Step one: The Competitive Environment
Inventory/Commercial Activities
As the key to positive results is competition, the first step is to learn what resources are available. In this step the government gathers information from various sources including business interests, government employees, and the general public. The task is to develop an inventory of opportunities to analyze and explore for possible use. What are the programs which might be opened to competition? Who might the competition be? A review of the agency’s functions, including consulting with clients and other stakeholders, is essential in order to assess the scope for competitive sourcing and prepare an opportunity inventory.
The step one review identifies the agency’s current activities in order to identify the policy goals which each program or activity is trying to accomplish. This can help identify areas where services are ineffective in meeting the policy goals. The mere fact that a particular government service is listed as an opportunity for competition will send a strong message to the government service providers that they may need to become more competitive internally.
Step one is also where the initial determination is made as to whether government needs to perform a particular function. Some functions, such as policy development and regulatory activities, may be a core responsibility of government which government itself must perform. Managers considering competitive sourcing must examine their services to determine whether a given service is a core function of government that is so intimately related to the public interest that it must be performed by public employees:
- is a core function of government that is so intimately related to the public interest that it must be performed by public employees;
- can be performed by others at the same or less cost; and/or
- can be performed by others so as to provide equal or better service.
The line on core functions is blurring. There is a danger in relying on too broad a categorization. The environment in which a service is provided may change over time as a result of changes in governments or their policies, advances in technology, or changes in social and economic conditions. What is core for one agency may be peripheral for another.
For example, one would expect the judicial system to be a core governmental function. But the increasing use of alternative dispute resolution by the business community has modified that belief. Today businesses routinely use alternative dispute resolution in order to settle their differences more cheaply and more rapidly, and without the need to involve the courts. Careful consideration is needed before reaching the decision that a particular government function is core to the operation of government and therefore should not be subjected to competition. Every potential opportunity should be assessed on a case-by-case basis.
External constraints on an opportunity should be carefully identified. These may derive from legislation or from other legal considerations. The agencies should preclude from consideration only those activities that are so constrained but should consider any unconstrained activities related to them, e.g., maintenance or housekeeping functions necessary to operate a core government function.
Core governmental services are subject to budgetary and resource scrutiny. The fact that a function is a core function does not preclude it from becoming internally more competitive. Non-core (and certainly commercial) governmental goods or services are open territory as government seeks to provide value for the citizen customer.
Another key issue is to determine if the activity is already being performed by the private sector as a commercial activity. Governments address this in different ways. The City of Indianapolis uses what it calls the "yellow pages" test. If the city yellow pages show that several firms now provide a service that the city is also providing, then competition is considered possible.
The Commonwealth of Virginia has defined commercial activity in the Code of Virginia as "performing services or providing goods which can normally be obtained from private enterprise." (1) Agencies report what commercial activities they are currently performing as an input into the state opportunity inventory. The information can also be used to determine when agencies may combine, like commercial ventures, for their common good.
The Federal government has also begun to define "commercial" activities with the passage of the Federal Activities Inventory Reform (FAIR) Act of 1998. (2) This act requires all federal government to report their commercial activities annually, using U. S. Office of Management and Budget Circular A-76. (3) After the commercial activities are reported, the next step in implementing the FAIR Act includes potential challenges to the lists. A specific time line for such challenges and the government’s response in provided in the Act. Under the policy of Circular A-76, government agencies must "compete" their listed commercial activities within a reasonable time. The FAIR Act is a major step by Congress toward introducing competition into the federal government.
Finally, step one provides an opportunity to involve the government’s work force, including the unions if any. It also can include training for managers and workers, in order to expand their ability to understand the process and to cut costs internally, as well as to prepare for the introduction of a competitive process.
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(1) Code of Virginia Section 9-341
(2) 31 U.S.C. Section 501, P.L. 105-270, 1998
(3) Office of Management and Budget, Circular No. A-76, Revised Supplemental Handbook: Performance of Commercial Activities, Office of the President, March 1996, (Updated through transmittal memorandum 20 June 1999)
Peggy.Robertson@dpb.virginia.gov
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