Under the buzzwords "competitive sourcing," the Bush administration is leaning harder on federal agencies to review which tasks are "inherently governmental" and which should be put up for competitive bid. The result of those reviews could be more work for construction industry firms, primarily for engineering firms and those contractors that provide building maintenance and management services.

The "privatization" push takes effect in early January, as the federal Office of Management and Budget implements changes to its 36-year-old Circular A-76, which outlines policies for determining when agencies should contract out. OMB proposed in a Nov. 19 draft Federal Register notice to expand "public-private competition" by doing away with exceptions that let agencies do work for each other on a reimbursable basis. It also wants to give agencies more flexibility to use quality as a factor in procurements. OMB could incorporate into the final directive public comments received as of Dec. 19, but still anticipates an early January effective date.

The campaign began last summer with President Bush's federal "management agenda." It said that "by rarely subjecting commercial tasks performed by the government to competition, agencies have insulated themselves from the pressures that produce quality service at reasonable cost." OMB says all federal work not "inherently governmental" could be open to bids, with work done by as many as 425,000 federal employees affected. Agencies must open at least 15% of affected jobs to competition by October 2003.

In a related move last October, Army Secretary Thomas E. White directed officials there to review all "non-core" activities with an eye to contracting out work. That could have an impact on the Corps of Engineers' civil works operation. A spokesman says the Corps is developing a plan to implement White's directive, including "requests for exemptions."

In agencies such as the General Services Administration, Dept. of Veterans Affairs and Bureau of Prisons, nearly all major construction and much design is by private firms. That has been driven in part by agency staff reductions. "We're as lean as we can be," says one federal construction manager. "Everything we're doing now is inherently governmental. When you look at signing change orders, that has to be a government employee." He sees more outsourcing potential in real estate and facility management.

After previous downsizings, remaining federal construction staffers "have become more like program administrators, kind of the final line of defense between the process of design and construction and the taxpayers' expense," says Nick Kolesnikoff, a Jacobs Engineering Group's vice president.

"Basically we don't do any construction work in-house," says April Heinze, the Naval Facilities Engineering Command's director for strategic sourcing. Only about 7% of its design work in dollar volume is done internally, "just the bare minimum to continue core competency in design," she says.

But there may be opportunities for more work in certain places. The National Park Service, which has boosted its design contracting since 1998, is studying 80 engineering-related jobs at its Denver Service Center. Dan Wenk, center director, says contracting out work done by those employees could amount to $200 million over five years. "The projects include designing utility systems, visitors centers, roads and housing--anything you'll see at a national park," he says.

Larry Bory, HDR Inc. vice president for federal relations, says the administration is "approaching this in a responsible way, but we are concerned that there be a clear definition between inherently governmental and commercial services." Mort Downey, a principal at PB Consult, adds that firms would like to see "best value" rather than price as a bigger component in outsourced procurements. But one observer cautions that "in the longer term, we may be hollowing out government to the point where it has no capabilities."