First a little history: Ten years ago, I wrote a book called Purchasing Strategies for Total Quality (McGraw-Hill). The book basically explained that companies should focus on their core competencies and outsource all non-core work. The decision to outsource should be based on the best overall value to an organization's total cost, service and quality.
Well, this is happening now to the U.S. government. President Bush's Management Agenda requires federal agencies to review fundamentally work/ tasks/activities: those that are “inherently governmental” and those that are non-core. These non-core activities are going to be competitively sourced.
OMB A-76 Impacts
This “privatization” push took effect in early January 2003 as outlined in the federal Office of Management and Budget (OMB) Circular A-76, which is more than 36 years old. Why has it taken so long to take effect? The Bush Administration's privatization and competitive outsourcing management agenda requires government agencies to be more flexible, responsive, quality-conscious and cost-effective.
This is a major challenge for many governmental agencies that have been immune to quality, cost and schedule pressures—in other words, immune to competitive project management pressures.
OMB Circular A-76 will have a huge impact on the project management profession. The estimates of “commercial activity” jobs that could be competitively sourced ranges from 400,000 to more than one million.
Project Management Opportunities
It's important to define outsourcing terms. Outsourcing is the contracting of a commercial activity. Competitive sourcing is the government term for the process whereby the cost of internal performance of an activity is formally compared to the cost of purchasing that performance somewhere else. Under competitive sourc-ing, the government retains ownership and control of the commercial activity, regardless of whether the service provider is from the public or private sector.
What governmental activities does OMB Circular A-76 impact? Non-core recurring commercial activities that can be obtained from private-sector sources are the first to be impacted. This can include anything from quality-control testing of products, in-house design, information technology and maintenance to facility management.
There are a number of milestones in the “competitive sourcing” process: public announcement, cost comparison and contract implementation. There also are a number of deliverables in each step. For example, after the public announcement, a performance work statement (PWS) and quality assurance surveillance plan are developed. Each major step also has a number of sub-steps that have to be project managed. For example, the cost comparison process has nine essential steps—more project management opportunities involving milestones, deliverables, timelines, quality and other requirements.
Federal government agencies must conduct comprehensive PWSs and most efficient organization studies. These project activities must be managed from the government and contractor side.
From the government side, we're seeing a sea change in critical roles and responsibilities. The federal government wants all the outsourced activities to make economic sense. The most efficient and cost-effective way to ensure that is through project management. As more federal agencies become lean through downsizing, competitive outsourcing and privatization, the remaining federal staffers will evolve into project administrators and project managers.
Information is Out There
Go to your favorite search engine and type in “competitive sourcing,” “OMB Circular A-76,” or “most efficient organization.” You'll get thousands of links as federal agencies scamper to comply with the OMB Circular.
Both sides of the sourcing equation, the federal agency as well as the sourc-ing contractor, have schedule, cost and quality project activities to be managed. This is a huge opportunity that will emerge in 2003. Best of luck on these activities. PM
Greg Hutchins is a principal management consultant with QPE, a program, process and project management advisory firm in Portland, Ore., USA. He is author of Value Added Auditing. QPE’s core competency is leading/coaching project teams to do the right things and right on time.
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