You win, you lose

Chanting slogans and holding signs, about 35 Labor Department employees gathered Aug. 18 on the steps of the agency's Frances Perkins building in Washington, D.C., to denounce what they called government for profit.

A recent competitive sourcing study conducted by Labor officials found $2 million in savings during a five-year period, mostly by reducing the pay grade of existing employees, according to officials from the American Federation of Government Employees.

"From our point of view, it's a lose-lose situation," said Larry Drake, AFGE Local 12 president. "Even if the in-house bid wins, people are still hurt."

A spata of competitive sourcing studies this summer has pushed the issue to the forefront of those facing the federal workforce. As one of five initiatives on the President's Management Agenda, competitive sourcing encourages agencies to cut costs by forcing federal employees uninvolved in core government functions to compete a "most efficient organization" strategy against private-sector bids to do the same work. Information technology workers in particular have been closely examined as candidates for outsourcing.

More than 840 full-time equivalent IT positions were the subject of competitive sourcing studies in fiscal 2003, making computer-related jobs the second most frequently competed activity, according to Office of Management and Budget officials. Recently, Forest Service officials announced they will cut about 500 full-time equivalent IT jobs following a successful in-house bid that consolidated data center operations.

Glen Douglas is an example of someone who now must look for employment. The 22-year government veteran will lose his Internal Revenue Service position next May. Ironically, he will not lose his job because the IRS lost a competitive sourcing bid to a faster, cheaper private-sector company. Rather, the tax agency won the competition, letting 218 technology service employees go in the process.

"It's not a good feeling to think that you've put in 22 years of your time doing a good job every day...and this is how you are going to be treated. It's terrible," Douglas said.

Federal IT jobs "are easy to get rid of. They're fairly easy to compete," said Mark Gibson, an AFGE labor relations specialist.

Approximately 1,500 IT positions at the Army Corps of Engineers are slated for competition next fiscal year. They represent the corps' entire information management function in all 50 states.

The Energy Department will compete 200 IT architecture jobs. And more competitions in the IRS' Modernization and IT Services may be on the way.

"You are seeing larger competitions, just because that's one of the best practices," said a government official who spoke on condition of anonymity. "The larger the competition, the better the results."

Although the anger felt by employees involved in competitive sourcing studies is real, some question whether federal jobs are in real danger. After OMB officials prohibited agencies from outsourcing work without competing the cost-effectiveness evaluations required by the revised OMB Circular A-76, which governs competitive sourcing rules, the trend has been toward in-house bids emerging as the winners. Federal bids win 89 percent of the time, the government official said.

Unless the numbers start evening out, private-sector teams will stop entering bids, said Chris Jahn, president of the Contract Services Association of America. "Without competition, you [won't] get those savings."

Employees charge that they're suffering either way. "For any bid to win, it pretty much has to come in at least 20 to 30 percent below the current staffing levels," said Colleen Kelley, president of the National Treasury Employees Union.

"We won the contract, but we lost all the jobs," Douglas said.

Efficiencies and associated cost savings are the government's seemingly irrefutable counter arguments. Because of completed competitive sourcing studies, $1.1 billion taxpayer dollars will be conserved during the next three to five years, according to a recent OMB report. In turn, with the excess cut away, the remaining jobs will be more secure, the government official said.

A competitive study "is not the end of the world; it is not a [reduction in force] notice; it is not a disaster in the making," the official added.

Few argue that the government's workforce does not need a diet. "If the work can be done with fewer employees, I think the agencies have an obligation and are interested in doing the job as effectively as possible," Kelley said.

But union leaders often call attention to intangible variables such as employee morale when making a case against competitive sourcing. That amounts to "one of those 'everything but the kitchen sink' arguments," said the government official.

"The solution to the morale issue is to have agencies' managers better communicate with their employees," the government official said. "The solution isn't to stop competitive sourcing."

But low employee morale is a consequence of the way competitions are conducted, Kelley said. By focusing only on a targeted government function, competition officials make false savings, she said.

"Most agencies have a lot of work that needs to be done that isn't done today because there isn't enough staffing," Kelley said.

Retrain employees, she said. "In most cases, you would find that if it wasn't a cost savings to retrain employees who are already in the agencies, then it would be awfully close to it."

Some critics say that even well-written contracts never cover the full scope of what needs to be done. "After you've awarded the contract, inevitably things arise," said Jacque Simon, AFGE public policy director. New tasks, or tasks not fully documented in the study, translate into new task orders — meaning additional costs, she said.

Many officials think competitive sourcing is here to stay, government officials said. Although the recent wave of competitions will recede because of the natural ebb and flow, competitive sourcing won't go away, the government official said. "I think we're going to see more studies as a natural progression of tight budgets,...regardless of who's in the White House," the official said.


A-76 in the red

The competitive sourcing column on the Office of Management and Budget's quarterly traffic-light score card has long had a swath of red ovals, which indicate trouble. And in the "progress in implementing the President's Management Agenda" column, competitive sourcing has had the highest number of red scores since the card's inception in 2002. On the latest score card, five agencies scored red on progress:

Education Department.

Department of Veterans Affairs.

National Science Foundation.


Smithsonian Institution.

In the "current status" column on the latest score card, eight agencies scored red on competitive sourcing:

Department of Housing and Urban Development.

State Department.


U.S. Agency for International Development.

Army Corps of Engineers.



Smithsonian Institution.

Source: Office of Management and Budget

About the Author

David Perera is a special contributor to Defense Systems.


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