[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Pages 11232-11234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03581]



Notification of a Public Meeting on the Use of Cost Comparisons 
in Federal Procurement

AGENCY: Office of Management and Budget, Executive Office of the 

ACTION: Notice of a public meeting and request for comments.


SUMMARY: The Office of Federal Procurement Policy (OFPP) in the Office 
of Management and Budget (OMB) seeks input from the public on the 
practice of comparing the relative cost of performance by Federal 
employees versus contract performance in order to identify the most 
cost-effective source. OFPP intends to consider feedback received in 
response to this notice as it evaluates existing policies addressing 
cost comparisons and considers new ones to help agencies save money and 
drive better results. Feedback will also be considered in connection 
with the development of guidance required by section 1655 of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013, 
Public Law 112-239. Section 1655 requires OMB to publish guidance 
addressing the conversion of a function being performed by a small 
business concern to performance by a Federal employee.
    Interested parties may offer oral and/or written comments at a 
public meeting to be held on March 5, 2013. Parties are also encouraged 
to provide all written comments directly to www.regulations.gov.

DATES: A public meeting will be conducted on Tuesday March 5, 2013 at 2 
p.m. eastern time and is expected to conclude not later than 5 p.m. 
eastern time.
    Procedures for the public meeting:
    The public is asked to pre-register by Friday March 1, 2013, due to 
security limitations. To pre-register, please send an email to Ms. 
Aisha Hasan of OFPP at [email protected]. Registration check-in will 
begin at 1 p.m. eastern time and the meeting will start at 2 p.m. 
eastern time.
    Oral Public Comments: Parties wishing to make formal oral 
presentations at the public meeting must contact Ms. Aisha Hasan by 
electronic mail at [email protected] no later than Friday March 1, 
2013, to be placed on the public speaker list. Time allocations for 
oral presentations will be limited to five minutes. All formal oral 
public comments should also be followed-up in writing and submitted to 
www.regulations.gov. When submitting your comments, reference ``Public 
Comments on the Use of Cost Comparisons.'' Note: Requests made after 
the deadline for formal oral presentations will be permitted as time 
permits and assigned based on the order the requests are received.
    Written Comments/Statements: In lieu of, or in addition to, 
participating in the public meeting, interested parties may

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submit written comments to www.regulations.gov by April 15, 2013. When 
submitting your comments, reference ``Public Comments on the Use of 
Cost Comparisons.'' Parties wishing to share written statements at the 
public meeting must submit such statements to Ms. Hasan at 
[email protected] by March 1, 2013.

ADDRESSES: The public meeting will be held at the General Services 
Administration Auditorium located at 1800 F Street NW., Washington, DC, 
    Meeting Accommodations: The public meeting is physically accessible 
to people with disabilities. Request for sign language interpretation 
or other auxiliary aids should be directed to Ms. Lague at 
[email protected] or 202-694-8149 by February 25, 2013.
    The TTY number for further information is: 1-800-877-8339. When the 
operator answers the call, let them know the agency is the General 
Services Administration; the point-of-contact is Deborah Lague at 202-

FOR FURTHER INFORMATION CONTACT: For clarification of the subject 
matter related to the memorandum: Mr. Mathew Blum, OFPP, (202) 395-4953 
or [email protected] or Mr. Jim Wade, OFPP, (202) 395-2181 or 
[email protected].
    For public meeting information and submission of comment: Ms. Aisha 
Hasan, OFPP, (202) 395-6811 or [email protected].

SUPPLEMENTARY INFORMATION: From the start of the Administration, it has 
been a priority to make sure agencies apply fiscally responsible 
acquisition practices that cut contracting costs and better protect 
taxpayers from cost overruns and poor performance. In response, 
agencies have been taking steps to buy less and buy smarter. These 
steps include cutting unnecessary contract spending and launching new 
efforts to pool the government's buying power. These efforts are paying 
off. FY 2012's total spending on contracts was $35 billion less than 
the amount spent in FY 2009, marking the largest three-year decline in 
Federal contract spending on record. (For additional information on the 
Federal government-wide contracting achievements, go to http://www.whitehouse.gov/blog/2012/12/06/historic-savings-contracting-and-plans-more.)
    To build on these efforts, OFPP has kicked off an initiative to 
consider how agencies may achieve further savings and drive even better 
results through the use of cost comparisons in appropriate 
circumstances. Cost comparison is the term used to describe the 
practice of comparing the cost of a private sector contractor 
performing a defined task, or set of tasks, to the cost of having 
Federal employees perform the same task(s) where the work is suitable 
for performance by either sector. This tool offers a number of 
benefits. A cost comparison can help the agency validate whether the 
current sector performing the work is the more cost-effective source. 
Where this is not the case, the cost comparison may be used to 
encourage the sector currently performing the work to adopt more 
efficient practices. Where the difference in cost between the public 
and private sectors for performance of the same task is significant, 
the comparison may support conversion of work from one sector to the 
other, in accordance with law, including any limitations imposed 
    OFPP seeks public comment on how agencies can best incorporate cost 
comparisons into their management practices and especially welcomes 
public comment on the following
    three issues: (1) When cost comparisons are likely to be 
beneficial, (2) what principles should guide the conduct of a cost 
comparison, and (3) what special considerations should be involved when 
work is currently being performed by a small business contractor. 
Additional explanation and discussion questions are set forth below.

A. Suitability

    Like most management practices, cost comparisons are not a ``one-
size-fits-all'' tool. A number of factors need to be considered to 
identify when a cost comparison may be appropriate and, when 
appropriate, where the agency is likely to derive benefit from using a 
cost comparison. For example, a cost comparison would not be 
appropriate if an agency decides that a particular requirement is no 
longer needed, or no longer affordable, no matter who performs the 
work. A cost comparison would also not be appropriate if only one 
sector is suitable for performing a given requirement. For example, 
performance of work by the private sector would not be suitable if the 
work to be performed involves (i) an inherently governmental function, 
(ii) a critical function to the extent that human capital and/or risk 
analysis shows that there is not a sufficient number of Federal 
employees performing, or managing, the function so that the agency can 
maintain control of its mission and operations, or (iii) an 
unauthorized personal service. These limitations are explained in OFPP 
Policy Letter 11-1, Performance of Inherently Governmental and Critical 
Functions, available at http://www.whitehouse.gov/omb/procurement_index_work_performance/, and OMB Memorandum M-09-26, Managing the 
Multi-Sector Workforce, available at http://www.whitehouse.gov/sites/default/files/omb/assets/memoranda_fy2009/m-09-26.pdf.
    At the same time, as explained in Policy Letter 11-01 and 
Memorandum M-09-26, there are many requirements that may be suitable 
for performance by either the public or private sector, such as 
positions within critical functions where the agency has determined it 
has the internal capacity to maintain control over its operations and 
work that is not inherently governmental, closely associated to an 
inherently governmental function, or critical.
    1. In situations where either sector may be suitable to perform the 
work, what factors should an agency take into account to determine if a 
cost comparison is likely to be beneficial?
    2. What considerations would be helpful in prioritizing which 
functions are studied first?

B. Procedures

    When an agency determines that a cost comparison may be beneficial, 
it must have principles and procedures to support the conduct of a cost 
    Guiding principles. OMB Memorandum M-09-26 provides two overarching 
principles for a cost analysis, namely, it must (a) provide ``like 
comparisons'' of costs that are of a sufficient magnitude to influence 
the final decision on the most cost effective source of support for the 
organization and (b) address the full costs of government and private 
sector performance.
    1. What additional guiding principles and/or clarification of the 
above principles would be helpful?
    2. What guidance might be provided regarding tracking of results to 
ensure expected benefits identified in the cost comparison have been 
    Cost principles. For many years, costing principles to facilitate 
the comparison of costs between the public and private sectors have 
been provided in Appendix C of OMB Circular A-76, available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a076/a76_incl_tech_correction.pdf. These factors were developed to 
support the use of public-private competition but also can be used to 
compare the relative cost of each sector's performance without 
conducting a competition.
    3. What changes and/or clarifications might be considered to 
improve the

[[Page 11234]]

effectiveness of these principles in the conduct of a cost comparison?
    4. In 2010, the Department of Defense established business rules 
for use in estimating and comparing the full costs of military and 
civilian manpower and contract support. See Directive-Type Memorandum 
(DTM) 09-007, ``Estimating and Comparing the Full Costs of Civilian and 
Military Manpower and Contract Support,'' available at http://www.dtic.mil/whs/directives/corres/pdf/DTM-09-007.pdf. What, if any, 
principles might be considered for adoption government-wide?

C. Small Business Considerations

    Section 1655 of the NDAA for FY 2013 requires OMB to publish 
procedures and methodologies to be used by Federal agencies with 
respect to decisions to convert a function being performed by a small 
business concern to performance by a Federal employee, including 
procedures and methodologies for determining which contracts will be 
studied for potential conversion.
    Section 5-3 of Policy Letter 11-01 includes management guidance in 
connection with small business contracting. Specifically, section 5-3:
     Instructs agencies to place a lower priority on reviewing 
work performed by small businesses where the work is not inherently 
governmental and where continued contractor performance does not put 
the agency at risk of losing control of its mission or operations, 
especially if the agency has not recently met, or currently is having 
difficulty meeting, its small business goals;
     encourages agencies to involve their small business 
advocates if considering the insourcing of work currently being 
performed by small businesses; and
     instructs agencies that make a management decision to 
insource work that is currently being performed by both small and large 
businesses, to apply the ``rule of two'' to the work that will continue 
to be performed by contractors (the rule of two calls for a contract to 
be set aside for small businesses when at least two small businesses 
can do the work for a fair market price).
    1. What additional factors might be considered, if any, in addition 
to those identified in Policy Letter 11-01, to determine where it may 
be appropriate to insource work that is otherwise suitable for 
performance by a small business contractor?
    2. Section 1655 also requires OMB's guidance to address procedures 
and methodologies for estimating and comparing costs. If a situation 
arises where it is appropriate to consider a cost-based insourcing of 
work currently being performed by a small business, to what extent, if 
any, should costing procedures and methodologies differ from those used 
to evaluate the cost effectiveness of other than small businesses?

Joseph G. Jordan,
Administrator for Federal Procurement Policy.
[FR Doc. 2013-03581 Filed 2-14-13; 8:45 am]