Competitive Sourcing (A-76)

Position:  The Office of Management and Budget’s (OMB) privatization effort is not about making federal services more efficient, 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 is hopelessly 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 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.  The Government Accountability Office (GAO) has repeatedly questioned OMB’s historically grandiose savings claims.  Moreover, OMB officials acknowledge that:

·          Only a very small percentage of OMB’s estimated savings from competitive sourcing, if any at all, result in actual savings.  Estimated net savings have not been independently verified.

·          Claims of 40% savings are completely false.  Any such estimates are qualified with hedge words that demonstrate the subjectivity of the claims.

·          Agencies deliberately use criteria that exaggerate savings from and minimize costs of conducting privatization reviews.  Costs of conducting a study can run into the tens of millions with no guarantee of any savings at all.

OMB officials have said agencies must review 850,000 federal employee jobs for privatization.  In order to accomplish that goal, OMB officials established crude numerical quotas for agencies.  Even though Congress officially outlawed the use of numerical privatization quotas in 2003, GAO reports that little has changed, and the privatization quotas imposed on agencies are still very much in place.  OMB is still directing agencies to conduct certain numbers of privatization reviews within certain periods of time affecting certain number of employees. 

Competitive sourcing rules lean heavily in favor of contractors.  For example, contractors, but not federal employees, can appeal agencies’ contracting out decisions to independent third parties.  In addition, federal employees, but not contractors, are automatically recompeted at the end of their performance periods.  The list of inequities between federal workers and contractors goes on and on.

Opposition to the competitive sourcing initiative is based on four basic principles:

1) Federal employees should have the same appeal rights as contractors. 

When federal employees win a privatization review, contractors can have the agency’s decision reviewed by independent third parties—by appealing to the GAO or the Court of Federal Claims—and perhaps get it reversed.  However, federal employees have no such appeal rights.  Only very senior managers can appeal a contracting out decision and they are allowed to do so in very limited circumstances.  Federal employees should have the same appeal rights as contractors.  It is basic fairness that both sides in a contest where jobs are at stake should have the same appeal rights.  A contracting official can’t help but be biased now because she knows that only one side—the contractors—can hold her accountable in court.

2) Federal employees should have opportunities to perform new work and contracted out work and to become more efficient outside of the narrow OMB Circular A-76 context. 

OMB acknowledges that federal employees routinely beat their contractor counterparts in competition after competition.  So why aren’t federal employees allowed to compete for new work and work that’s already been outsourced?  If public-private competition is good for federal employees, then it should be good for contractors, especially given that insourcing is common practice in local government and in the private sector.  Similarly, federal employees should be allowed to reengineer internally to become more efficient without going through the costly and controversial A-76 process.

3) Health care and retirement costs should be excluded from the cost comparison process of privatization reviews used by all federal agencies so that contractors are not rewarded for providing bad benefits or even none at all. 

Such an approach does not require contractors to provide comparable benefits.  Such an approach does ensure that federal employees won’t be punished for the fixed costs of the federal government’s modest health care and retirement benefits in any public-private competition.  Health care costs are already excluded for the Department of Defense (DoD), and the same approach has been advocated for DoD retirement costs.  However, health care and retirement costs should not be a consideration in any cost comparison in any agency. 

4) Federal employees should not be reviewed for privatization because of guidance, direction, requirement, or encouragement from OMB officials. 

OMB’s use of numerical privatization quotas was outlawed by Congress.  However, OMB is still forcing agencies to review arbitrary numbers of federal employees for privatization merely to achieve quotas.  OMB political appointees should not be telling agency career managers how many and which employees to review for privatization. 

Agency Exclusions

In some agencies, competitive sourcing simply does not make sense.  One obvious case is where a single employee has substantial responsibilities outside of his/her typical duties.  In the Forest Service (FS) for example, in addition to performing land management work, the majority of employees serve a critical homeland security function as well.  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.  This is just one agency-specific example of many where competitive sourcing is a poor model for reform.

Congressional Action

The IAM encourages Congress to improve the competitive sourcing system by:

1.       Granting federal workers the same appeal rights as contractors.

2.       Granting federal employees opportunities to perform new work and contracted out work.

3.       Excluding health care and retirement costs from cost comparisons.

4.       Eliminating once-and-for-all the privatization quotas imposed by OMB.

5.       Exempting agencies where competitive sourcing is a poor vehicle for reform.