Are they A-76 winners or second-class feds?

Public/private competitions under the Office of Management and Budget’s Circular A-76 policy have created opportunities for federal employees to learn new skills and provide public services more efficiently, although managers report that most employees dislike the job competitions.

“A-76 is a very difficult process. It’s not one that employees would typically embrace,” said Peggy Wright, information technology director at the Army Corps of Engineers. However, Wright sees an upside to OMB’s A-76 policy. “It gave us an opportunity to transform ourselves into a more efficient organization.”

By more efficient organization, Wright means the Most Efficient Organization (MEO) team she leads. The team captured a bid in April to provide IT services to the corps. Wright’s streamlined organization, managed from Vicksburg, Miss., supports about 35,000 employees in more than 50 locations.

The Federal Activities Inventory Reform (FAIR) Act of 1998 requires executive agency leaders to send OMB a list each year of the commercial activities their agencies perform. OMB also requires agencies to submit a list of inherently governmental activities for its review. Agency executives must decide which commercial activities they will compete under OMB’s Circular A-76 rules.

Originally issued in 1955, OMB’s Circular A-76 policy guides executive agencies in administering public/private job competitions. The thinking behind the policy is that society gets the greatest value from the public sector if the private sector is periodically invited to bid on federal jobs that are similar to ones performed in the commercial sector. OMB said it revised the circular in 2003 to expand the program and improve its efficiency.

As part of the competitive process, federal agencies can streamline their work by creating MEOs to compete against private-sector bidders. MEOs create an opportunity for federal employees to work in a new organization that has a unique, if somewhat isolated, relationship to the agency in which they still work.

Federal employees have fared well in those competitions, according to a Competitive Sourcing Update published in May by OMB’s Office of Federal Procurement Policy. In fiscal 2006, federal employees won 87 percent of the work competed. Between fiscal 2003 and 2006, they won 83 percent of the work competed.

However, some policy experts say the high success rates of federal employees in those competitions have created unintended consequences. Too many employee wins tend to undermine Circular A-76’s purpose, which, the circular states, is to free federal agencies to focus on core mission activities.

Some companies that ordinarily would welcome an opportunity to provide IT services have become discouraged from entering a process that appears to favor the federal teams.

“If there is only one other bidder than the MEO, it’s not the kind of robust competition we should be looking to get,” said Stan Soloway, president at the Professional Services Council. “The process has lost so much credibility, due to political pressures, companies have decided unless it’s a really big requirement, it’s not worth competing.”

An OMB official confirmed that the majority of A-76 competitions involve only one company competing against the agency’s MEO. And and in some cases, the MEO is the only competitor. The government received two or more private-sector offers in only 30 percent of the competitions completed in fiscal 2006, compared with 53 percent between fiscal 2004 and 2006, OMB spokeswoman Andrea Wuebker said.

Congress as blocker
“We believe this decline is due, in part, to the uncertainty created by the continued efforts by Congress to block competitions,” Wuebker said in an e-mail response. However, she added, if agencies receive no offers, they try to encourage c
mpetition by holding public forums and asking potential service provi
ders if the solicitation is vague, confusing or restrictive.

Wuebker said MEOs are successful because they take the challenge of competition seriously. They use the public/private competitions to enhance their performance through a variety of means, including better use of technology, re-engineered processes, workforce realignments, consolidation of operations and reductions in contract support costs, she said.

Agencies expect to achieve $4.4 billion in savings with MEOs that won public/private competitions between fiscal 2003 and 2006. That amount equals an annual savings of $23,300 for each full-time equivalent position competed, Wuebker said.

In some cases, employees have said their agencies are overstating the savings. Projected savings can be off if the MEOs’ initial baseline costs are estimates and are inaccurate or incomplete, said Mark Davis, chairman of the legislative committee for the National Federation of Federal Employees’ Forest Service Council, an employee union.

That was the case at the Education Department. Its inspector general reported in February that the department’s MEO for human resources lacked the data to determine whether it met its performance targets and, consequently, it overstated its savings to Congress and OMB.

Off-the-book costs
The Forest Service reorganized its IT organization and formed an MEO in 2005. In the reorganization, the agency reduced the number of employees performing computer and communications work from about 1,260 to about 750, and it centralized common IT functions. The agency claimed savings of $35.2 million from fiscal 2005 through fiscal 2006, Davis said.

A press released issued by the Forest Service Council in May said agency documents showed that the restructuring resulted in many Forest Service employees outside the MEO spending a substantial amount of their time performing IT tasks.

“There’s off-the-book costs,” Davis said, adding that a substantial amount of work has been shifted from the IT organization to non-IT employees. “I’m not an IT person, so it takes me a lot of time” to trouble-shoot IT problems. “I’m a GS-12, so it costs [the government] a lot of money.”

Shifting IT support to users cost the agency $327 million and created a net operational loss of $292 million in fiscal 2005 and 2006, according to a Forest Service Council press release.

Some see the Forest Service’s MEO as a mixed success. Bruce McDowell, a project director at the National Academy of Public Administration who worked with the Forest Service to create the MEO, said he believes the new organization has improved IT management at the agency. The MEO quickly bought new equipment and consolidated servers — and took only three months to do it, McDowell said. However, the reorganization was hard on employees.

“Everybody needed training while they were performing on the job,” McDowell said. “It’s like trying to fix an airplane while you’re still flying it. Workloads went up for most people in general.”

Whether agencies win or lose an A-76 competition, employees find public/private competitions difficult, McDowell said. The biggest problem for Forest Service employees was low morale, partly because of the increased workloads and partly because their work changed, he said.

Jobs recompeted
Many of the best workers leave before or during an A-76 competition, McDowell added. Their departures help the agency downsize. But often by the time an MEO wins an award, it has a difficult time filling the vacancies.

Workers are still federal employees when they are part of an MEO, but typically their jobs will be recompeted every five years, McDowell said. “It is a much less certain career path than [that for] a normal federal agency person. It sets up a second class of federal employee.”

Wuebker said public/private competitions are not dismantling the federal IT workforce, co
trary to what some might think. Between fiscal 2004 and 2006, about 5,000 of the nearly 79,000 FTEs that
make up the federal IT workforce were subject to competitive sourcing through public/private job competitions, she said. Most of those 79,000 positions will never be considered for competition because the work is inherently governmental or it is considered essential to the agency’s core mission, she said.

When the Justice Department announced an A-76 competition for IT support services in October 2006, it put the positions of about 125 employees and 125 contractors up for bid, said Nancy Chamberlin, the MEO team co-leader at Justice. However, by the time the MEO won the bid in January, a number of MEO employees had left the organization.

Chamberlin signed a letter of obligation with the agency in March, but the MEO has not yet taken over the work because a congressional notification process must be completed after an award. Chamberlin said she is working to fill the initial 117 federal positions included in the MEO’s bid, which was the only competitor. Like many MEOs, her team partnered with a company, in this case Lockheed Martin, to strengthen its offer. Working with an industry partner has many advantages, Chamberlin said, particularly because most federal employees have never written a bid proposal.

“There’s no question that the process itself is very hard on employees, even before the announcement,” Chamberlin said. “They worry about their jobs. I wasn’t a fan of A-76 going into this,” she added, even though she has seen some good results from the process. However, Chamberlin added, the process should be changed because it hurts employee morale.

Because of the large number of positions retained, Justice’s IT workers don’t have to fear downgrades or a reduction in force, Chamberlin said. She is busy trying to put employees in jobs that match their interests and qualifications. But many of them are already worried about what will happen to their jobs in 10 years, when their work will be recompeted, she said.

Out-of-court settlement
The Army Corps of Engineers’ jobs competition was delayed because a private-sector bidder filed a lawsuit. Wright’s MEO with Lockheed Martin proposed to save the corps nearly $1 billion in six years, but Northrop Grumman Information Technology filed a suit in the Court of Federal Claims to stop the award. The parties settled, however, and Northrop Grumman filed a motion to dismiss the protest.

“I don’t feel the MEO had any advantage over the private sector,” said Ray Navidi, the corps’ strategic sourcing program manager. “Partnering with the private sector was their choice.”

The corps’ MEO based its proposal on centralizing services and standardizing technology, Navidi said. When the competition started in June 2004, 1,300 federal employees were affected. By the time the Army made the award in April this year, 800 federal workers and 1,500 to 2,000 contractors were part of the MEO, he said.

“Because you have that uncertainty from Day One, it has to be difficult for the employees,” Navidi said. “They may not win.”

His office provides a comprehensive employee transition program. Navidi said he expects few people to ned to relocate. Because IT specialists can perform many of their job functions from nearly anywhere many can work remotely or virtually instead of relocating.

More than 80 percent of the corps’ MEO IT positions will be in field offices, and about 17 percent will be at the MEO’s headquarters in Vicksburg, Wright said. About 40 percent of the MEO positions are classified as virtual and can be filled by employees without requiring them to relocate, Wright said.

In addition to such steps to mitigate dislocation, industry competitors can lessen the effect on federal workers when work is competitively outsourced, Soloway said. By including in its bid how the company would support the incumbent workforce, a company can send a clear message to emplolyees that their wel
are is part of the A-76 competition, he said.

“I’ve never believed that we should have
-76 be a process bound on the back of federal employees,” Soloway said. But the perception that the policy has harmed federal employees has made A-76 highly political, he added.
“Is this process going to survive?” Soloway asked. “Right now, it is on its last legs. There are already very few people willing to play.”

Trimble is a freelance writer in Alexandria, Va.

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