Bringing market discipline to federal work

Bringing market discipline to federal work
© Greg Nash


Back in 1966, the Johnson administration formalized the rules under which the private sector could compete to provide services otherwise performed by federal government employees. The Office of Management and Budget (OMB) published those rules as OMB Circular A-76.

The idea was to save taxpayers money by introducing market discipline and competitive forces to the management of federal agencies. The process established in the circular aimed to create a fair playing field in which private businesses could bid against public sector employees to provide common, commercially available services such as landscaping, vehicle maintenance and information and technology support.

Under this process, government employees performing work ripe for competition would submit a proposal to continue doing the job. This Most Efficient Organization (MEO) proposal would represent the public sector’s best offer and serve as the baseline that the private sector would have to beat in order to win the contract.  This dynamic provides efficiency gains, even if the incumbent government employees win the bid.


Unfortunately, Congress barred these competitions in the aftermath of a 2008 scandal at Walter Reed Medical Center. At the time, Walter Reed staff members were facing two major uncertainties: the outcome of an A-76 competition and the realignment of the facility as part of a base realignment and closures (BRAC) round.

Fearing that, one way or another, their positions might be eliminated, hospital staff began leaving in greater numbers than anticipated, and Walter Reed had difficulty finding replacements. The result: inadequate personnel to care for military patients.

The Congressional Research Service later traced the problem — not to the BRAC or the A-76 processes — but to management failures at Walter Reed.

Still, the situation at Walter Reed provided the opening for opponents of competition for commercial services in the government to prohibit new A-76 competitions. And that prohibition has been renewed in the annual defense authorization bill ever since.

Perhaps it’s just that the prohibition has become routine, but there has been little discussion of why Congress still bars A-76 competitions, let alone a reevaluation of the circular and its utility in today’s government.

It’s time for that to change. The Trump administration, especially Defense Secretary James MattisJames Norman MattisOvernight Defense — Presented by Boeing — Trump insists Turkey wants cease-fire | Fighting continues in Syrian town | Pentagon chief headed to Mideast | Mattis responds to criticism from Trump The Hill's 12:30 Report: White House does damage control after Mulvaney remarks Mattis responds to Trump criticism: 'I guess I'm the Meryl Streep of generals' MORE, should push to lift the prohibition.

Historically, the Defense Department has been the largest user of A-76 competitions, both in volume and in resources. On regular basis, the Pentagon has to make decisions on which type of workforce — be it military personnel, civilian, or contractor — to employ for a given task, As such, it is well versed in evaluating and deciding between different work proposals.

Reforming how the Pentagon conducts its business so that it gets the most value for the taxpayers’ dollars is among Sec. Mattis’ stated priorities. A-76 competitions can certainly help him get there. They have a solid record of accomplishment, creating efficiencies by forcing the government to assess how it can get the best value for money spent on commercially available services. They also force government managers to get a clear understanding of how they are currently approaching their tasks and to consider—and test—if they are doing it as effectively as possible.

By lifting the prohibition on A-76 competitions, Congress could help the Department of Defense both be more effective and make better use of the resources at its disposal. A-76 competitions are a great way to assess both the efficiency and the costs of commercial activities within the federal government.

It is very common for members of Congress to rail against government inefficiency and the high costs of the bureaucracy. Lifting the A-76 prohibition would be doing something about it. It is a question of political will.

Frederico Bartels is a policy analyst specializing in defense budgeting at The Heritage Foundation’s Center for National Defense.