Friday, June 27, 2008 – Position: The Office of Management and Budget’s (OMB) privatization effort is not about making federal services more efficient; rather, it is designed to replace hundreds of thousands of federal employees with contractors. OMB is still forcing agencies to use privatization quotas, the A-76 process remains extremely pro-contractor, and OMB justifies its unprecedented wholesale privatization effort with unsubstantiated savings claims. We encourage Congress to adopt rules that will level the playing field for all federal workers in A-76 competitions, and where appropriate, eliminate competitive sourcing altogether.
Competitive sourcing is the method by which federal agencies attempt to move work performed by federal workers into the private sector. Competitive sourcing is one of the five elements of the President’s Management Agenda. While competitive sourcing may seem like a good way to save the government money in principle, any savings that the Office of Management and Budget (OMB) claims are unsubstantiated. For example, a recent Government Accountability Office (GAO) study found that a Forest Service estimate of $35.2 million in savings from competitive sourcing in fiscal years 2005 and 2006 excluded $40 million in transition costs. Other agencies are using similarly questionable criteria in generating savings estimates, and GAO has repeatedly questioned OMB’s historically grandiose savings claims. Moreover, OMB officials acknowledge that:
Last year, Congress included some significant contracting out reforms in the FY08 Defense Authorization Bill and the FY08 Omnibus Appropriation Bill. While these reforms were a good start, many of the provisions only apply to the Department of Defense (DoD). We believe these provisions should be expanded to apply to all federal agencies. They include the following:
Direct Conversions – Agencies continue to engage in direct conversions, giving work performed by federal employees to contractors, without public-private competition. This 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.
HPOs – OMB is requiring agencies that can’t or won’t conduct A-76 privatization reviews to instead achieve their federal employee quotas with High Performing Organization (HPO) reorganizations. Because HPOs, as internal reorganization efforts, can involve both commercial and inherently governmental employees, 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. A serious flaw with HPOs is that there is practically no guidance for agencies to follow in devising their HPO reorganization plans. As much as unions sometimes object to A-76 studies, there is at least an established process in place that Congress is informed about and agency employees can count on. For HPOs, no such process or guidance exists. There is no paper trail or Congressional reporting requirement for committees or affected federal employees to follow. In fact, we have been told by the top competitive sourcing officers that their entire guidance for a specific HPO review impacting 3,500 workers is a set of bullet points that fits on one side of a sheet of paper. Agencies are conducting multi-million dollar reorganizations of critical government functions, and yet neither employee representatives nor Congress know anything about the process they are using.
Agency Exclusions – In some agencies, competitive sourcing simply does not make sense. Two such agencies are the Forest Service and the Department of Defense (DoD). At the Forest Service (FS), in addition to performing land management work, the majority of employees serve a critical homeland security function. These workers serve in the FS militia, in which they respond at a moment’s notice to wildfires and a wide variety of emergency incidents. Outsource the forest planner and you lose the highly trained rapid responder as well. To outsource this workforce would be to decimate the nation’s emergency response capabilities. At DoD, the agency has refused to comply with A-76 changes Congress has demanded, and they continue to spend millions of dollars on outsourcing government jobs when those resources are being diverted from the war effort.
Summary of Requested Congressional Action
The IAM encourages Congress to improve the competitive sourcing program by: