**GAO-08-753R**                      Published: May 29, 2008. Publicly Released: May 29, 2008.                  

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## Highlights

Federal agencies are required to use the procedures contained in OMB Circular A-76 in determining whether commercial services should be performed by government personnel or through contracts with private-sector entities. In general, the circular instructs agencies to base these decisions on competitions among public and private-sector entities conducted in accordance with the Federal Acquisition Regulation (FAR). Under the FAR, agencies have broad discretion in establishing the criteria they will use to select the winners of these competitions. An agency may decide, for example, that selection of the lowest priced, acceptable offer would best meet its needs. The FAR advises that this may be appropriate when requirements are clearly defined and the risk of unsuccessful performance is minimal. On the other hand, the FAR says that it may be in the best interest of an agency to provide for selecting other than the low offer when requirements are less definite, development work is required, or the risk of unsuccessful performance is high. An evaluation scheme that allows for considering the relative importance of both price and technical factors (such as an offeror's management capability, experience, or ability to apply new technology) is commonly known as the "best value" tradeoff process. The use of best value permits tradeoffs between price and non-price factors, allowing acceptance of other than the lowest-priced proposal. Although the FAR allows agencies to use different source selection approaches, public-private competitions at DOD must comply with section 2461 of title 10 of the U.S. Code. That section requires that before a function being performed by 10 or more DOD civilian personnel may be converted to performance by a contractor, DOD must determine that performance of the function by a contractor, rather than by DOD employees, will result in savings to the government over the life of the contract. In essence, section 2461 prevents DOD from using the best value tradeoff process to award a contract that would cost the government more than continued performance by the government. The pilot authority in section 336 temporarily permits DOD to use the best value tradeoff process in competitions for IT services to award contracts at costs that may be higher than government performance, when doing so would provide DOD the greatest overall benefit.

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## Topics

Information Technology

AccountabilityAgency proceedingsCompetitionCompetitive procurementDefense procurementEvaluation criteriaEvaluation methodsFederal agenciesFederal procurement policyGovernment contractsInformation technologyInternal controlsManaged competitionPrices and pricingPrivate sectorProcurementProcurement evaluationProcurement lawProcurement policyProgram evaluationProgram managementRequirements definitionRisk managementSource selectionStrategic planningTechnical proposalsContract principlesPilot programs