Outsourcing pact back under fire

A Republican congressman has attached an amendment to a Defense Department spending bill that could derail the Pentagon's efforts to save billions of dollars by outsourcing operations of information technology support services to commercial contractors.

Observers said the amendment, attached to the House version of the fiscal 2000 DOD authorization bill by Rep. James Talent (R-Mo.), also could have a chilling effect on outsourcing federal IT operations across government.

The amendment, introduced last week, would prevent the Army from outsourcing computer software maintenance functions at two Army Materiel Command units in St. Louis, Mo., and Chambersburg, Pa., until at least 2001. Those facilities, which together employ a total of 550 Army civilian workers, are responsible for writing and maintaining software that AMC uses to manage a $9 billion inventory of helicopters, helmets and other logistics supplies.

As part of the $1 billion Wholesale Logistics Modernization Program (WLMP), AMC would like to turn those centers over to private contractors that can provide some badly needed upgrades to the systems at those centers. Last month top Army leaders, in a first-of-its-kind move, gave AMC the green light to proceed with WLMP without having to first compete the work between contractors and the Army organizations and workers whose jobs would be displaced by the contract. Army headquarters gave AMC a waiver from Office of Management and Budget Circular A-76, which gives federal employees the chance to compete against private firms in a move to retain their jobs.

Despite Army assurances that the WLMP contract would provide any displaced Army worker with a one-year employment guarantee, Talent attached his amendment to the DOD authorization bill to ensure that the Army can retain the workers' services during a period of transition to the new contract, Talent said in a "Dear colleague" letter to other members of the House. Talent has received an endorsement from the union representing the workers and plans a run for governor in Missouri.

News of the amendment brought sharp reaction from industry associations.

Retired Lt. Gen. Thomas McInerney, head of Business Executives for National Security, which has championed WLMP as a key example of how the Pentagon can reform its business practices, said he worries about the impact on future outsourcing and privatization projects. "We're going to have to make sure we build up enough ammo to take this thing down," McInerney said.

"Watershed Event"

Bert Concklin, president of the Professional Services Council, described the amendment as "a watershed event because [WLMP] is a world-class test of whether or not the federal government can outsource high-tech functions that are clearly commercial in nature and where there will clearly be a quantum improvement."

Olga Grkavac, executive vice president of the Information Technology Association of America's Enterprise Solutions Division, said the effect of the Talent amendment would be widespread.

"If this amendment is not withdrawn, it could send a very chilling signal for future outsourcing projects.... Everyone will be watching this," Grkavac said.

Despite the Talent amendment, AMC continues to push ahead with the WLMP program. Potential bidders include a wide array of integrators such as Computer Sciences Corp., Electronic Data Systems Corp., TRW Inc. and possibly Litton/PRC Inc.

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