Development of a National Make-or-Buy Strategy:

Progress and Problems

PSAD-78-118: Published: Sep 25, 1978. Publicly Released: Sep 25, 1978.

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There has been much controversy regarding the question of whether the government should provide its own needed goods and services or contract for them with private enterprise. The Office of Federal Procurement Policy (OFPP) in the Office of Management and Budget (OMB) provides overall procurement policy direction for executive agencies. OMB Circular A-76 states that no executive agency will start or continue the operation of a government commmercial or industrial activity except as specifically required by law or as provided for in the circular. During 1976 and 1977, there has been increased emphasis on contracting.

The stated policy has not been perceived as a national policy with full executive and legislative branch approval and support. Policy pronouncements and applications have been controversial; implementation has been inconsistent and relatively ineffective; and make-or-buy decisions have not necessarily been based on sound management principles. Management of the A-76 program needs acceptable management control systems, clarification of basic policy and regulations, clear identification of types of activities subject to the policy, consistent execution of the policy, and development of review and appraisal systems. Implementation has been hampered by confusion, lack of understanding, reluctance to carry out the program which was not integrated with agencies' main decisionmaking processes, and budgetary and accounting systems which did not always support the program. Agencies seldom prepared cost comparisons because of such difficulties as when and how to prepare them, determining government's and contractors' costs, and comparability of pay rates. Agency make-or-buy decisions were significantly influenced by such factors as personnel ceilings, contract issues, labor-management policies, other procurement policies, personnel assignment policies, legislation, and federal printing policy.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: This is a politically sensitive issue. Congress will not take action at this time towards endorsing a national policy of contracting. Legislation has been passed in several instances precluding agencies from contracting work performed by federal employees.

    Matter: The House Committee on Government Operations and the Senate Committee on Governmental Affairs should consider the findings and recommendations of the Commission on Government Procurement during their deliberations on the revised A-76 policy.

  2. Status: Closed - Not Implemented

    Comments: This is a politically sensitive issue. Congress will not take action at this time towards endorsing a national policy of contracting. Legislation has been passed in several instances precluding agencies from contracting work performed by federal employees.

    Matter: The House Committee on Government Operations and the Senate Committee on Governmental Affairs should consider the findings and recommendations of the Commission on Government Procurement during their deliberations on the revised A-76 policy.

  3. Status: Closed - Not Implemented

    Comments: This is a politically sensitive issue. Congress will not take action at this time towards endorsing a national policy of contracting. Legislation has been passed in several instances precluding agencies from contracting work performed by federal employees.

    Matter: Congress should: (1) endorse a national policy of reliance on private enterprise for the government's needs to the maximum extent feasible and consistent with the national interest and procurement at reasonable prices; (2) require executive agencies to report on their progress in supporting that policy; and (3) direct reviews of existing related legislation to identify and eliminate sources of conflicts and inequities.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: OFPP will not take action because it states that it is the responsibility of the agency to review A-76 implementation.

    Recommendation: The Administrator, OFPP, should develop the overall policy and requirements for agency heads to institute an independent review process of the A-76 program within each agency.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  2. Status: Closed - Not Implemented

    Comments: OFPP will not take action because it feels that these issues involve major policy considerations and should be addressed in a much broader context than the implementation of Circular A-76.

    Recommendation: The Administrator, OFPP, should undertake studies to establish the extent to which the budgetary and accounting systems will support the make-or-buy program.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  3. Status: Closed - Not Implemented

    Comments: OFPP is not taking action because it believes that it is the agencies' responsibility to ensure that government policies are followed.

    Recommendation: The Administrator, OFPP, should require agency heads to develop a plan for integrating the policies into the mainstream of agencies' management and decisionmaking processes. These plans should be subject to his review and approval.

    Agency Affected: Senate Committee on Governmental Affairs

  4. Status: Closed - Not Implemented

    Comments: OMB took some action in that agencies are required to provide certain data relevant to A-76 implementation. In regard to incorporating activities into the budget review process, some agencies reduce the number of personnel by the number of people expected to be released by contracting. OMB has not developed a method to systematically review how agencies carry out the program.

    Recommendation: The Director, OMB, should assess the feasibility and practicability of incorporating the objectives of the A-76 program into the budget review process. The Director should also develop a method to systematically review how the agencies carry out the A-76 program.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

 

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