describe it. Sometimes we look at it and say, 

we really need to examine these commercial activities; and other 

times we say, oh, we’ve examined them, we know we need to protect the Federal employees. So it’s been back and forth, even 

though it’s very, very clear when you subject these jobs to the pressures of competition, whether the private sector wins, the public 

sector wins, you get cost savings and you get better service. 

Mr. MULVANEY. Mr. Palatiello, is the private sector ready to step 

up and have these competitions again? Are there businesses that 

are prepared to provide the same services that the government 

does? 

Mr. PALATIELLO. Oh, absolutely. Absolutely. They’re providing it 

in a marketplace today. You have examples where you have one 

Federal agency, for example, that considers something inherently 

governmental and another is successfully contracting for that service. So you have firms—for example, I’ll use the mapping example 

that I mentioned in my testimony. 

You have the geological survey that has demonstrated very successfully how to use the private sector in this field, but then you 

have, for example, NOAA that still does a significant amount of its 

hydrographic surveying and mapping in-house. 

I got an email the other day from a company—and this is not unusual. I get these every couple of months—companies that have indefinite delivery, indefinite quantity contracts for surveying and 

mapping with the Corps of Engineers and then don’t get task orders, don’t get any work out of the contract. And then they go on 


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FedBizOpps and that same office with the Corps of Engineers is 

spending millions of dollars to buy equipment to beef up its inhouse capability, but yet they’re telling the firm we don’t have any 

requirements, we don’t have any money. 

Mr. MULVANEY. Is the Federal Government still in the pest extermination business? 

Mr. PALATIELLO. It is to a certain degree, and we applaud your 

efforts in that regard. There is a negotiated settlement between 

USDA and the pest management industry, but that’s an example. 

This is a little bit of a dated example, but there was a—this is no 

disrespect to the dais, but there was a pest problem here on the 

Hill. Did the Congress contract out to a private company? No, they 

brought in the Department of Agriculture. No competitive bidding. 

Mr. MULVANEY. And I still have the mice traps in my office. 

Mr. McTigue, thank you. But you mentioned something I never 

even considered before, which is competition and intragovernment 

competition. Could you tell us very briefly about—more details 

about that, what you guys did in New Zealand? I’ve never heard 

of such a thing, never even occurred to me. 

Mr. MCTIGUE. One of the things that happens inside government 

is that you often have to build a capability for a pretty small operation. So a relatively small agency has to build legal services, accounting services, payroll services, HR services. It’s just smart to 

say, hey, not everybody has to do that. So-and-so next door has excess capacity there, we will buy it from them. In some cases, they 

will actually buy that, get together and buy it from the private sector. 

Mr. MULVANEY. I’m sorry to interrupt you, but you’ve just— 

something just popped into my head, because we’ve had similar 

hearings on this exact topic, or something similar, I think, in this 

room, which is computer security; that certain agencies within the 

government have—do a tremendous job of protecting their computer systems and others do a really, really lousy job and don’t 

even use some of the same systems. 

Would that be—could you do the same type of competition in 

that service area? 

Mr. MCTIGUE. Certainly. But one of the experiences of the New 

Zealand Government, after having made huge mistakes in technology purchases, was to actually start contracting for capabilities. 

So what kind of capability do we want on people’s desks, and we 

would buy those services? 

So instead of buying computers and servers, you bought that capability, and the provider made certain that you had that capability there all the time and it was continually renewed. It also 

means that you didn’t have to go through dealing with the problem 

of getting capital for new purchases because you were now buying 

a service that was outside the capital budget. 

Mr. MULVANEY. Thank you. That’s very helpful. 

Professor Kettl, I don’t have any time left, but I have—you said 

something, sir, that stunned me, in fact, shocked me. You said you 

had pleasant conversations with Mr. Grothman. 

Mr. KETTL. That’s actually true, sir. 

Mr. MULVANEY. Can you—afterwards, can you teach us how to 

do that because we’re—— 


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I yield back the balance of my time that I don’t have. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the ranking member, Mr. Connolly, for 5 

minutes. 

Mr. CONNOLLY. I thank the chair. 

And it may come as a further shock to my friend from South 

Carolina, I remember we had one vote—I can’t remember when, 

though. It’s a number of years ago—on the floor, and I was the only 

Democrat at that time who supported A–76. I mean, it was a lonely 

place. But I have been consistent in my position. 

Mr. MULVANEY. Have you figured out the Grothman thing yet? 

Mr. CONNOLLY. And I’m working on that one. 

Mr. MULVANEY. Okay. All right. 

Mr. CONNOLLY. I’m working on that one. We’re working through 

a dictionary and the whole thing. 

I will say, sometimes people are consistent and inconsistent. Secretary Gates, when he was Secretary of Defense, of all people, a 

Bush holdover, announced that there was too much outsourcing 

and we needed to just put an artificial limit on it. And it reminded 

me of the scene in Amadeus where, you know, the emperor is saying to Mozart, you know, your music is beautiful but there are just 

too many notes. Cut out a few, it’d be perfect. And Mozart says, 

well, which notes did his majesty have in mind? 

How does one in a—is this some platonic ideal of what constitutes just the right percentage of outsourcing or just the right 

percentage of insourcing? And so I’ve tried to be consistent. I took 

on Secretary Gates, and we won that battle, actually, in the—in 

Virginia, about, no, we’re not going to have artificial limits and 

there is no such thing as too much or too little. 

And I’m, you know, I’m going to be boringly consistent that it 

may not always make you happy because probably your prejudice 

on this side of the table tilts toward the private sector can always 

do it better. That’s actually not always true, just factually not always true, as I discovered in running a local government. On the 

other hand, there are some things that absolutely the expertise is 

there, the management and expertise and so forth. 

Ms. Styles, I took your point about wanting to expand the outsourcing of services, which really began in bulk under Ronald 

Reagan and, maybe to the surprise of some, actually expanded 

under Bill Clinton and sustained under George W. Bush and expanded. 

But one of the things I think would be a fair criticism—and my 

guess is Professor Kettl would agree—during those years of growth 

and outsourcing in the Bush years, what we did not do was keep 

up with quality contract management. We actually—the ratio 

changed lower and the risk of that is bad project management, 

losses, waste, and sometimes fraud. You agree? 

If you look back on in terms of area of self-criticism, would that 

be a fair criticism from your point of view? 

Ms. STYLES. Well, I do agree, but I think there were a number 

of things going on. So you were in a post-2000 9/11 environment, 

right. And so the Federal Government spending with the private 

sector went from $200 billion to $600 billion, and that’s right after 

we’d gotten through Clinton administration cuts to the Federal 


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workforce and to the Federal contracting workforce. Honestly, it 

was too much for them to handle all together at that time. 

Mr. CONNOLLY. Professor Kettl, do you want to comment on that? 

Mr. KETTL. Sure. There are a couple of points that are worth 

making. The first is that whoever it is who can do the job best and 

most cheaply ought to do the job, and we have a hard time trying 

to make those comparisons. But the other thing—and this is a lesson the private sector teaches us—contracts don’t manage themselves. And one of our real problems, and if you look at sustained 

studies from OMB and GAO over the years, is that our acquisitions 

workforce is not strong enough and is not capable enough to be 

able to do the jobs that we’re asking it to do. 

Mr. CONNOLLY. Yeah. 

Mr. KETTL. The same things would be true for the private sector 

as well. And the costs of that are everything from the fact that $1 

out of every $10 spent on Medicare through contracts is subject to 

improper payments and is a major problem. If you look at GAO’s 

high risk list, we have a huge number of programs that are on the 

list because of inadequate contract management. 

So contracting, that makes great sense, but only makes sense if 

we have the capacity to be able to manage the contracts well. 

Mr. CONNOLLY. Yeah. I think that’s really key. If we’re going to 

expand on outsourcing, we’ve got to have the contract management 

capability, the procurement and management capability. And as 

contracts get more technical, more technically detailed and complex, that becomes even more of a challenge because, quite frankly—I mean, I worked in the private sector for 20 years with two 

IT companies. The Federal Government has difficulty just matching the expertise of the private sector on the other side of the contract table, even when both parties mean well and want to make 

sure it works, let alone—you know, but the Federal—increasingly, 

the Federal manager on the other side is older and less skilled 

technically, if we’re talking about IT contracts, big systems integration contracts, for example. 

And what can go wrong when you don’t really have the expertise 

to manage a multibillion dollar, multiyear complex—even—you 

need help from the outside in even determining the terms of reference to the contract, because you may know in laymen’s terms 

what you want to accomplish but translating that technically into 

a contract so that the specified services are matched against your 

objectives, actually even that requires increasingly private sector 

expertise to help. And what can go wrong with that? Well, selfdealing, conflicts of interest, and so forth. 

Mr. Palatiello, you look like you want to comment on that. 

Mr. PALATIELLO. I do, Mr. Connolly, my Congressman. You make 

an excellent point, but I would place a caveat. If a Federal agency 

doesn’t have the expertise because it’s an aging population, it’s not 

current with technology, that it can’t write specifications and can’t 

write a contract, you cannot then conclude that that agency has the 

capability to actually do that technology work in-house. And if 

you’re not smart enough to go out and buy it—it’s like the experience I once had. 

You know, I walked into the kitchen one day and Sally says to 

me, the garbage disposal is broken. I have a decision to make. Do 


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I try to replace it myself or do I call the plumber and have him 

come in? Well, I tried to fix it myself. 

Mr. CONNOLLY. Yeah. 

Mr. PALATIELLO. In a couple of days and several—— 

Mr. CONNOLLY. But in this case, there’s no question about that. 

They are outsourcing, but they’re having—I’m getting at the contract management piece, and it starts with how you write the 

terms of reference for what you think you need. You know—— 

Mr. PALATIELLO. And we need the workforce to do that. 

Mr. CONNOLLY. Yes. Yeah, because—— 

Mr. PALATIELLO. I stated that in my testimony as well. 

Mr. CONNOLLY. Absolutely. 

Mr. PALATIELLO. And that’s an inherently governmental function, 

that is right. You don’t want contractors hiring contractors on behalf of the government. That is a very important function, and it’s 

a question of priorities. We need to have a good, strong acquisition—a stronger acquisition workforce in the government, absolutely essential. 

Mr. CONNOLLY. Absolutely. And I just stand on this, because I 

can tell—you know this, but, I mean, the private sector doesn’t 

want to be in that position. The private sector doesn’t want to be 

in the position of substituting itself for contract management because it creates—well, it can sometimes eliminate them from competing. Because if you’re going to do that, you can’t compete for the 

actual work. And the government has kind of sometimes strict and 

funny conflict-of-interest rules that preclude the ability of companies, even pro bono, to provide expertise that we sometimes need. 

My time is up, Mr. Chairman. Thank you for indulging me. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentleman from Wisconsin, Mr. 

Grothman, for 5 minutes. 

Mr. GROTHMAN. Thanks much. 

Professor, first of all, for Professor Kettl, how did you wind up 

over here? 

Mr. KETTL. I’m here—actually, I’ve—in what may have been a 

mistake in judgment, I left Wisconsin, and I’m now at the University of Maryland, where I actually served as dean for 5 years, and 

I’m now a professor of public policy. 

Mr. GROTHMAN. Okay. Very good. Now I got that. 

Mr. KETTL. But I still want to, for the record, assert the fact that 

I remain a shareholder of the Green Bay Packers. 

Mr. GROTHMAN. Very good. Very good. 

Okay. I have questions for Ms. Styles or Mr. McTigue. The competitive sourcing critics say that any cost savings is eaten up by 

the cost of administering the competition. Is there any truth to that 

charge? Do you want to respond to that charge? 

Ms. STYLES. So, of course, there’s a cost to administering it. 

There’s an infrastructure of people that actually have to run the 

competitions and then have to manage the contracts. But the cost 

savings are so significant, whether it stays in-house or whether it 

goes out to the private sector, it is not wholly eaten up. There are 

still cost savings, and frankly, there are still tremendous benefits 

of simply the pressure of competition giving us better performance 

and better service. 


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Mr. GROTHMAN. Is there any way we can measure, you know, the 

savings we had last time, the last time we used A–76 competition? 

Ms. STYLES. Well, what I was fascinated by, as I left the government at the end of 2003, and competitive sourcing continued to 

build—you know, a lot of the infrastructure for the civilian agencies, built on what had been done by the Clinton administration at 

DOD and pushing out the civilian agencies—I’ve been really 

stunned by the lack of data and information from those competitions that used to be out there. There was a law that required the 

information to be out there about the cost savings. It has almost 

entirely been taken down from the White House Web sites and the 

agency Web sites. The data should be there. It was reported to 

Congress. But it’s there, there’s just very, very little analysis of the 

most recent iteration. 

Mr. GROTHMAN. So if I want to be a little bit jaded, I might wonder if there is a lot of cost savings, but for political reasons you 

want to hide the savings. Do you think that’s what’s going on here? 

Ms. STYLES. I am really worried about that, because I was 

stunned. Professor Kettl actually mentioned the Federal Advisory 

Committee panel. There was one led by David Walker in 2002. This 

is the report that they came out with. It cannot be found on the 

Internet. It literally—like how is that possible that a year’s worth 

of efforts with a panel of ten experts is not available on the Internet? And this talks about the savings. 

Mr. GROTHMAN. Hmm. Can you extrapolate from that report on 

the savings that you think we might have today if—— 

Ms. STYLES. Absolutely. I went back—and this was only, you 

know, a few days’ effort, because Mr. Palatiello and I have lots of 

old files that we don’t rely on the Internet necessarily to keep. And 

I went back through GAO reports, the Center for Naval Analyses, 

and I just scratched the surface of the ones that are available that 

demonstrate the cost savings. They’re really hard to find now, 

though. 

Mr. GROTHMAN. Okay. 

Mr. PALATIELLO. Mr. Grothman? 

Mr. GROTHMAN. Yes. 

Mr. PALATIELLO. If I may, after Ms. Styles left the Office of Federal Procurement Policy, the program continued and OMB—OFPP 

was issuing annual reports. The last one was in May of 2008, reported on the competitive sourcing results for fiscal year 2007, and 

it documented the 2003 to 2007 savings at $7.2 billion, with the 

majority of the savings to be realized over the next 5 years, and 

the annualized expected savings of over $1 billion. I have the full 

report. It is rather lengthy. Whether you want to enter it into the 

record or not—— 

Ms. STYLES. And it’s not on the Internet. I looked for it. I could 

not—you may have been able to more easily. 

Mr. PALATIELLO. I think it could be found in some back archive 

someplace. It is not on the White House Web site any longer. But 

that is the most recent report that actually documents the savings 

that were achieved. 

Mr. GROTHMAN. Professor Kettl, you must do research all the 

time. Do you find this is sometimes something you deal with in 


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government; if the results are not what they want, it kind of gets 

hidden and you can’t find the results? 

Mr. KETTL. In terms of trying to track down, especially old documents, things from the late 1990s and early 2000s are sometimes 

refugees from the Internet. And these are—this is information we 

need to try to recapture. But the broader point is that it is undoubtedly the case that we can save money by effective contracting. 

It’s also undoubtedly the case that we can lose substantial money 

from ineffective contracting. 

We can create fraud, waste, and abuse by contracting managed 

poorly, and we can improve government performance by managing 

it well. And what we really need to do is to make sure we do more 

of the good stuff and less of the bad stuff. And our problem is creating the capacity for being able to do that and making the cost 

comparisons to make sure that we’re making the smart decisions. 

And that’s where the really difficult problems are. 

Mr. GROTHMAN. You just think it’s coincidence that that stuff is 

not on the Internet, of all the things that are on the Internet? 

Mr. KETTL. I think it probably—I can point to lots of stuff from 

back in the late 1990s and early 2000s that I have been looking 

for and just can’t find anymore either. So it may very well be, especially if it’s not the product of a particular agency that didn’t have 

archival policies at that point. 

Mr. GROTHMAN. We will give you one more question, and this is 

for Ms. Styles again. Are there any limitations we should place on 

the A–76 competitions? Either you or any one of the folks. 

Ms. STYLES. Sure. I mean, there are inherently governmental 

functions, and that’s a public policy decision to make. I mean, there 

were times after 2011 that we thought screening at airports was 

an inherently governmental function. And so there are some things 

that should be off limits, but saying that nothing should happen, 

that there should be zero examination of commercial activities, is 

not the right response. 

Mr. GROTHMAN. It seems the answer should be obvious. Thanks 

much and I’ll—— 

Mr. MEADOWS. I thank the gentleman. 

Ms. Styles, if you will get the report to this committee, we will 

make sure that it’s on the Internet in short order, and I can assure 

you that it will not disappear. 

Ms. STYLES. Thank you. 

Mr. MEADOWS. And, Mr. Palatiello, if you’ve got something that 

you think would be prudent, and I think Professor Kettl makes a 

good point, is we need to look at the balance. Good data always 

makes for at least informed decisions. And so, in doing that, it 

doesn’t always make for good decisions, but it makes for informed 

decisions. And so, as we do that, we will do that. 

The chair recognizes the gentleman from Tennessee, Mr. Duncan, for 5 minutes. 

Mr. DUNCAN. Well, thank you, Mr. Chairman, and I want to 

thank all of the witnesses for what I think has been very interesting and informative testimony. 

I tell people in my district all the time that we all don’t hate 

each other up here, though some people out in the country seem 

to think that’s the case and that everything is so partisan and diviVerDate Sep 11 2014 09:55 Sep 26, 2016 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\21324.TXT APRIL

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sive. I think I get along with almost all the Democrats in the Congress, but at the same time, I will say that, in this committee, we 

have had many fairly contentious hearings. 

This has been about the most pleasant hearing I think we’ve ever 

had in this committee, because I think I agree with about everything that everybody said here today. 

And Mr. Connolly talked about outsourcing the oil change functions and so forth. And I can tell you, I said in my statement, I 

said: This bill is not about contracting out to the private sector for 

the sake of just contracting things out; this bill is about getting the 

best service and at the lowest cost for the taxpayers. 

And Professor Kettl talked about how we need to manage these 

contracts better, and I agree with that, because I can tell you I am 

horrified when I read about some Federal contractor who is ripping 

the taxpayers off. That’s not what this is about at all. 

Mr. Connolly talked about all the caucuses that he chairs, and 

he is a very hardworking and effective Member. I will tell you that, 

in this Congress—of course, in the Congress, to have an official 

caucus, you have to have a Republican co-chair and a Democratic 

co-chair. I’m the Republican chair of the Clean Water Caucus, because that is a special interest of mine. 

But I think it was about 12 years ago, the British Embassy 

called up and said they had run a genealogy and found out that 

I had more Scottish heritage than just about anybody in the Congress, and they asked me would I form a Friends of Scotland Caucus. And I was a little surprised at that, but I did that, and I still 

co-chair that caucus, and I really enjoy that. And I get teased all 

the time about being too tight, and maybe it’s because of that Scottish heritage. But I remember I was told that they had two thick 

notebooks in one department that had biographical sketches of all 

the Members of Congress, and at the bottom, it had questions commonly asked at hearings. And they said, on most Members, it 

didn’t have many questions listed, but under mine, it said: How 

much does it cost? 

And I thought, well, they’ve gotten me pretty accurately, but I 

think that we haven’t had enough Members who have asked that 

question as much as we should have. 

And Mr. Connolly is correct also in saying that I guess most of 

us on this side do generally favor the private sector. 

Professor Kettl, what would you say to this: As a general rule, 

do you think the private sector does things more economically and 

efficiently than the public sector, or would you disagree with that? 

Mr. KETTL. I think it’s a question that needs to be examined. 

Sometimes the answer is yes; sometimes the answer is no. Sometimes what government seeks to buy is not the kind of stuff that 

the private sector supplies. Sometimes when it comes to a lot of 

commercial activities, it does. 

And I think, as Mr. Connolly pointed out earlier, what’s essential 

is to try to figure out what we want to buy, who can supply it best, 

and how the government can make sure it gets its money’s worth. 

And that is the set of core questions that we have to examine, and 

there isn’t I think a black or a white question on this. And we’ve 

sometimes gotten ourselves into the biggest problems by assuming 

we know the answers to the questions before we start looking at 


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the evidence. I think we need just a much more careful examination of cost comparisons to be able to do this, and that I think is 

the key to unlocking the A–76 question. 

Mr. DUNCAN. Well, I think that’s exactly right, what you’ve just 

said. And I also have read about the 10 percent of improper payments in the Medicare program, and that’s something that we all 

want to fight and do as much as we can about. 

I guess another thing, I always usually root for the underdog in 

sports, and I usually almost always root for the small business 

against the big business. So one reason I’ve worked with Mr. 

Palatiello for so many years is that, you know, he’s testified here 

today that 71 percent of the businesses that would benefit from 

this primarily are small businesses. 

And do any of you question or doubt this when he said that the potential savings here are probably $35 billion or more? Would any 

of you question that? In other words, do all of you agree that there 

can be substantial savings—— 

Ms. STYLES. I certainly agree, yes. 

Mr. DUNCAN. —if we expand this? 

Mr. McTigue? 

Mr. MCTIGUE. I just want to make two comments there, Mr. 

Duncan, that I think are important. The first is, one of my jobs in 

government was controlling government spending. You can save all 

of the money if you stop doing everything. So there’s a tradeoff. 

You’re going to spend some money, but what you really need to 

measure is what you get in return. So sometimes the lowest price 

is not necessarily the best deal. I think that’s very important. 

The second thing is, unrelated to this, please don’t think that A– 

76 is a miraculous, perfect document. I would start off with a big 

red pencil and get rid of three-quarters of it. It tries to micromanage the process too much. And if you were just judging the end 

result, you would get a much better result than you would by using 

all of that micromanagement, because a lot of the accountability is 

for complying with the process rather than getting the best result. 

Mr. DUNCAN. Right. Mr. Palatiello, this isn’t all just about savings, saving money, though, is it? Aren’t there other potential benefits? 

Mr. PALATIELLO. Well, yes, and I spelled them out in my testimony, in terms of bringing in innovation, being able to manage the 

workforce for peak loads, things of that nature. 

But two other points. One is I think all the Kumbaya has just 

gone out, because Mr. McTigue would take a red pen to A–76, and 

he’s sitting here with the author of the last version of A–76. So I 

think Angela may be a little offended by that. 

Let me point out something that we really haven’t discussed in detail this morning and the reason why I stand behind my $35 billion figure. The way A–76 works is an agency says: Okay. We have 

a widget-making function that we have in our agency, and we are 

using government employees, and we have 100 Federal employees 

involved in making widgets, and we are going to compete that 

against the private sector. 

Well, the first thing that occurs is that 100-person widget-making function goes through what is called an MEO, a most efficient 

organization reengineering. And they may determine that they can 


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make widgets with 75 people. Well, it’s that 75-person function 

that then gets competed against the private sector, and the better 

provider wins. 

So, in terms of cost saving, the taxpayer saves regardless of 

whether the activity gets contracted out or stays in-house, because 

then that 75-person MEO gets implemented and the savings are 

achieved. 

I would point out in the study that—or the report from OMB 

that I cited earlier, in fiscal year 2007, this was not something that 

was applauded by the private sector. Seventy-three percent of the 

A–76s that were conducted in fiscal year 2007 stayed in-house, but 

there were still savings. 

So your bill, for example, Mr. Duncan, doesn’t mandate contracting out; it mandates some type of review. Do something with 

that commercial activity so a saving and an efficiency will be 

achieved, regardless of whether the work gets contracted or not. 

So, to Mr. Connolly’s point, no, our position is not that the private sector is always more efficient than the government. We think 

things always ought to be studied and competed to make the determination as to who should be the better provider. 

Mr. DUNCAN. Well, I’ve gone way over on my time, and I apologize, but let me say this. We were able to pass this earlier bill out 

of this committee, and it’s in law, and I am very pleased about 

that. But what we’re trying to do is go a little bit further, expand 

on that. And I think that it would be a good thing if we could do 

that, and that’s what this is about. Anyway, I will stop. 

I will say this, Mr. McTigue. I came to New Zealand many years 

ago. It’s a beautiful country, and they actually had me shear a 

sheep on a sheep farm there. And my dad told me many years ago, 

he said, everything looks easy from a distance. And I can tell you 

there’s a lot of truth in that, because that is a very difficult thing. 

The professionals make it look pretty easy, but it’s not. 

Mr. MCTIGUE. Every Scotsperson should be able to shear a 

sheep. 

Mr. DUNCAN. Thank you. 

Mr. MEADOWS. I thank the gentleman for his questions and his 

interest in this topic. 

The chair recognizes himself for a series of questions, and so I 

just want to try to bring some of this into focus in two ways. One 

is I want to thank all of you for being here today and, actually, for 

the genteel way that we have had differing opinions bantered back 

and forth. I think I would agree with Mr. Duncan that it’s refreshing. 

I would be remiss, however, if I would suggest that we’re all on 

the same sheet of music at this particular point, because this is the 

start—and I would like to reemphasize—the start of really looking 

at procurement overall and how we do it and how it should be 

done, what are best practices. 

Mr. Connolly and I have really agreed to start to lay the foundation for real reform. It will not happen this year. And so that foundation will start to be laid, hopefully, again, in the spring of the 

next term, provided that both of our constituencies believe that we 

should return, and then, from there, start to make real progress on 

how we look at procurement overall, whether it is the public/priVerDate Sep 11 2014 09:55 Sep 26, 2016 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 F:\21324.TXT APRIL

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vate side of things, whether it is procurement overall, whether it 

is best practices. And this is much larger than just this particular 

contracting issue. 

With that being said, it is incumbent on all of you, all four of 

you, to get us real details on what you see are the problems associated with this. Mr. Connolly actually has two very tough constituencies. He has Federal contractors and Federal workforce, of which 

those have at times competing interests with regard to this particular issue that he has articulated. He has also been one who has 

been very transparent in saying he wants to make sure that we do 

the best thing at the right time at no expense to the American taxpayer, and I’m taking him at his word. We’ve been able to work in 

a real bipartisan way there. 

So, with that being said, here’s what I would like each one of you 

to comment on. As we start to look at the procurement process and 

if we are going to go from less insourcing to more outsourcing, one 

of the troubling things—and I see some of our Federal contractors 

here—that I get, it gets to be we have an outside firm who is going 

to do some Federal work, but we put so many parameters on it that 

we don’t actually allow the outside firms to come forward with a 

proposal that will actually be implemented in an effective way. 

So then the finger-pointing starts. I used to have general contractors that worked for me. So you had a general contractor say: Well, 

it wasn’t my fault. It was the subcontractor over here, or it was 

this person. 

What I need from each one of you for you to comment on is 

where you get that conflict, where you have a Federal agency that 

puts out an RFP that is maybe too ambiguous, and so everybody 

is bidding on this, and then all of a sudden, we try to work it out 

later on in the process. 

And, Mr. McTigue, have you ever seen that happen in the public 

arena? 

Mr. MCTIGUE. Absolutely. I also had the task of stopping it from 

happening. And one of the things is what I mentioned in my testimony, allowing, readily allowing departures from the signed contract, because around that, you get changes to terms and conditions 

and changes to payments, and then it’s not fair to all of those who 

failed in the bid. 

The second thing I would say about that is that there’s too much 

focus on how many jobs are being contracted. I think that it’s the 

task that you are contracting that is more important and whether 

or not you can get better outcomes from putting that out to competition. 

And part of it is not just about price; it’s about, how can we do 

it better? That might be better technology. It might just be better 

empathy with the subject groups that you’re going to deal with. 

Also, sometimes, it means that the best bid is one you have to turn 

down. I got a bid once, we were putting—contracting out debt collection. And that was very effective. We were getting a lot of debts 

that previously were hard to collect. One of the bidders was actually the Road Knights motorcycle gang, and they theoretically had 

a very good record of collecting money, but we had to say: No, you 

are not a satisfactory bidder. 

So those things have to be taken into account in the process. 


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Mr. MEADOWS. Point well taken. 

Ms. Styles, in that Mr. McTigue would like to redline most of 

your proprietary work, how would you take some of that and 

streamline it so that we can be more efficient and effective as it 

relates to the contracting and procurement process? 

Ms. STYLES. Well, what I really appreciate about this hearing is, 

I will tell you, in my 3 years at OMB—and I must have testified 

like more than 20 times on this issue while I was in the government—is that rarely do people understand that public-private competition wasn’t going to be effective unless our procurement system 

was really effective. 

And I think what you’re finding today is that, as the dollars increase going out the door to Federal contractors—and it wasn’t just 

public-private competition; it was just because we were spending 

more to fight terrorism, really—is that the oversight increases. 

So what you see today is you’ve got the Department of Justice, 

DCAA. You’ve got the IGs. You’ve got AUSAs. You’ve got the press 

that all look at contractors, and what has happened is there has 

been this extraordinary chill in the discussions between them. 

So when you describe the situation where, you know, the government comes out because nobody will talk to them about what their 

requirement is, they don’t really have enough information from the 

private sector to really put together a good RFP. And then when 

things start going bad, they’re even scared to talk to the government about it, just because, are we going to be investigated? Is my 

contracting officer going to be investigated? Is my company going 

to be investigated? So it’s created a real chill in the procurement 

system in terms of providing the best service, I think, for the taxpayer. 

I will say, though, in the A–76 process and in rewriting it, like 

anything else, it’s a compromise. We worked extremely closely, believe it or not, with the AFGE on rewriting that. You know, the 

door was very open. They commented on many versions of it. I’m 

not going to say that it was always friendly, but the door was always open, and we worked really hard on that. 

I think, after I left, it became just more, you know, difficult between the administration and the AFGE. And it’s really critically 

important, whether you rewrite A–76 or not, that you really have 

both parties at the table to compromise. And it’s going to be a compromise. And sometimes that means that compromise on how you 

do the process is pretty complicated. 

But I will say my mantra in running my law firm is that you 

should never let the perfect be the enemy of the good enough. And 

here you see $1.2 million commercial activities that aren’t being 

competed. Do something. You know, actually, take a look at some 

of these things as opposed to waiting for the perfect process or the 

perfect cost comparison. That will never exist. 

Mr. MEADOWS. Professor Kettl, obviously, as you’ve looked at 

this, you can see a number of the cost issues. Have you seen there 

being a very difficult time to determine that real cost comparison? 

So you have public sector, private sector. I was in the private sector all my life, and I put everything in there, because, I mean, 

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ruptcy. And so it was accounting for all those costs. And at times, 

in the public sector, we don’t necessarily do that. 

So would you suggest that the current cost analysis at times is 

ambiguous or—and I don’t want to put words in your mouth, but 

you’ve looked at that and testified to that. 

Mr. KETTL. Sure. You can look at whether it’s ambiguous, whether it’s uncertain. At the very least, it’s contentious. The basic problem is we just don’t have an agreed-upon methodology for making 

the cost comparisons. If the basic point is, whoever it is who can 

do the job best and cheapest ought to get the work, we need to be 

able to figure out how to do that and how to have some consensus 

on agreeing on what that looks like. And we have no consensus on 

how to do that. 

My suggestion is to circle back, perhaps, to this idea of creating 

an advisory committee to establish a methodology that creates a 

level playing field. This is a set of rules by which everybody will 

agree to play, and it’s something that, in the coming year, may be 

something—can be the foundation for both trying to reinvigorate 

A–76 and being able to establish the goal of giving the work to 

whoever it is who can do it best and cheapest. 

Mr. MEADOWS. All right. 

Mr. PALATIELLO. Mr. Chairman, there are three things that I 

would add. First of all, the FAIR Act was a compromise. As Mr. 

Duncan indicated, he had an earlier version of the Freedom from 

Government Competition Act. There was a negotiation between the 

private sector—I was chairing the Procurement and Privatization 

Council of the U.S. Chamber at the time, so I was very much involved in those discussions—AFGE and the Clinton administration, 

and what we all could agree to was the FAIR Act. 

I would agree with Mr. Duncan that the shortcoming and one 

thing we had to give in that was the FAIR Act said: Do the inventory and then review everything on the inventory. We could not 

reach agreement as to what constituted that review. The term was 

not defined. And his current bill tries to establish what that review 

process is. 

I would agree that the—you know, when I cited before, when in 

the last year where there’s a report from the Bush administration, 

that 73 percent of the competition went to the government, the private sector was saying: Well, we don’t have a good methodology for 

calculating the in-house government cost; there’s no way they could 

be winning that percentage. So I would agree that revisiting that 

issue is probably worthwhile. 

Three things that I think are absolutely essential: One, as I 

think many of us have said, is training and rebuilding that acquisition workforce. 

The second is communication, and Ms. Styles mentioned that. It 

is amazing today, when a government agency puts out an RFP, the 

communication shuts down. ‘‘Oh, I can’t talk to you about this because we have to preserve procurement integrity. If I tell you something, I’m afraid I won’t tell one of your competitors.’’ So the communication just gets shut down, and that’s not good for the process. 

So I think that is another thing we have to review. 

And the third is, surprisingly, the communication within the government. Often, whether this is a regular procurement or an A–76, 


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the program manager often doesn’t see the RFP until it’s out in 

the—I am dating myself, Commerce Business Daily—FedBizOpps. 

So there’s this lack of communication between the contracting officers and the program people that actually have to use the service 

or product once it’s purchased. So I think enhancing that communication would really improve the process all the way around, communication within the government and communication between 

government and the firms that are seeking to compete for the contract. 

Mr. MEADOWS. All right. Well, thank you all. 

I’m going to recognize the ranking member, Mr. Connolly, for his 

closing remarks. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

And thank you to the panel. 

And good luck with that apples-to-apples thing. I mean, we have 

that problem even within the private sector, because there are people who come in and low bid and win contracts. And I can remember arguing about whether they had fully loaded costs in their proposal and so forth and accurate overhead and administrative costs 

and so forth. 

So, at the end of the day, this happens all the time, but, I mean, 

for various and sundry reasons, sometimes because of set-asides or 

whatever, but somebody who wins the contract obviously patently 

does not have the capacity to undertake the contract and then has 

to subcontract with the people who do have the expertise. And it’s 

a bit of a shell game, so that we meet check boxes or meet certain 

statistical goals. And I am not sure the public is well-served by 

that, or the private sector, frankly, is well-served by that, but that 

is a different issue. 

I just want to point out in context and to end, Mr. Chairman— 

because one would not want the impression left from this hearing 

that somehow we’re starving the private sector of Federal Government business—we spend over a half a trillion dollars a year on 

outside products and services. And that’s a pretty big increase from 

where we started, say, at the beginning of the Bush administration, 2000. We grew 87 percent in that time period. It’s growing at 

a rate of about 5 percent a year. 

Contracting also grew as a percentage of total Federal spending 

during that time. So it’s not like, ‘‘Well, yeah, but if you look at 

the total pie, it shrunk.’’ No. Actually, contracting grew from 11 

percent to 15 percent. 

And then a final point that the GAO presented to us: The Federal Government spends more on contract employees—your point 

when you were talking about my district—than it does on public 

employees. GAO pointed out that non-DOD agencies spent $126 

billion on service contractors, and DOD spent $184 billion, for a 

total of $310 billion. The total cost of Federal civilian employees, 

excluding Postal Service—they are not exactly Federal employees— 

by way of contrast, was $240 billion. 

So, you know, again, for me, it’s not theology, but I did want to 

put it in context. Actually, contracting has grown. Non-Federal employment in this context has also grown. And the Federal workforce, as a percentage or in a ratio to U.S. population, has actually 

shrunk. 


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Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

I’d like to thank all of our witnesses for being here, and so let 

me just close by saying this. It is not my policy nor my desire to 

hold hearings just to hold hearings. And I think you will find the 

ranking member and I have been committed to not only hold hearings but to follow up on those things. So, whether it’s input from 

stakeholders, whether it’s input from you, as witnesses and experts 

in this field, if you will get it to this committee. This fits into really 

a painting that we’ve started to paint on a canvas that, when we 

came in, really was blank. We said: We’re going to take a blank 

canvas, make no assumptions, and then start to put the different 

images on a canvas. And by that, whether it is this, whether it is 

job sharing, whether it is FITARA, whether it is the DATA Act, a 

number of these areas that start to bring in different parameters 

on what we do well and what we don’t do well, we are in that information-gathering process, but it is one that we will be tenacious 

and diligent on until, ultimately, we come up with a product that 

incorporates something like Mr. Duncan has in his and a number 

of other legislative remedies and then working with whatever administration is there to hopefully look at the procurement process 

that advances the efficiency and accountability that we all want. 

So I want to thank you, look forward to your continued input. 

And, with that, if there is no further business, without objection, 

the subcommittee stands adjourned. 

[Whereupon, at 10:29 a.m., the subcommittee was adjourned.] 


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