Competitive sourcing fight isn't over

Bush administration and Congress can't agree on whether A-76 savings are real

New requirements

Congress won’t let agencies spend money on public/private job competitions unless the department’s officials can meet new requirements described in the fiscal 2008 Consolidated Appropriations Act, which became law Dec. 26. Organizations must:

  • Hold a competition between a contractor and federal employees who are in a most efficient organization.

  • Determine that the department will save 10 percent of the employees’ organization costs or $10 million.

  • Ensure the contractor provides its employees with an employer-sponsored health insurance plan that is at least equal to what the government pays on its premiums.

  • Require the contractor to offer retirement benefits to its employees, which cost as much annually as the federal employees’ benefits cost the government.

The appropriations law prevents the Office of Management and Budget from stopping an agency from hosting a competition to evaluate the benefits of converting work from a contractor to federal employees.

The law also won’t let OMB require agencies to host public/ private competitions.

— Matthew Weigelt

The Bush administration wants to stop Congress’ efforts to end public/private job competitions and it used the president’s fiscal 2009 budget request as its latest weapon.

President Bush asked Congress to repeal language in the 2008 Consolidated Appropriations Act that hinders agencies from conducting job competitions between federal workers and private contractors for certain tasks traditionally done by government employees. It’s the latest skirmish in a long running battle between Congress and the Bush administration over competitive sourcing.

Competitive-sourcing competitions held since 2005 could save the government about $7 billion, according to the president’s budget proposal. Savings of $1 billion a year are possible if agencies use competitive sourcing to consolidate operations, realign their staff members and improve how they use technology, according to the budget.

The administration’s request to have Congress repeal language in the law comes less than two months after lawmakers passed the omnibus spending bill. “Congress spoke clearly by passing a law curtailing President Bush’s efforts to unfairly contract out federal jobs, and giving federal employees certain rights,” said Rep. Henry Waxman (D-Calif.), chairman of the Oversight and Government Reform Committee.

Congress restricted competition for government work in the appropriations law by limiting competitions in specific departments.

The section that Bush wants repealed creates hurdles for any agency that holds a public/private job competition under the government’s competitive sourcing policy.

Competitive sourcing, governed by the Office of Management and Budget’s Circular A-76, typically pits a contractor against a team of federal employees reorganized to compete as a most efficient organization.

According to the new requirements for public/private job competitions in the law, the government must examine a company’s costs for employee health insurance and retirement benefits in evaluating A-76 bid proposals.

Those costs must be at least equal to the amount the government spends on federal employees for those benefits.

Some union officials said Congress made the right decision when it created the new rules. “We are not going to let [administration officials] run from this important commitment to fairness and to the fundamental need to spend federal dollars in ways most advantageous to the taxpayers,” said Colleen Kelley, president of the National Treasury Employees Union.

Some acquisition officials now question whether competitive sourcing can survive under the new rules. However, Paul Denett, administrator of the Office of Federal Procurement Policy, said he still is optimistic about the future of competitive sourcing.

Asked if the new congressional restrictions end competitive sourcing, Denett replied at a roundtable discussion in January,“ No, they absolutely do not kill it.”

The budget request states that federal agencies will continue to look for opportunities to use competitive sourcing and work with Congress to have restrictions removed.

“Elimination of these legislative constraints would allow taxpayers to get the best results possible from competitive sourcing and manage their resources in the most effective manner possible,” administration officials wrote in the budget.

Congress remains skeptical of the administration’s claims about competitive sourcing and is demanding proof that the policy will produce real savings. The appropriations act requires the administration to tell Congress how it calculates the billions of dollars that officials say the government will save through competitive sourcing. OMB must report agencies’ annual and recurring savings and show how it arrived at those numbers.

Congress also doesn’t think that OMB is counting all of th government’s costs to conduct public/private job competitions.

In its future reports to Congress on competitive sourcing, OMB must include the cost of conducting those competitions and factor in the upfront cost of having employees determine whether holding a job competition is worth the effort. In addition, OMB must account for the costs of developing, managing and monitoring competitive sourcing, including workforce, travel and training costs.

Furthermore, agencies can’t host public/ private competitions until OMB submits reports to the House and Senate.

Agencies must then wait two months after reporting to Congress before they can hold another public/private job competition.

Denett said administration officials are embarking on an analysis of 90 programs that could save the government $3.5 billion.

“We will validate [those numbers],” he said.

The Health and Human Services Department reviewed five programs and claimed about $22 million in savings from becoming most efficient organizations under competitive- sourcing rules. After an independent source validated that figure, HHS adjusted the savings figure to $24.5 million.

“This is very encouraging,” Denett said.

Although HHS was an unusual case, “the savings are real,” he added.

Jason Miller contributed to this report. 

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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