PSC: Rigor In Cost Analyses Needed but Missing

Arlington, Va., March 28, 2012—The Professional Services Council presented written testimony to the Senate outlining five recommendations for making appropriate and cost-effective government sourcing decisions.

PSC was asked to submit its views to the Homeland Security and Governmental Affairs Committee for a March 29 hearing on the cost of contractors to the government and the degree to which the government is using accurate and complete data to make appropriate cost-comparison determinations when such comparisons are relevant.

“The key to getting the ‘right’ answer for the American taxpayer in cases where cost is a factor lies in ensuring that the government is using the best and most complete taxonomy for conducting its cost comparisons. To date, the evidence overwhelmingly suggests that this objective is not being achieved,” said PSC President and CEO Stan Soloway. “Understanding the cost implications associated with agency sourcing decisions is always important, particularly in today's fiscal environment.”

“While we recognize that there are clear limits to the scope of work that is appropriate for the private sector to perform for the government, it is also true that the innovation, skills, agility, and competitive spirit of the private sector are the engine that drives our economy,” Soloway said. “Any decision to perform work inside the government that is appropriate for the private sector to do must be accompanied by real analytical rigor. To do otherwise is contrary to both the government's and taxpayers' interests and the broader health of our economy.” 

PSC recommended that lawmakers: 

  1. Rescind the moratorium on public-private competitions under OMB Circular A-76 to enable agencies to gain the full benefit of competition—the engine that drives performance and efficiency.
  2. Require OMB to update the current OMB Circular A-76 cost comparison taxonomy to address the shortcomings and process improvements identified in the May 2011 Center for Strategic and International Studies report, “DoD Workforce Cost Realism Assessment.”
  3. Require DoD to develop a new methodology, if necessary using its existing Directive-Type Memorandum (DTM) 09-007, to compare costs of in-house with private-sector performance, correct identified shortcomings in the DTM and incorporate the process improvements highlighted by the CSIS report.
  4. Require that, in cases where agencies make a decision to insource contracted work, the analysis used in making that decision be shared at a minimum with the affected contractor and that a process for appeal by the contractor be provided.
  5. Require that any decision to insource contracted work be accompanied by a government analysis of the impact of its decision on small business.
PSC’s testimony is available here.


About PSC: PSC has been the voice of the government professional and technical services industry for 40 years. PSC’s nearly 350 member companies represent small, medium, and large businesses that provide federal agencies with services of all kinds, including information technology, engineering, logistics, facilities management, operations and maintenance, consulting, international development, scientific, social, environmental services, and more. Together, the trade association’s members employ hundreds of thousands of Americans in all 50 states. Follow PSC on Twitter @PSCSpeaks and @StanSoloway.