Outsourcing efforts expected to face rougher terrain

By ELISE CASTELLI

A Democratic Congress could make it tougher for agencies to outsource federal jobs to private-sector vendors in the future, industry and government officials predict.
“I’m expecting it to be tougher sledding,” Paul Denett, procurement policy administrator for the Office of Management and Budget, said in a speech shortly after the November elections. Denett said he expects to be before the government reform committees of both chambers during the new session and will make the case for competitive sourcing when he is called.
In 2007, agencies could see more restrictions on competitive sourcing, such as the exclusion of employee benefits costs from consideration in job competitions or caps on what the government can spend on competitions, Denett said. These actions, which have been used in the past to impede outsourcing, will cost the government significant savings in the long run, he said.
“Can you imagine [Congress] saying in some instances they’re prohibiting us from using best value when we’re trying to decide who the winner is?” Denett asked in the speech. “To me this is unconscionable.”

Competitive sourcing, which involves opening federal jobs to contractor competition, is a goal of the president’s management agenda. These public-private competitions are conducted under rules called OMB Circular A-76. Denett predicts the A-76 competitions conducted in the last three years alone could save the government $5 billion over the next decade.
Denett said comparing government with private operations is the best tool the government has to create truly efficient organizations. The government estimates it saves $23,000 for every job it examines under the A-76 process and awards 80 percent of job competitions to the government workers who hold those jobs. In such competitions, federal employees compete in teams, known as most efficient organizations, in which employees propose cheaper and more streamlined ways of performing work.
Governmentwide, there were more than 26,000 jobs scheduled for competition in fiscal 2006. The latest management scorecard, for the quarter ending Sept. 30, shows 15 of the 26 agencies evaluated had green, or successful, ratings for competitive sourcing efforts. The same number of agencies also received green ratings for their progress in using A-76 measures to improve efficiency.
Denett, who was appointed in August, said his goal for his first year in office was to have 14 agencies be deemed successful — and awarded green ratings — in meeting the administration’s competitive sourcing goals.
Competitive sourcing proponents, like Denett, received some support for their efforts from Congress in 2006. The Republican-controlled legislature defeated two measures in the Defense appropriations bill that could have stymied outsourcing.
One of the amendments would have required the Defense Department to exclude reviews of retirement benefit costs for all parties in a job competition if federal retirement costs exceed private bidders’ retirement costs. The other amendment would have prevented the Army from outsourcing 350 jobs at Walter Reed Army Medical Center in Washington. The measures were removed during conference committee negotiations in September.
No matter what party is in power, Congress is rarely kind to competitive sourcing efforts, making the defeat of the two measures a significant victory for industry. In the past, a lot of restrictions have been imposed on competitive sourcing regardless of party, said Cathy Garman, senior vice president of the Contract Services Association, a trade group representing government contractors.
With union-friendly members of Congress in positions of power, like new House Majority Leader Steny Hoyer, D-Md., “we expect [opposition] to continue, and there might be some move to put further restrictions” on the A-76 process, Garman said. “At some point in time we hope they realize it is a very useful tool to reduce the deficit and a way of finding additional sources of funds.”
For unions such as the American Federation of Government Employees the rejection of the two amendments was a temporary setback. Had the amendments occurred in the new session the federal employees would have won, said John Threlkeld, legislative representative for AFGE.
Looking forward to 2007, the union is hopeful Democrats will put the brakes on the competitions it says threaten federal jobs and the quality of government work.
“We expect better results in conference committees as a result of the chairs being Democrats,” Threlkeld said. Although unions usually enjoy bipartisan support in their fight against outsourcing, in some cases conference committees remove provisions, like the retirement benefits amendment, under pressure from the White House, he said.
The union will continue to work with Congress to have retirement benefits excluded from competitions, he said. “We don’t want to see contracting out because the contractor doesn’t provide retirement benefits,” Threlkeld said. Performance of the task should be the deciding factor in a competition, not the cost of benefits, he said. In the past, Congress approved a similar exclusion of health care benefits costs from A-76 considerations when contractor benefits cost less than government packages.
Congress’ failure to pass spending bills for fiscal 2007 also stalled a union-backed measure regarding A-76 competitions in the Commerce, Justice and State appropriations bill, Threlkeld said.
The bill contained language to remove funding for A-76 competitions until federal employees are given the right to protest decisions to award their jobs to a private company. AFGE will continue to work for appeal rights, which he said would have given federal employees the same rights as contractors. Contractors, though not contractor employees, have the right to protest outsourcing decisions.
Where the Republican Congress gave out industry victories, it also doled out industry defeats.
Under pressure from Congress, the Army Corps of Engineers decided to abandon its plans to outsource 2,000 lock and dam operations jobs. Instead it will create a high-performing organization to improve efficiency within the agency.
“We may see more of that in the future,” Threlkeld said. “Where agencies see the reluctance of Congress to allow privatization of government functions, they may look at alternatives to A-76.”