Financial Services Appropriations Bill Letter to Congress

April 7, 2008

The Honorable Jose Serrano                                         
Chairman, House Appropriations                                   
Subcommittee on Financial Services                              
B-300 Rayburn House Office Building                           
Washington, DC 20515                                                 

The Honorable Richard Durbin
Chairman, Senate Appropriations
Subcommittee on Financial Services
184 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairmen:

The undersigned unions are profoundly grateful for your leadership in the fight against the Bush Administration’s wholesale privatization effort.  The provisions you put in the FY08 Financial Services Appropriations Bill constituted dramatic and unprecedented reforms of a privatization process that, historically, has been as unfair to federal employees as it has been unaccountable to taxpayers.

We are eager to follow up on the brilliant FY08 successes with related reforms that would ensure compliance with last year’s most important reform, close a loophole in a key reform from last year, extend certain reforms from last year that were Department of Defense (DoD)-specific to all agencies, and build on last year’s reforms in order to take into account a recent change in tactics by the Office of Management and Budget (OMB).

1. Ensure compliance with last year’s most important reform:

Section 739(d) represented a much-needed effort to free agencies from meddling and interference by OMB political appointees with agencies’ A-76 decision-making.  Under Section 739(d), OMB was forbidden from directing agencies to undertake A-76 studies and agencies were forbidden from following that direction.  OMB has not issued guidance to implement Section 739(d), A-76 quotas established by OMB have not been repudiated, and requests from senior managers for relief from “competitive sourcing” schedules have neither been solicited nor acted upon.  In fact, there have been no changes in agencies’ “competitive sourcing” schedules after enactment of Section 739(d). 

OMB Director Jim Nussle first told the House Financial Services Appropriations Subcommittee, on March 6, 2008, that he thought OMB was already in compliance with Section 739(d).  Then Director Nussle said he thought the guidance issued on February 20, 2008, covered Section 739(d).  However, a cursory review of that guidance, which dealt with several “competitive sourcing”-related provisions in the FY08 Financial Services Appropriations Bill, reveals no mention of Section 739(d).  Finally, Director Nussle promised to submit something in writing. 

Section 739(d) is the most important of the reforms enacted in the FY08 Bill.  Chairman Serrano, you said it best at the hearing with Director Nussle: If the Administration has not complied, “is it reasonable to expect that the Congress will allow the administration to pursue its A-76 agenda if OMB can’t follow the law?  Should A-76 activity, as of the date of enactment of 739(d), be suspended administratively or legislatively until the provision is satisfactorily implemented?”  We believe the answer to the first question is a vigorous no and the answer to the second question is an emphatic yes.  

2. Close a loophole in a key reform from last year:

Agencies continue to engage in direct conversions, giving work performed by federal employees to contractors, without public-private competition, which is contrary to the interests of taxpayers as well as federal employees.  Section 739(a) requires public-private competitions for functions performed by ten or more federal employees.  Agencies are directly converting smaller functions and breaking up larger functions in order to get under this threshold.  The threshold should be reduced to zero.  Agencies also let federal employees retire and then replace them with contractors, again without competition.  Whether genuinely commercial functions should be contracted out should be decided by a fair competition process, not by whether the federal employees currently performing the work are of retirement age.

3. Extend certain reforms that were DoD-specific last year to all agencies:

The FY08 Defense Authorization Bill included several provisions that were DoD-specific that should be extended to all agencies, including a prohibition against automatic recompetition (Section 323), a requirement to develop an insourcing policy (Section 324), and a requirement to develop a contractor inventory (Section 807).  As it is so often said, if procurement provisions are suitable for DoD, which undertakes two-thirds of all service contracting, then they are suitable for the other agencies. 

In fact, in a March 17, 2008, question for the record from the House Defense Appropriations Subcommittee, the Pentagon reported that, “Since February 2007, the Army has in-sourced approximately 475 full-time equivalents (FTE) performing functions such as: congressional liaison, personal services, strategic planning, intelligence services, program analysis, logistics management and support, security management, and budgetary/financial management.  Savings average approximately $48K per FTE.”  The question is not whether other agencies should also start insourcing; rather, the question is how soon can they get started?

4. Build on last year’s reforms in order to take into account OMB’s recent change in tactics:

OMB is requiring agencies that can’t or won’t conduct A-76 privatization reviews to instead hit their federal employee quotas with High Performing Organization (HPO) studies.  HPO’s are increasingly becoming known to rank-and-file federal employees as the new A-76.  Because HPO’s, as internal reorganization efforts, can involve all employees—both commercial and inherently governmental—they are usually larger and more extensive than A-76 studies and thus can have far more wide-ranging consequences for the delivery of services.  One agency’s HPO’s take 18 months to develop and five years to implement—these are not mere reorganizations.

Nevertheless, there is no paper trail or Congressional reporting requirement for committees or affected federal employees to follow.   An agency official acknowledged that the HPO guidance received from OMB could fit on one regular-sized piece of paper.  The Homeland Security Appropriations Subcommittees has specifically cancelled one HPO because of excessive downsizing.  The Energy and Water Appropriations Subcommittees included a provision that prevents implementation of all HPO’s by the Corps of Engineers after one was used to strip employees of their collective bargaining rights.   

We urge the inclusion of a provision that would allow agencies to develop HPO’s but prevent them from being implemented without specific and explicit approval from the relevant appropriations subcommittee so that these ambitious but often mysterious schemes can be examined before they are put in place.  If an HPO has merit and can withstand scrutiny, then surely it will be swiftly approved. 

Thank you again for your leadership in the fight against wholesale privatization and your consideration of our proposals for the FY09 Financial Services Appropriations Bill.

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