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Doing More with Less: From Fairfax to the Feds

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Former New York Governor Mario Cuomo has been quoted as saying, “It is not government’s obligation to provide services, but to see that they’re provided.”

One of the most popular and effective management tools used in government today to realize Cuomo’s vision is a process known as “competitive sourcing.” From the Commonwealth of Virginia to the state of California, using competition to improve the delivery of services, as well as lower costs, is a strategy being used by Republicans and Democrats alike — except in Fairfax County.
Competitive sourcing is a process by which a government entity conducts an inventory of its in-house activities that are commercial in nature. A “Yellow Pages” test – if a private company on Main Street can be found in the Yellow Pages, the activity is subjected to a form of competition.

For more than a decade, the Federal Government has been implementing a serious review of such commercial activities. Since the enactment of the Federal Activities Inventory Reform (FAIR) Act, Public Law 105-270, in 1998, Uncle Sam has recognized that more than 850,000 Federal employees, out of a civilian (non-military uniformed, non-postal) workforce of 1.8 million, are in positions that are commercial in nature.

Once agency heads develop their own inventories these lists are made public and open to comment. Procedures are in place for interested parties, whether they are government employees, their unions or private firms, to recommend additions or deletions of activities from the inventory.

Based on the final inventories, a process is put in place to “compete” the activities. In some cases, agency managers intuitively recognize that some activities are no longer consistent with agency core missions or strategic plans and they are converted to private performance through competitive procurement among private sector offerors. Or, the agency head implements reforms, re-engineers or reorganizes to assure that the in-house activity operates as the “most efficient organization”, or MEO, that is then subject to competition with the private sector. An independent third party within the government evaluates the proposal from both the in-house MEO and private offerors, and based on a best value evaluation, awards the work to the provider that can best meet the government’s needs.

Regardless of whether the activity stays in-house or is contracted, the taxpayer wins. The Federal government’s experience is that, on average, 30 percent of the cost of an operation is saved by this process, since the activity is transferred to a lower cost, more efficient provider, either through the MEO or the private sector. According to the Reason Foundation, the Bush Administration’s competitive sourcing efforts saved taxpayers $7.2 billion over the last five years.

Governors in states such as New York, Connecticut, Wisconsin, Michigan, Georgia, Massachusetts and Washington State successfully implemented competitive sourcing programs. Virginia’s program was initiated by Governor George Allen and sustained through the Commonwealth Competition Council. At the local level, cities such as Indianapolis and Philadelphia, under Republican and Democrat mayors, respectively, have implemented highly successful competitive sourcing programs. A number of counties have also saved money and improved the delivery of services through implementation of competitive sourcing programs. In 1997, Orange County (Orlando), Florida, for example, received a NACO award for its privatization activities.

Last year, Utah became one of the most recent states to enact such a reform, with the legislature passing H.B. 75, requiring the Privatization Policy Board to investigate whether certain activities must be performed by the state. One of the reasons for the growth in government in Utah, and elsewhere, are governments’ attempts to provide goods and services that should be provided by private enterprise, an impulse that competitive sourcing serves as a check against.

Competitive sourcing not only results in improved service and lower costs, but helps inject new technology into government activities. It also helps solve government’s human capital challenges by bringing in contract employees in a faster, more efficient manner than the normal civil service process and gives government access to talent that might not otherwise be available in the public sector. Most importantly, competitive sourcing helps government to allocate its resources toward higher priority and inherently governmental activities, whether it be education or public safety, or used to help provide tax relief.

It has been nearly 15 years since Fairfax County endeavored to initiate a new competitive sourcing program. Although the county was engaged in such activities in the early 1990s, and there is still board adopted policy on the books today from that time, the County has done little in this regard in recent years. A competitive sourcing effort in Fairfax County will not only save tax dollars, provide more efficient services and focus county employees on core governmental priorities, but it will help increase tax revenues, through the BPOL, by transferring activities from non-taxpaying entities within the county government to tax-paying entities in the private sector.

The Fairfax Board of Supervisors should take these four steps –
1.      Conduct an inventory of County activities that are deemed commercial in nature
2.      Make public that inventory and solicit public comments
3.      Directly convert activities to the private sector, or develop a program to review, evaluate and compete activities on the inventory to determine whether country performance or private sector performance of each activity provides the best value to the taxpayers; and
4.      A schedule for implementation of the tasks 1-4 outlined above.
Such an approach is being proposed in Congress in the form legislation known as the “Freedom from Government Competition Act,” being offered by Senator John Thune (R-SD) and Rep. John J. Duncan, Jr. (R-TN).

What is the cost of not taking such action? President Obama’s budget anticipates adding another 250,000 employees to the Federal workforce. Americans for Tax Reform estimates the cost to the taxpayer will be more than $1 trillion over the next 40 years.

As Bloomberg reported in March, public sector pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.

This is another extraordinary and unnecessary burden we will be passing on to our children and grandchildren.

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