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Outsourcing Management Functions for the Acquisition of Federal Facilities (2000)

Chapter: 2 Outsourcing of Management Functions

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Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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2

Outsourcing of Management Functions




One of the committee's primary tasks was to develop guidance to help federal agencies determine which management functions for planning, design, and construction services for federal facilities may be outsourced. The decision framework was developed in the context of government policies, processes, practices, and methods for acquiring facilities and related issues.

This chapter begins with a brief history of the federal organizational structure for acquiring facilities and describes a general process for facility acquisition, including process components, participants, and contract methods. Federal legislation and policies related to determining which functions are inherently governmental—a critical determinant in outsourcing decisions—are then reviewed. The chapter concludes with a brief discussion of the A-76 Process and a review of federal experiences with the outsourcing of management functions for facility acquisitions.


BRIEF HISTORY OF FEDERAL FACILITIES ACQUISITION

Federal activities related to the planning, design, and construction of facilities are as old as the nation. From the beginning of the republic through the early 1800s, government building activity increased rapidly as a result of the construction of the capital city in Washington, D.C., national expansion westward, and a growing population requiring government services. The U.S. Department of Treasury carried out most civilian building activities; USAGE was primarily responsible for the construction of fortifications and other military facilities. In 1842, the Navy Bureau of Yards and Docks (now NAVFAC), was established and given authority for the design and construction of Navy yards and docks. To

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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encourage efficient management, an Office of Construction was established in the Treasury Department in the 1850s. In 1864, the position of supervising architect was established by law to oversee the design of federal buildings (NRC, 1989).

In the post-Civil War period, federal architects and engineers continued to do much of the design work for government facilities, but the actual construction was contracted out to the private sector. The burgeoning of the government's design activities and the desire of private-sector architects to participate led to the passage of the Tarnsey Act in 1893, which permitted—but did not require—the Treasury Department to contract for private-sector architectural services selected through a competitive process. The Tarnsey Act was repealed in 1912 amid allegations of favoritism and inflated design costs.

Although the Treasury Department continued to control and execute the majority of federal building designs, by 1914 at least seven other federal agencies had in-house facilities engineering staffs for designing and managing the construction of buildings. World War I and rapid growth in the western states accelerated the trend toward the decentralization of design and construction activities. The Public Building Acts of 1926 and 1930 again authorized the Treasury Department to acquire design services from the private sector. The Great Depression accelerated demands by private-sector architects to be allowed to compete for government design work (NRC, 1989).

In 1939, the Public Buildings Administration was created within the Federal Works Agency, and it took on many of the responsibilities of the Treasury Department's Office of Construction. The title of supervising architect disappeared, and, for the first time, some design supervision was delegated to regional offices, weakening the government's centralized control over design. The National Security Act of 1947 created the Air Force and required that a majority of military construction projects be executed by the Army or the Navy. Today, except for activities reserved for readiness training, virtually all planning, design, and construction for the Air Force are managed by USACE and NAVFAC.

GSA, which was created in 1949, subsumed the Public Buildings Administration. From the beginning, the GSA has contracted out for the majority of its design and construction-related services. At the time the GSA was established, the U.S. Department of Defense, the Veterans Administration (now the U.S. Department of Veterans Affairs), the U.S. Department of State, and the National Park Service all maintained in-house capabilities in building operations to meet their own needs (NRC, 1989). See Table 2-1 for important dates in the history of federal facilities acquisition.

The decentralization of federal building activity has continued in the last 50 years. As of 1999, at least 25 separate federal entities were involved in acquiring facilities. 1 Individual federal agencies program and budget for facility acquisition

1 The entities involved in acquiring planning, design, and construction-related services include, but are not limited to, the U.S. Air Force, Air National Guard, Army Corps of Engineers, U.S. Department
Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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TABLE 2-1 Important Dates in Federal Facilities Acquisition

1800s

Federal facilities design and construction carried out by Treasury Department (civilian) and U.S. Army Corps of Engineers (military).

1842

Navy Bureau of Yards and Docks (now NAVFAC) established with authority for design and construction.

1864

Position of supervising architect established in Treasury Department.

1893

Tarnsey Act permits Treasury Department to contract for private sector architectural services.

1912

Tarnsey Act repealed.

1924, 1930

Public Building Acts authorize Treasury Department to acquire design services from the private sector.

1939

Public Buildings Administration established, absorbing responsibilities of the Treasury Department. Title of supervising architect abolished.

1947

National Security Act establishes U.S. Air Force, assigns design and construction activities to USAGE and NAVFAC.

1949

General Services Administration established, assumes responsibilities of Public Buildings Administration.

1949–1999

Decentralization of design and construction continues. At least 25 separate agencies involved.


to support their mission requirements, such as military readiness, statutory compliance, and the delivery of government services. The types of facilities include hangars, warehouses, docks, military installations, office administrative space to deliver government services, courthouses, prisons, foreign embassy compounds, nuclear plants, dams, park facilities, museums, monuments, archives, laboratories, and research centers, among others. Thus, in addition to being the nation's largest owner of buildings and facilities, the federal government is also responsible for the stewardship of the most diverse facilities portfolio in the United States.


of Energy, Naval Facilities Engineering Command, U.S. Department of Justice, U.S. Department of Veterans Affairs, General Services Administration, Indian Health Service, National Aeronautics and Space Administration, National Institutes of Health, National Institute of Standards and Technology, Smithsonian Institution, U.S. Postal Service, National Park Service, Bureau of Indian Affairs, Internal Revenue Service, Public Health Service, U.S. Department of Agriculture, U.S. Department of Transportation, Environmental Protection Agency, Bureau of Prisons, Administrative Office of the U.S. Courts, the U.S. Coast Guard, the Architect of the Capitol, and the U.S. Department of State.
Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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ROLES OF FEDERAL AGENCIES IN FACILITIES ACQUISITION

At any one time, a federal agency may be responsible for managing several dozen to several hundred individual projects in various stages of planning, design, and construction. As a result of relatively recent legislation and changes to the Federal Acquisition Regulations (FAR), federal agencies may acquire facilities using a variety of contracting methods: design-bid-build; design-build; construction management; program management; or variations of these. The use of performance-based specifications in contracts is also increasing.

Agency budgets for facilities acquisition vary widely. The Indian Health Service, a relatively small agency, had more than $265 million worth of building activity in planning, design, and construction as of 1999. In contrast, the U.S. Navy has an annual design and construction budget of about $2.5 billion (FFC, 2000). As missions, priorities, and situations change, the scope and budget of agency facility-acquisition programs can fluctuate greatly. For example, a recent program to upgrade federal courthouses around the country has added billions of dollars to GSA's construction budget. The U.S. Department of State is facing a similar situation. Following the 1998 bombings of U.S. embassies in Africa, legislation requiring rapid, extensive upgrades of embassy security features worldwide was enacted, which could require several billion dollars to execute (FFC, 2000).

When acquiring facilities, an agency may be acting in one or more distinct roles—as an owner, a user, or a provider of facilities. In some cases, agencies acquire facilities with the intent of owning and managing them directly. In other cases, agencies only require the use of facilities and may use a procuring entity to represent the government-as-owner in the acquisition process. Procuring entities include separate executive departments, such as GSA, or private-sector firms. A government procuring agency may also be an office or division in the same agency, such as the Office of Foreign Building Operations, which acquires facilities for use by the State Department's diplomatic staff (NRC, 1994). A few agencies, primarily GSA, USACE, and NAVFAC, provide facilities for other agencies and organizations as a key component of their missions.

GENERAL FACILITY ACQUISITION PROCESS

The federal government has not established a single, standardized process for facility acquisition, although it has established general guidance through legislation and regulations. In practice, the complex and diverse nature of federal projects, the variety of contracting methods, and the decentralization of facilities acquisitions preclude an exact, systematic, or single process for programming, budgeting, planning, designing, or constructing a facility. Within the guidance provided, agencies have developed policies, practices, criteria, and/or guidelines for facility acquisitions that reflect their missions, cultures, and resources. Thus,

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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although agencies follow similar procedures and decision-making processes, the number, name, substance, and sequence of acquisition phases may vary. With these caveats, a general process for acquiring facilities is shown in Figure 2-1 and described below as a context for the committee's findings and recommendations.

Requirements Assessment Phase

The federal budgeting process requires that agencies conform to a procedure of setting requirements and prioritization before agency budget requests are submitted to Congress. The requirements assessment phase (also called project requirements, project assessment, or needs assessment) begins when someone (e.g., facilities program manager, senior executive, or elected official) identifies the need for a facility. In response, the agency initiates a process to gather information and validate the need for the facility relative to its mission. As part of this assessment, an agency may review its entire facilities inventory and determine whether existing buildings and infrastructure can adequately support mission and program requirements or if facilities will have to be acquired, upgraded, or replaced.

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FIGURE 2-1 General facility acquisition process.


Note: The contracting method determines whether the design, equipment procurement, and construction phases occur in sequence or concurrently. The contracting method can also affect who is involved at each phase (architect, engineer, construction contractor, etc.). For example, if the design-bid-build contract method is used, the phases generally occur in sequence, with an architect-engineer entity involved in the design phase and a construction entity involved in the construction phase. If a design-build contract method is used, the same contractor is responsible for the design and construction phases; thus, some phases or activities occur concurrently.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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The requirements assessment phase typically identifies space requirements by use and number of personnel. At this point, agencies that have the authority and resources to do so proceed to the conceptual planning stage. Other agencies must first prepare a request for initial congressional approval to acquire facilities and the appropriation of funds for conceptual planning and design services. The request is typically structured to meet the requirements of the particular congressional committee responsible for agency appropriations. Therefore, the exact documentation varies, but it usually includes materials justifying the facilities in relation to mission requirements and the locational, physical, and functional requirements upon which preliminary cost estimates are based.

In this phase, some agencies contract with external organizations to conduct preliminary planning and design studies that are used as the basis for formal documents submitted for congressional action (NRC, 1994). Agencies may also contract for other consultation services, such as separate opinions on long-range planning, validation of agency projections, or strategic facility planning. The decision to seek authorization and funding to acquire a particular facility to meet mission requirements, however, is the responsibility of the government agency.

Conceptual Planning Phase

In the conceptual planning phase (also called project preplanning, master planning, advance planning, front-end loading, and concept development), alternative designs are developed and considered. Functional requirements, such as floor areas for particular activities and for required or desired adjacencies and connections among activities, are developed (NRC, 1994). Various feasibility studies are conducted to define the scope or statement of work based on the agency's expectations of facility performance, quality, cost, and schedule. Several alternative design solutions may be considered during this phase, leading up to the selection of a single preferred approach that will be the basis of the scope of work used in making future decisions and in procuring design and construction services.

Studies by academicians, the NRC, the Construction Industry Institute, The Business Roundtable, and the Project Management Institute have all highlighted the importance of conceptual or advance planning to the entire facility acquisition process. Predesign phases, during which the size, function, general character, location, and budget for a facility are established, are critical. Errors at this stage are usually embodied in the completed facility in forms such as inappropriate space allocations and inadequate equipment capacity (NRC, 1989, 1999). The Business Roundtable has stated:

The supply chain of a capital project starts with the identification of a customer need that might be translatable into a business opportunity. The front-end loading process is made up of the critical planning phases of the project. It is called front-end loading because the effective commitment of time and resources at this point dictate the future success of the project (BRT, 1997).

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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The importance of the conceptual planning phase is illustrated in Figure 2-2. The cost-influence curve indicates that the ability to influence the ultimate cost of a project is greatest during the conceptual planning phase and decreases rapidly as the project matures. Conversely, a project cash-flow curve shows that conceptual planning and design costs are relatively minor and that costs escalate significantly as the project evolves through the equipment procurement and construction phases.

The project scope and statement of work for a federal facility may be developed by an agency's in-house staff or with the assistance of external entities. Outside assistance might include the development of alternative design concepts or cost estimates. The responsibility for the elements included in the scope of work, however, ultimately rests with the agency.

Programming/Budgeting Phase

Once senior agency officials have determined that a project is critical to the agency's mission and, therefore, warrants acquisition, the agency prepares a request for congressional approval to acquire the facility and/or for the appropriation of funds for design and/or construction services.

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~ enlarge ~
FIGURE 2-2 Cost-influence and cash-flow curves. Source: FFC, 2000.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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Design Phase

Once the scope of work has been established and funds have been appropriated, the design phase begins. The preferred design approach matures into drawings, specifications, construction methods, schedules, and other documents from which equipment procurement and construction bids can be solicited.

Unless agencies have in-house staff available, design activities are typically contracted out to organizations that have the appropriate expertise, either other federal agencies that provide facilities or private-sector architect-engineer firms. Agencies may retain management and oversight responsibility by incorporating a review process to ensure that the designer accomplishes the tasks contracted for, conforms to the budget, and so forth. Agencies may also contract for related services, such as reviewing for code compliance and structural integrity, risk assessment, and compliance to design and engineering standards.

An NRC report in 1990 found that key factors in the design-related increases in construction costs that exceed budgets for federal facilities are poor planning and the failure to think carefully about foreseeable construction problems. The report also found that the early stages of the design process are critical for ensuring design to budget because, at that point, the design is still flexible, and factors that determine cost are not yet fixed (NRC, 1990).

Equipment Procurement Phase

Complex projects may include an equipment procurement phase to expedite the purchase, manufacture, and delivery of long-lead-time equipment, such as unique process machinery, large electrical and mechanical equipment, and sophisticated architectural components. Equipment procurement may proceed in parallel with construction-phase activities to ensure that long-lead-time equipment is furnished to the construction contractor at the proper time to avoid construction delays attributable to late deliveries.

Construction Phase

The construction phase of the acquisition process is by far the most costly. Approximately 70 to 90 percent of total project funding is spent during the construction phase. 2 Facility planning and design, in contrast, typically account for only 10 to 30 percent of acquisition cost, including site exploration, regulatory reviews, and other activities required prior to occupancy (NRC, 1994). A significant challenge during the construction phase is managing changes resulting from


2 In the total life cycle of the facility (i.e., planning, design, construction, operation, maintenance, repair, renewal, disposal), design and construction costs account for 5 to 10 percent of the total costs of ownership; operation and maintenance costs account for 65 to 80 percent of total costs (NRC, 1998).
Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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changes in the scope of work by the owner, errors and omissions in the construction documents, and changed or unknown site conditions. The construction phase is considered complete when the agency accepts occupancy of the facility, although final closeout of the construction contract may continue for months (or even years) until all discrepancies have been identified and resolved.

The majority of tasks associated with federal construction are outsourced to the private sector. Architect-engineer and construction-management firms may even be retained to advise an agency about the responsiveness of bidders to bid requirements or to assess contractors to determine if they are capable of performing the tasks that would be assigned.

Federal agencies typically use in-house personnel for construction activities only when these functions are central to the agency's mission or existence. The military services, for example, typically retain control of facility construction that affects mission readiness, although even they sometimes use private contractors in support of military deployments. Design and construction quality assurance 3 are traditionally performed by government employees, although they have also been performed by contractors.

Start-Up Phase

The start-up phase, sometimes called commissioning, begins with the initial period of occupancy of the facility by its users. A “shakedown” of building equipment occurs during this phase, during which building components are tested individually and then in conjunction with other components in the system to measure and compare their performance against the original design criteria. Facility operation and maintenance plans are implemented, tested, and refined. Minor repairs and alterations are made, and users may learn about the facility (NRC, 1994).

Start-up phase activities are often informal, but some agencies work with the facility user and building contractor during a more formal four to six month commissioning process. Specialist consultants or the architect-engineer designer may also be hired to participate in the commissioning process (NRC, 1994).

CONTRACT METHODS

Since 1994, a number of laws have been enacted to allow agencies more choices in selecting the contract method for acquiring facilities. Before the early 1990s, the design-bid-build method, described below, was used almost exclusively. Although there are variations, current federal practice recognizes four basic contract types that apply to several facility acquisition systems:


3 Quality assurance is defined as the process of evaluating overall project performance on a regular basis to provide confidence that the project will satisfy the relevant quality standards (PMI, 1996).
Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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  • design-bid-build

  • construction management

  • design-build

  • program management

The level of involvement and oversight by the owner organization varies depending on the contract method. Consequently, the relationship with the contractor(s) also varies.

The design-bid-build approach assumes that the owner organization contracts individually for the design, engineering, and construction services required to acquire a facility. The owner organization manages individual contracts with all design, engineering, and construction service providers, implying that the owner must also manage all interfaces between service providers. Under this approach owners commonly enlist outside consultants for various functions of the acquisition process. Interface management is critical for assessing accountability for problems incurred during the project's evolution, which can be difficult because of the variety and separation of individual contracts. This contract method requires that the owner organization maintain a relatively large and experienced in-house design, engineering, and management staff (FFC, 2000).

For the construction management approach, the owner contracts with an external entity to manage the construction of a project. The construction manager (CM) may function either as an “agency” CM or as an “at-risk” CM:

  • Agency CM. The owner holds all individual construction contracts, and the CM functions as the construction contract administrator, acting on behalf of the owner and rendering an account of activities. Actual construction work is performed by others under direct contract to the owner. The CM is typically not responsible for construction means and methods and does not guarantee construction cost, time, or quality.

  • At-risk CM. The actual construction work is performed by trade contractors under contract to the CM, who then becomes responsible to the owner for construction means and methods and delivery of the completed facility within the owner's scope of work for cost, time, and quality.

Under the construction management approach, the owner typically retains responsibility for managing all preconstruction architecture-engineering services and, therefore, must address all interface issues between service providers (FFC, 2000).

Under the design-build approach, an owner organization prepares a project scope definition and then engages a single entity to provide all services necessary to complete the design and construct the facility. Generally, the scope definition package represents a design that is between 15 and 35 percent complete, although variations of the design-build approach may begin much earlier, often with a performance specification, or much later, with perhaps a 65-percent design package.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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Project success under the design-build approach is primarily dependent on the owner organization's ability to produce a comprehensive, well defined, unambiguous scope of work upon which all subsequent design-build activity will be based. Once the design-build contract has been awarded, changes to owner requirements generally incur heavy penalties in project cost and schedule (FFC, 2000).

For the program management approach, the owner organization contracts with a program manager (PM) to exercise oversight of the entire facility acquisition process, from planning through design, construction, outfitting, and start-up. Similar to the CM, the PM can serve in either an agency-PM or at-risk-PM capacity:

  • Agency PM. The owner holds all individual contracts, and the PM functions as the contracts administrator, acting on behalf of the owner and rendering an account of activities. All project work is performed by others under direct contract to the owner. The PM is typically not responsible for project means and methods and does not guarantee cost, time, or quality.

  • At-risk PM. All project work is performed by service and trade contractors under contract to the PM, who then becomes responsible to the owner for project means and methods, as well as delivery of the completed facility within the owner's objectives of cost, time, and quality.

Because the PM is responsible for managing the interfaces between all phases of facility acquisition and all parties involved, the owner organization's participation in the facility acquisition process is minimal (FFC, 2000).

INHERENTLY GOVERNMENTAL FUNCTIONS

Although the federal government has contracted with the private sector for various design and construction activities for more than a century, a larger philosophical debate over which functions should be provided by the government and performed by government employees—so-called inherently governmental functions—and which functions should be provided by the private sector—so-called commercial activities can be traced back to discussions among the framers of the Constitution that appear in the Federalist Papers (GAO, 1992). The debate continues today.

In the last 50 years, efforts have been made to develop policies and guide-lines for federal agencies to determine which functions should be performed only by government employees and which ones can be performed either by government employees or private-sector contractors. Budget Bulletin No. 55-4, issued by the Eisenhower administration in January 1955, stated “it is the general policy of the Federal Government that it will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels” (Childs,

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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1998). Bulletins No. 57-7 and 60-2, issued in 1957 and 1962, respectively, reiterated this policy and added guidance for evaluating commercial activities, making cost comparisons, and initiating new in-house activities (Childs, 1998).

In 1966, the Office of Management and Budget (OMB) issued Circular A-76, Performance of Commercial Activities, which stated that “The guidelines of this Circular are in furtherance of the Government's general policy of relying on the private enterprise system to supply its needs.” The circular was revised and reissued in 1979, 1983, 1996, and 1999. (In 1979, OMB issued a supplemental handbook to Circular A-76 that included detailed procedures for competitively determining whether commercial activities should be performed by in-house employees, by another federal agency through an interservice support agreement, or by the private sector. The experience of federal agencies with the so-called “A-76 process” is discussed later in this chapter.)

The 1983 version of Circular A-76 provided some guidance regarding governmental versus commercial functions and who should perform them. A governmental function was defined as:

…a function which is so intimately related to the public interest as to mandate performance by Government employees. These functions include those activities that require either the exercise of discretion in applying Government authority or the use of value judgment in making decisions for the government. Governmental functions normally fall into two categories: (1) the act of governing, i.e., the discretionary exercise of Government authority…(2) monetary transactions and entitlements (EOP, 1983).

An activity not considered governmental in nature was deemed a commercial activity and defined as:

…[a function] which is operated by a Federal executive agency and which provides a product or service which could be obtained from a commercial source....A commercial activity also may be part of an organization or a type of work that is separable from other functions or activities and is suitable for performance by contract (EOP, 1983).

To supplement OMB's guidance, some agencies, including the U.S. Department of Energy (DOE) and the Environmental Protection Agency, developed more specific guidelines for use by their employees (GAO, 1992). However, a 1990 report of the President's Council on Management Improvement focusing on Circular A-76 concluded:

The identification of what are inherently governmental functions…and identification of commercial activities that can be contracted out is frequently contentious and difficult to accomplish. The identification process is normally unique to each organization's programs and circumstances…the definition of activities inherently governmental in nature is unclear, and there is little consensus as to which activities are governmental in nature and which are not (GAO, 1992).

The General Accounting Office (GAO), in a review of 108 randomly selected contracts issued by several federal agencies between 1989 and 1991, found that:

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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The problem of defining governmental functions becomes particularly complex because consultants and management support contractors administer a broad range of activities for government agencies. Such activities involve a variety of work, such as preparing studies and analyses that are to assist agencies in making policy decisions, researching technical issues that may be beyond the expertise of available agency technical staff, developing agency reports, preparing testimony, and conducting administrative hearings (GAO, 1992).

In September 1992, the Office of Federal Procurement Policy (OFPP) issued Policy Letter 92-1 to the heads of executive agencies and departments. Policy Letter 92-1 established the policy of the executive branch on service contracting and inherently governmental functions. Its purpose was “to assist Executive Branch officers and employees in avoiding an unacceptable transfer of official responsibility to Government contractors,” although the letter did “not purport to specify which functions are, as a legal matter, inherently governmental, or to define the factors used in making such a legal determination.”

Policy Letter 92-1 incorporated OMB's definition of an inherently governmental function and added that:

an inherently governmental function involves, among other things, the interpretation and execution of the laws of the United States so as to

    (a) bind the United States to take or not to take some action by contract, policy, regulation, authorization, order or otherwise;
    (b) determine, protect and advance its economic, political, territorial, property, or other interests by military or diplomatic action, civil or criminal judicial proceedings, contract management, or otherwise;
    (c) significantly affect the life, liberty or property of private persons;
    (d) commission, appoint, direct or control officers or employees of the United States; or
    (e) exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible of the United States, including the collection, control, or disbursement of appropriated and other Federal funds. (OFPP Policy Letter 92-1 is reprinted in Appendix C).

In October 1998, the Federal Activities Inventory Reform (FAIR) Act of 1998 was signed (reprinted in Appendix C.) This act codifies the definition of an inherently governmental function found in OFPP Policy Letter 92-1. The FAIR Act also states that the following functions are not inherently governmental:

    (i.) gathering information for or providing advice, opinions, recommendations, or ideas to Federal Government officials; or
    (ii.) any function that is primarily ministerial and internal in nature (such as building security, mail operations, operation of cafeterias, housekeeping, facilities operations and maintenance, warehouse operations, motor vehicle fleet management operations, or other routine electrical or mechanical services).

Subpart 7.5, Inherently Governmental Functions of Part 7, Acquisition Planning, of the FAR implements the policies of OFPP Policy Letter 92-1. Subpart 7.5 became effective on March 26, 1996, and was reissued on December 27,

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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1999. The purpose of this subpart is to “prescribe policies and procedures to ensure that inherently governmental functions are not performed by contractors.” Chapter 3 of this report includes a more detailed discussion of relevant elements of FAR Section 7.5; although there is no debate about design and construction functions being commercial activities, the distinction related to the management of such functions is not as clear.

THE A-76 PROCESS

As noted above, in 1979, OMB issued a supplemental handbook to Circular A-76. The handbook, amended in 1983, 1996, and 1999, provides guidance and procedures for federal agencies to determine if recurring commercial activities should be operated under contract with commercial sources, in-house using government facilities and personnel, or through interservice support agreements. The introduction to the handbook states:

Circular A-76 is not designed to simply contract out. Rather, it is designed to: (1) balance the interests of the parties to a make or buy cost comparison, (2) provide a level playing field between public and private offerors to a competition, and (3) encourage competition and choice in the management and performance of commercial activities. It is designed to empower Federal managers to make sound and justifiable business decisions (OMB, 1999).

Under the A-76 process and related legislation, agencies are required to evaluate their activities to determine whether they are inherently governmental functions or commercial activities and to complete an inventory of commercial activities. New and expanded activities may be directly outsourced without using the A-76 process as can national defense activities, direct patient care, and other exempted activities. In certain circumstances, including those where an agency manager may want to change the method of performance and that may involve more than 10 federal staff positions, agencies must conduct cost comparisons to determine the most efficient means of carrying out the commercial activities. This involves a three-step process to determine who will perform recurring commercial activities. The first step is to develop a performance work statement defining the technical, functional, and performance characteristics of the work to be performed. The second step is to conduct a management study to determine organizational structure, staffing, and operating procedures for the most efficient organization (MEO) for effective in-house performance of the commercial activity. The third step is to accept formal bids and conduct a cost comparison between the private sector and the government's MEO to decide if an activity will be performed by government employees or the private sector (GAO, 1998).

In 1998, GAO reported that there had been “minimal A-76 activity among many agencies since the late 1980s” (GAO, 1998). Reasons cited for the lack of activity included the time and expense of conducting A-76 cost comparisons, changing management priorities, the lack of staff with the necessary technical

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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skills to conduct the comparisons, the lack of offers from the private sector in response to solicitations, the government's lack of complete cost data (particularly for indirect costs), and limited leadership by OMB in ensuring implementation. Federal agencies established since the 1950s, including the National Aeronautics and Space Administration (NASA), DOE, the Environmental Protection Agency, and the Health Care Finance Administration, “have relied from the start on contracting out much of their work rather than performing it directly” (GAO, 1998). The GAO also noted that some agencies had done cost comparisons for providing services, but the comparisons did not involve any federal positions and, therefore, did not require A-76 analyses. Nevertheless, GAO concluded:

Agencies' experiences with A-76 suggest that competition is a key to realizing savings, whether functions are eventually performed by private sector sources or remain inhouse…there appears to be a clear consensus....that savings are possible when agencies undertake a disciplined approach, such as that called for under A-76, to review their operations and implement the changes to become more efficient themselves or contract with the private sector for services (GAO, 1998).

OUTSOURCING OF MANAGEMENT FUNCTIONS FOR
FEDERAL FACILITY ACQUISITIONS

One element of the committee's statement of task was to assess recent federal experiences with the outsourcing of management functions for planning, design, and construction services. The committee received briefings on this subject from the U.S. Department of State, DOE, the U.S. Department of Veterans Affairs, and the U.S. Air Force. The committee also developed a questionnaire on this subject that was distributed to the sponsoring agencies of the Federal Facilities Council. Thirteen agencies responded. Of the 13, seven reported that they had outsourced some management functions for facility acquisition services at some time since 1980. Those agencies included the U.S. Department of State, the International Broadcasting Bureau (IBB), NASA, DOE, the National Institute of Standards and Technology (NIST), the U.S. Air Force, and the Air National Guard (ANG). 4 NAVFAC had provided management functions under contract to other federal agencies.

U.S. Department of State

The Office of Foreign Buildings Operations (FBO) of the U.S. Department of State is responsible for acquiring embassies, housing, and other facilities for

4The responding agencies that reported they had not outsourced management functions at the time the questionnaire was distributed were the Indian Health Service, NAVFAC, U.S. Department of Veterans Affairs, the Bureau of Reclamation, Fish and Wildlife Service, and the Bureau of Land Management.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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approximately 260 diplomatic missions worldwide. FBO exercises overall responsibility for project management during the site acquisition, design, construction, and commissioning phases of acquisition, including security support. FBO develops and implements project execution plans, including project status reporting requirements, and manages the project planning system to ensure that project schedules, costs, and resources are effectively reviewed.

In the 1980s, FBO was shifting its contracting method to program management. At the same time, legislation required that a major portion of existing overseas facilities be replaced to comply with new security standards. Through a competitive bidding process, FBO outsourced for the expertise to develop a program management project delivery system and for staff services until FBO could hire permanent in-house staff. The value of the contract was approximately $76 million, and the value of the work managed was approximately $850 million. Fifty-seven task orders were issued for work on project and technical studies. Each project was subject to the development of a delivery order that specified hours, resources, and costs; tasks were identified in a series of project management manuals establishing the quality and products expected. FBO used a series of reports and management techniques to control and oversee the work of the contractor. FBO did not complete an A-76 study or establish formal performance standards or other methods of quantifying the outcomes of the outsourcing.

FBO reported that the key results of this outsourcing experience were compensation for a lack of in-house expertise and a staff shortage. In addition, “other benefits were produced that focused on project delivery times and quality of product deliverables.” By the completion of the contract, FBO had hired and trained sufficient in-house staff and transferred the necessary technology to resume direct management of projects by federal employees.

The FBO response to the questionnaire also noted that outsourcing management functions to another federal agency was less successful than outsourcing to a private-sector firm. “Using another government agency with established procedures and internal administrative processes at variance with FBO created problems such as variation in standards and quality of acceptable product delivery established in each agency, and the variation in each agency's criteria for contract completion.”

International Broadcasting Bureau

The Office of Engineering and Technical Operations of the IBB was responsible for the construction of radio relay stations for the U.S. Information Agency and Voice of America when the committee's questionnaire was distributed (the IBB has since been reorganized). At the time, IBB managed all planning, design, and construction project/program implementation using a combination of project managers in the Washington, D.C., headquarters office and construction and relay station managers overseas. The types of facilities acquired required highly

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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specialized skills related to high-power, high-frequency transmitters and antennas and satellite program delivery.

In the mid-1980s, the IBB undertook an unprecedented $1 billion modernization program involving the construction of several new relay stations. A significant portion of this construction was attributable to international political changes following the end of the Cold War and required that IBB expand and update its facilities. Because IBB did not have enough in-house staff, skills, or expertise to manage the modernization program, it outsourced management functions to USAGE and independent contractors. A support agreement defining the scope of work and outlining the responsibilities of each entity was written for each project. An IBB project manager was assigned to each project to oversee the work of USAGE or contractor personnel. An IBB construction manager was assigned to each location where work was under way to act as a liaison between IBB and USAGE and contractor personnel. Project changes were monitored, and most were submitted to the IBB for review and approval before implementation. Guidelines were issued outlining the requirements for review and/or approval of each level of project change. IBB did not complete an A-76 study or establish formal performance standards or other methods of quantifying the outcomes of the outsourcing.

IBB reported that the key results of this outsourcing experience were improved quality of the product and the growth and training of in-house personnel. In-house staff acquired the skills and expertise to manage subsequent specialized projects, thus eliminating the need for outsourcing—and reducing overall costs for these projects. IBB staff were also able to resolve day-to-day problems in operating and maintaining the relay stations, problems that could not be easily resolved through outsourcing because only a few outside organizations specialize in the installation and maintenance of high-power, high-frequency transmitters and antennas and because of the remote locations of many of these facilities.

National Aeronautics and Space Administration

NASA maintains a Facilities Engineering Division at NASA headquarters whose responsibility is to develop the Construction of Facilities Budget, obtain authority and resources, and oversee and direct NASA's 10 centers. NASA centers are responsible for providing end users with required facilities and maintaining existing facilities. Headquarters engineering staff monitor project schedules, the obligation of funds, and costing and ensure that project requirements are incorporated as authorized. In-house and consultant architecture-engineering firms develop project plans, designs, drawings, and specifications used by construction contractors. A center's engineering staff oversees construction to ensure that contract requirements, schedules, and funding limits are met. At the center level, an in-house project manager is usually responsible for overseeing a project from start to finish. The project manager contracts for design services, monitors

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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design activities, conducts design reviews, and works with the construction contractor. For a few projects, the design is completed by in-house staff because of the unique nature of the project or for purposes of efficient workforce utilization.

NASA has outsourced management functions for facility acquisition in its government-owned, contractor-operated (GOCO) centers since its establishment. In GOCO centers, the planning, design, construction, and maintenance of facilities is an embedded minor function in support of a center's primary mission, such as research and development or the exploration of space. In a GOCO arrangement, the responsibilities are covered in a cost-plus-award fee contract in which the facilities portion is small compared to the scope of the contract for research and development or other missions. Planning, design, and construction are sub-contracted to architecture-engineering and construction firms. The GOCO contractor develops construction projects within allocated resources and in support of the center's mission. Headquarters facilities engineers work with the GOCO contractor's engineers as if they were government employees except that projects are placed under the GOCO contract via contract task order agreements.

To illustrate these procedures, the Advanced Solid Rocket Motor (ASRM) facility was described. The ASRM contract was a cost-plus-award fee contract for the design, development, testing, and manufacture of a rocket. The contract provisions included all testing of manufacturing equipment and facilities. The prime contractor was responsible for generating all facility/equipment criteria and was required to subcontract with a facilitation subcontractor to manage the design and construction activities. The contractor was free to develop the initial design and cost estimate, subject to NASA approval. Once approved, the design was locked into a configuration-control process. The contractor was delegated change authority up to a limited dollar threshold, above which NASA approval was required.

The key results of outsourcing management functions noted in the NASA questionnaire were shorter project delivery time and compensation for staff shortages.

U.S. Department of Energy

DOE's organization is comprised of 12 headquarters program offices, 10 major operations offices, and two large field offices with more than 50 major contractor-operated facilities (NRC, 1999). The facilities infrastructure is managed by a “limited core staff of professional managers and engineers” who primarily oversee the work of a large cadre of contractors working under comprehensive management and operations contracts (NRC, 1999). At DOE, outsourcing of management functions for facilities acquisition is standard operating procedure.

DOE conducts technically complex activities for the federal government, including developing and producing nuclear weapons; operating nuclear reactors, and performing research and development on the military and civilian uses of

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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nuclear energy; promoting and funding nuclear and other sciences; promoting energy conservation and efficiency; managing federal petroleum reserves; and, cleaning up environmental contamination resulting from its past operations (GAO, 1997). These activities often involve large-scale, first-of-a-kind projects that require substantial design, construction, technology, and other expenses. For this study, the committee received briefings on two DOE projects: the Superconducting Super Collider (SSC) Project and the Advanced Photon Source (APS) Project.

Site selection and design activities for the SSC were begun in the 1980s. However, the project was terminated in 1996 prior to construction but after more than $735 million had been spent. The following reasons were cited for the failure of this project:

  • Staff was not focussed to build a construction project.

  • Management buy-in to approved costs was not demonstrated.

  • A committed approach to cost control was not evident.

  • The contractor lacked experience in leadership positions.

  • Contractor teaming with partners was not effective.

  • A trusting relationship between DOE and the contractor did not develop.

  • Schedule and planning were not emphasized.

  • Control over subcontractors was inadequate. 5

After evaluating this experience, DOE determined that the following factors would be critical to the success of subsequent projects:

  • strong leadership and experience in senior management

  • checks and balances at appropriate points

  • a strong partnership and shared goals between DOE and the contractor

  • a focus on quality

  • proactive identification, tracking, and resolution of problems

The APS, in contrast, was determined to be a successful example of the outsourcing of management functions for facility acquisition. The APS, a one-million square foot, third-generation synchrotron radiation facility, was completed ahead of schedule and under budget. The following reasons were cited for this success:

  • well defined responsibility and authority for participants

  • good conceptual design and cost estimate

  • project baseline and change-control system established early


  • 5Additional information relevant to the history of the SSC project can be found in Improving Project Management in the Department of Energy (NRC, 1999).
Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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  • effective communication and periodic reviews

  • a common objective

  • committed team

  • reasoned judgment at every step

In 1997, GAO reviewed 80 DOE projects that cost about $100 million or more and found that the majority of them were behind schedule and over budget. GAO identified the following key factors underlying cost overruns, schedule slip-pages, and termination of projects (GAO, 1997):

  • Constantly changing missions for DOE make it difficult to maintain departmental and congressional support for long-term, high-cost projects.

  • Incremental funding of projects from year to year rather than up-front funding, subjects projects to potential delays or terminations.

  • A flawed system of incentives both for DOE employees and contractors often rewards contractors despite poor performance.

  • Hiring, training, and retaining enough people with the requisite skills to provide effective oversight and/or management of contractors' operations is difficult.

U.S. Air Force

The U.S. Air Force Office of the Civil Engineer, Engineering Division, is responsible for policy, planning, and budgeting of the Air Force's military construction program. The Air Force's FY 96 military construction budget was $587.2 million, including $26.6 million for project design. The program involved 124 projects, including base infrastructure, runways, aircraft hangers, dormitories for enlisted personnel, and child development centers. Almost all planning, design, and construction-related activities of the U.S. Air Force are managed by USACE and NAVFAC, as required by the National Security Act of 1947. In the response to the questionnaire, the Air Force stated that it directly manages less than 5 percent of the total, only those projects for which the Air Force has specific design expertise in a particular type of facility.

NAVFAC and USACE goals are aligned with those of the Office of the Civil Engineer to establish performance measures or other methods of measuring achievements. Those goals are: (1) to award 100 percent of construction projects in the year of budget appropriation and (2) to be ready to award 100 percent of projects anticipated to receive appropriations in the next fiscal year budget. No additional information related to the Air Force's experience outsourcing its management functions was provided.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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National Institute of Standards and Technology

At NIST, program/project management is the responsibility of several groups. The Plant Division nominates a five-year plan of active and future projects. Projects for the upcoming fiscal year are evaluated and prioritized based on current and future safety, capacity, and maintenance needs. Upon budget approval, the Facility Planning and Programming Group defines the scope of work for the funded projects. The Design Engineering Group, with the support of private-sector architect-engineer firms, when necessary, produces the final design packages for the Construction Contracts Management Group. Internal end-users work with the Design Engineering Group and architect-engineer firm representatives during design-development.

When the questionnaire was submitted, NIST had outsourced management functions for construction of a large, multimillion-dollar project to a private-sector firm. NIST reported that the reason for the outsourcing was to compensate for a lack of in-house expertise and staff shortages because of a hiring freeze. NIST personnel were involved in all decisions related to changes in project scope and associated costs. Standard procedures included Plant Division Staff acting as the contracting office; a technical representative was assigned to evaluate and validate all change orders for the contracting office. The construction management contract documents defined the duties and responsibilities of the construction management firm; the architect-engineer firm that designed the project and the construction contractor reported to the construction management firm.

NIST reported that a key result of outsourcing the management functions for this project was compensation for a shortage of in-house staff. Outcomes of the project itself were not available because the work was ongoing.

Air National Guard

ANG's physical plant consists of more than 90 military bases located at 160 sites throughout the United States with an aggregate value of approximately $12 billion. The FY 99 annual construction and replacement budget was about $250 million (FFC, 2000).

The National Guard Bureau in Washington, D.C., which provides overall guidance for ANG operations in states, territories, and the District of Columbia during peacetime, also provides design standards and special requirements and monitors the funding, scope, cost, and schedule of major projects. The design process (including design policy, standards, and guidelines) for ANG facilities is managed by the Engineering Center of the Air National Guard Readiness Center (ANGRC/CEC), located at Andrews Air Force Base, Maryland. ANGRC/CEC is also responsible for management oversight and design approval for all major facility project designs. ANGRC/CEC receives technical assistance from one of its branches, the Civil Engineering Technical Services Center, located at Minot, North Dakota.

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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For new projects, the local engineer at each military base develops the project statement of work based on information provided by the intended facility user or occupant. The base engineer and the facility user or occupant work directly with the design architect-engineer firm to develop the requirements milestones. All design work is contracted out to architect-engineer firms. A federal contracting officer in each state contracts for architect-engineer services, manages construction bidding, and awards construction contracts (FFC, 2000).

In response to the questionnaire, the ANG reported that it had outsourced some management functions for 26 projects in FY 96 to compensate for staff shortages and to shorten project delivery time. All of the projects were outsourced to private-sector firms. The ANG had not yet had enough experience with this outsourcing initiative to report results or outcomes.

Conclusions

Information about the experiences of seven federal owner agencies that outsourced management functions was available to the study committee. Since its establishment, the U.S. Air Force has been required by law to outsource almost all management functions for facility acquisition to USACE and NAVFAC. NASA and DOE, established after the Eisenhower administration, have relied from the beginning on outside contractors to provide many management functions through GOCO arrangements. The remaining four agencies, the U.S. Department of State, IBB, NIST, and ANG, had outsourced management functions to compensate for staff shortages and for the lack of in-house expertise. All seven agencies outsourced management functions for reasons other than cost competitiveness and, therefore, were not required to conduct A-76 analyses.

The Air Force, State Department, and IBB had outsourced management functions to other federal agencies. The Air Force reported that its goals were aligned with those of the provider agencies. The State Department reported that its experience using federal provider agencies was less successful than with private-sector firms because of conflicts with established procedures and internal administrative processes. The IBB reported that its experience with a federal provider agency was successful. Based on this information, the study committee was unable to draw any general conclusions regarding the outsourcing of management functions to other federal agencies.

The State Department and the IBB outsourced management functions for a limited time to compensate for staff shortages and lack of in-house expertise. In both cases, federal staff were able to learn from the external entities and gain enough expertise through training to enable the agencies to resume management functions by in-house staff after the outsourcing contracts had been fulfilled.

NASA and DOE have outsourced management functions through GOCO arrangements since their creation. DOE's experience has been well documented and has generally not been successful for facility acquisition. The reasons for this

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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lack of success are many and varied. At the time the study committee's questionnaire was distributed, the ANG and NIST had outsourced management functions to compensate for staff shortages and a lack of in-house expertise. These projects were ongoing, and the outcomes were not available.

From the available information, the study committee was not able to identify any discernible trends.

SUMMARY

The federal government has contracted out for construction services throughout its history and for design services for more than 70 years. Federal design and construction activities, once the purview of the Treasury Department, USACE, and the Navy Bureau of Yards and Docks, are now managed by at least 25 separate federal entities. Individual agencies may be responsible for managing a facilities program comprised of several dozen to several hundred projects in various stages of planning, design, and construction. Agencies that only require the use of facilities may use a procuring entity to represent the government-as-owner in the acquisition process. Procuring entities include separate executive departments, such as GSA, private-sector firms, and offices within the same agency, such as the FBO within the U.S. Department of State. A few agencies, primarily GSA, USACE, and NAVFAC, provide facilities for other agencies and organizations as a key component of their missions.

The federal government has established general guidance for facilities acquisition through legislation and regulations. The complex, diverse nature of federal projects and the decentralized nature of facilities acquisition, however, preclude an exact, systematic, or single process for programming, budgeting, planning, design, or construction. Within the guidance provided, agencies have developed policies, practices, criteria, and/or guidelines that reflect their missions, cultures, and resources. Studies by academicians and research organizations have concluded that the predesign phases, when decisions are made about the size, function, general character, location, and budget of a facility, are critical to success; the effective commitment of time and resources at this point dictate the future success of the project.

Agencies may use a variety of contract methods to acquire facilities, including design-bid-build, design-build, construction management, and program management. The level of involvement and oversight by the owner organization varies depending on the contract method used.

In the last 50 years, efforts have been made to develop laws, policies, and guidelines for federal agencies to determine which governmental functions should be performed only by government employees (inherently governmental activities) and which can be performed either by government employees or private-sector contractors (commercial activities). Although there is no debate that design

Suggested Citation:"2 Outsourcing of Management Functions." National Research Council. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, DC: The National Academies Press. doi: 10.17226/10012.
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and construction activities are commercial, the distinction for management of those functions is not as clear.

The experiences of federal agencies related to the outsourcing of management functions for facility acquisition to other federal agencies and to private-sector firms as reported to the study committee are inconclusive. The most frequently cited reasons for outsourcing management functions were staff short-ages and the lack of in-house expertise. The outcomes of outsourcing ranged from failure to success. A number of factors were cited for these outcomes.

FINDINGS

Finding. The outsourcing of management functions for planning, design, and construction services has been practiced by some federal agencies for years. Management functions have been outsourced either to other federal agencies or the private sector. The outcomes of these efforts have varied widely, from failure to success.

Finding. At different times, an agency may fill one or more of the role(s) of owner, user, or provider of facilities.

REFERENCES

BRT (The Business Roundtable). 1997. The Business Stake in Effective Project Systems. Construction Cost Effectiveness Task Force. Washington, D.C.: The Business Roundtable.

Childs, D.M. 1998. Privatization, Outsourcing, and Competition and How It All Relates to the March 1996 OMB Circular A-76. Briefing by David Childs, Office of Management and Budget, to the Committee on Outsourcing of Design and Construction Management-Related Activities for Federal Facilities, National Research Council, Washington, D.C., September 22, 1997.

EOP (Executive Office of the President). 1983. Performance of Commercial Activities. Circular No. A-76. Washington, D.C.: Office of Management and Budget.

FFC (Federal Facilities Council). 2000. Adding Value to the Facility Acquisition Process: Best Practices for Reviewing Facility Designs. Technical Report #139. Washington, D.C.: National Academy Press.

GAO (General Accounting Office). 1992. Government Contractors: Are Service Contractors Performing Inherently Governmental Functions? Report to the Chairman, Federal Service, PostOffice and Civil Service Subcommittee, Committee on Governmental Affairs, U.S. Senate. Washington, D.C.: Government Printing Office.

GAO. 1997. Department of Energy: Opportunities to Improve Management of Major Systems Acquisitions. Chapter Report. RCED-97-17. Washington, D.C.: Government Printing Office.

GAO. 1998. OMB Circular A-76. Oversight and Implementation Issues. T-GGD-98-146. Washington, D.C.: Government Printing Office.

OMB (Office of Management and Budget). 1999. Circular No. 1-76 Revised Supplemental Handbook: Performance of Commercial Activities. Washington, D.C.: Office of Management and Budget.

NRC (National Research Council). 1989. Improving the Design Quality of Federal Buildings. Building Research Board, National Research Council. Washington, D.C.: National Academy Press.

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NRC. 1990. Achieving Designs to Budget for Federal Facilities. Building Research Board, National Research Council. Washington, D.C.: National Academy Press.

NRC. 1994. Responsibilities of Architects and Engineers and Their Clients in Federal Facilities Development. Board on Infrastructure and the Constructed Environment, National Research Council. Washington, D.C.: National Academy Press.

NRC. 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets. Board on Infrastructure and the Constructed Environment, National Research Council. Washington, D.C.: National Academy Press.

NRC. 1999. Improving Project Management in the Department of Energy. Board on Infrastructure and the Constructed Environment, National Research Council. Washington, D.C.: National Academy Press.

PMI (Project Management Institute). 1996. A Guide to the Project Management Body of Knowledge. Sylva, N.C.: PMI Communications.

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In this study outsourcing is defined as the organizational practice of contracting for services from an external entity while retaining control over assets and oversight of the services being outsourced. In the 1980s, a number of factors led to a renewed interest in outsourcing. For private sector organizations, outsourcing was identified as a strategic component of business process reengineering—an effort to streamline an organization and increase its profitability. In the public sector, growing concern about the federal budget deficit, the continuing long-term fiscal crisis of some large cities, and other factors accelerated the use of privatization measures (including outsourcing for services) as a means of increasing the efficiency of government.

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