Department of Human Services Letter to Congress

April 7, 2008

The Honorable David Price                                           
Chairman, House Appropriations                                   
Subcommittee on Homeland Security                             
B-307 Rayburn House Office Building                           
Washington, DC 20515                                                 

The Honorable Robert Byrd
Chairman, Senate Appropriations
Subcommittee on Homeland Security
135 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairmen Price and Byrd:

The Congress has shut down “competitive sourcing” programs in agency after agency.  In 2007, the Congress used the FY08 Omnibus Appropriations Bill to shut down the use of the costly and controversial OMB Circular A-76 privatization process in four different agencies because of problems: the Corps of Engineers, the Bureau of Prisons, the Forest Service, and the Department of Labor.  However, no agency deserves to have its A-76 program shut down more than the Department of Human Services (DHS), which in January declared its intention to review this year more than 1,600 jobs for outsourcing.  What’s wrong with DHS’ privatization scheme?

1. Inherently governmental work at DHS is now being performed by contractors.  The Government Accountability Office (GAO) has described a pattern throughout DHS of using contractors to perform professional and management support services closely supporting inherently governmental functions, including budget preparation, policy development, acquisition support, developing or interpreting regulations, and reorganization and planning.  “The closer contractor services come to supporting inherently governmental functions,” observed GAO, “the greater the risk of their influencing the government’s control over and accountability for decisions that may be based, in part, on contractor work.” 

One of GAO’s case studies caught the eye of federal employees: the Coast Guard had contracted out in May 2007 support services for the administration of its “competitive sourcing” program.  As Senate Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman put it, the Coast Guard had “hired a contractor to help determine whether existing Coast Guard jobs should be contracted out”. 

2. DHS should use alternatives to the A-76 circular to generate savings.  A privatization review is only one method by which an agency might become more efficient—other methods ought to be used to create a more efficient organization.  In OMB’s reports on competitive sourcing for FY04, FY05, and FY06 (the last year available), it is reported that federal employees won every single privatization review at DHS.   Although its in-house workforce has proven to be formidable, DHS has not slowed down on its privatization studies, or even considered alternatives to A-76.  

3. DHS shouldn’t use Office of Management and Budget (OMB) A-76 targets or quotas or respond to OMB directions or requirements on using A-76—it’s the law.  OMB was prohibited from telling agencies to review 5% and 10% of their workforce classified as commercial for privatization in 2003.  According to internal documents, DHS has been directed by OMB to review all of its jobs that are classified as commercial as part of privatization reviews scheduled to last until 2015.  In other words, DHS is working under a 100% quota that will be finished during the second term of President Bush’s successor. 

4. DHS employees should be allowed to compete for new work and outsourced work.  If savings are possible from competing federal employee jobs, then savings are possible from giving federal employees opportunities to compete for new work and outsourced work, especially given that contractors rarely compete against federal employees and all too infrequently against one another to acquire and retain work.  However, despite DHS’ acknowledgement that federal employees have won 100% of their competitions against contractors, the department has failed to allow them any opportunities to compete against contractors for new and outsourced work. 

5. DHS must be accountable for its contracting decisions DHS’ ability to monitor service contracts has repeatedly been called into question.  A 2005 audit by the Inspector General “identified a number of vulnerabilities and potential vulnerabilities that…fell into three general categories: adherence to ethical conduct, program management, and procurement management.” 

The Government Accountability Office (GAO) recently reported (GAO-08-195) on the Forest Service’s use of “competitive sourcing”.  Forest Service is one of OMB’s model agencies for its privatization effort.  Agency officials told Congress the agency saved more than $38 million between 2004 and 2006, but, according to GAO, they couldn’t say how they arrived at that figure or provide supporting data.  The agency didn’t have complete and reliable cost data from those two years to show whether it complied with statutory spending limits on competitive sourcing and accurately reported savings to Congress.  Moreover, the agency also excluded a number of costs that would have cut into the $38 million in savings.  For example, agency officials told GAO that they didn’t include about $40 million in information technology transition costs from the savings totals.  Given DHS’ record on procurement generally, we believe the situation is likely to be worse.  Indeed, some of GAO’s most significant concerns with the Forest Service’s “competitive sourcing” program reflect systematic problems with the guidance OMB provides to all agencies, including DHS. 

The other reason why DHS’ “competitive sourcing” policy is unaccountable is that the department takes work from federal employees and contracts it out without competition, in violation of the A-76 circular—which requires public-private competition before any work can be given to a contractor, absent an OMB waiver—and potentially in violation of the law, which requires a full-blown competition before any function performed by more than ten employees may be converted to contractor performance.  Among the functions that DHS acknowledges contracting out without conducting an A-76 study are administrative and support functions, records management, and preliminary case processing operations. 

Thank you for considering our recommendation. 

Sincerely,

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO

AMERICAN FEDERATION OF TEACHERS, AFL-CIO

DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO

INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, AFL-CIO

INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO

INTERNATIONAL FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS, AFL-CIO

NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES

NATIONAL FEDERATION OF FEDERAL EMPLOYEES, AFL-CIO

NATIONAL TREASURY EMPLOYEES UNION

TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO

UNITED AUTO WORKERS, AFL-CIO