Will Rogers, said to have been the most beloved and widely quoted figure of his time, had a droll, witty way of getting right to the heart of a matter. In 1935, he wrote “Thoroughbreds are a very nervous, nutty lot. . . . [For] a horse to ride around on, I want one you kinder nudge him in the stomach at every step. We have a lot of mountain trails out here and they are plenty narrow and steep sometimes, and there is a lot of difference in the way different horses negotiate ’em.”
It is an apt characterization that may be applied to the steep dilemmas that currently snag the efforts of the US federal government to increasingly implement competitive sourcing and privatization of public sector activities. Many in the private sector believe these matters can?and must?be negotiated in a different way. Randall A. Yim, Deputy Under Secretary of Defense (Installations) is doing some nudging.
The Current Pathway
The office of the Secretary of Defense provides oversight and policy guidance for each of the US military services. Determining whether a non-core function is appropriate for sourcing or privatization begins when a service determines it no longer wants its employees to do that function. If it wants to get out of that business area entirely, the process is privatized. If, however, the service wants to maintain a hand in some processes of that business area and provides the Department of Defense (DOD) justification for doing so, those processes must undergo an A-76 study to give the public employees in that area an opportunity to do the function.
A-76 Studies. The Office of Management and Budget’s (OMB) Circular A-76 requires comparisons between the costs of doing the work by the private sector and the costs of doing it in-house with public employees. The A-76 process is frequently perceived as unfair; ironically, it was designed to achieve fairness.
Yim says that the Defense Reform Initiative Goals for Fiscal Years 1997-2005 are on track, as of DOD’s review of two months ago. The goal was about 230,000 positions to be studied for competitive sourcing; savings through that same period of time of $11.2 billion; and manpower reductions as a result of the A-76 studies of 76,000-77,000 positions. The expected savings will be used to fund modernization.
There are a number of challenges in doing these cost comparison studies in a fair and accurate way. “The biggest problem,” Yim says, “is when the private sector proposes to do something in a different manner than how it is being done. With performance improvements or infusion of new technology, how can there be a fair comparison?”
Bid Process. Although competition is the linchpin to the A-76 strategy, the private sector often does not bid because it perceives the process as being slanted toward public sector employees. In large part, the perceived unfairness is due to the federal government’s requests for proposals (RFPs). “Typically, we give people 3,500-page RFPs and tell them exactly every step of the process,” Yim says. “For example, in ground maintenance, we tell them we want our grass cut using self-propelled, gasoline-powered lawn mowers with a 24-inch cutting swath; cut only on Mon, Wed and Fri; sweepings taken to a particular location. Instead, we should say we want somebody to cut our grass between three-quarters of an inch and one and a half inches long and then let them figure out how to accomplish that task. Yim says it is one of his goals to move toward a smarter contract process using performance standards.
Bundling. With related work bundled together in a single contract solicitation, the DOD is likely to get economies of scale from a larger company, along with a better price. “Alternatively, it may make it impossible for small businesses to be able to effectively capture that workload, and a lot of innovation comes out of small companies,” Yim comments. DOD has a difficult balance to achieve between price and its goal of supporting small and disadvantaged companies.
Public Employees. Yim acknowledges the DOD’s desire to take care of people who have served the US for 20-30 years. “We are making monetary decisions,” he says, “but not at any cost. We are dealing with the jobs of 230,000 public employees. When we go down this path because we need to become more efficient, we are not going to override other values that are important to the military. Those things may cost us a little more.”
What the DOD values in public-private competitions is smooth transitions. It is important that there be “no degradation in the performance or quality of the work,” Yim says. “There has to be expertise to keep us smoothly operating, which can be provided by the public employee who has been doing that job; and the private sector should offer that opportunity to our displaced employees.”
Improving the Approach
Yim is responsible for installations management for US domestic and overseas facilities, including even utilities and base closure. In an organization of the magnitude of the DOD, it is easy to lose sight of how business processes interrelate. His utility privatization efforts affect housing requirements and costs. Construction of a hospital affects DOD’s energy conservation goals and commodity purchasing goals.
To eliminate duplication of effort from several entities dealing with related topics, Yim instituted a senior leader installation policy board. Active since April 1999, the policy board is modeled after a corporate board of directors. “Essentially, we provide advice to the guys who run the infrastructure for all of our defense components,” Yim explains. “We are all struggling a bit with how to use this body wisely. But it is nice for me to have a forum where I can bring senior leaders together to talk about issues and try to have a consensus across all the services. I am very pleased. It allows the Army, for example, to know about some of the new things that the Air Force is doing and vice versa. Hopefully, we can all learn from each other’s mistakes and, more importantly, from each other’s successes.”
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].