Fair or foul?
- By Dan Verton
- Jan 23, 2000
Federal employees declared victory in 1997 after skillful lobbying defeated
the Freedom from Government Competition Act, which many of the government's
1.8 million civilian employees feared would send the bulk of federal jobs
to the private sector.
Federal employees, however, may be finding that the victory was short-lived.
A watered-down version of the legislation, 1998's Federal Activities Inventory
Reform (FAIR) Act, is rearing its head throughout every agency and department
in the government. Agencies have listed more than 600,000 civilian federal
positions that could be contracted out.
The latest outsourcing addition — about 500 positions responsible for
maintaining the Army's legacy logistics applications at software centers
in St. Louis and Chambersburg, Pa. — has added a sense of urgency to the
debate about whether outsourcing provides any tangible benefits for government.
When the Army awarded the $681 million Wholesale Logistics Modernization
Program (WLMP) contract last month to Computer Sciences Corp., it got exactly
what it couldn't get from its existing civilian work force: a more efficient,
cutting-edge logistics system operated by individuals schooled in the latest
technologies, according to Olga Grkavac, executive vice president of the
Information Technology Association of America's Enterprise Solutions Division.
"They've studied this for years. It wasn't an issue they decided overnight,"
Grkavac said. "It was [a solution that was] not available in the Army, and
the skill sets that are needed could not be found in the current work force."
The WLMP award ended a yearlong battle waged by a local chapter of the
National Federation of Federal Employees (NFFE) to save roughly 500 jobs
at the two centers. The employees will get a chance to exercise their right
of first refusal when it comes time to fill the CSC positions under the
contract. Those closer to retirement and who can count on monthly annuities
are most likely to take jobs with CSC. Workers with less seniority but who
want to save their retirement benefits likely will seek government jobs
elsewhere. Others may choose to leave government altogether.
But industry sources contend that it is only the senior federal workers — the ones who can take advantage of a healthy pre-1984 retirement package — who are making a stink about outsourcing.
"CSC did a lot for the government employees," according to one source
familiar with the WLMP deal. "They want to keep them. But no one can match
the government's pre-1984 pensions."
Few would argue that government must find new ways to operate more efficiently
in the Information Age. Industry and government worker representatives agree
that the FAIR Act is not fair at all, but for different reasons.
The American Federation of Government Employees (AFGE) has challenged
the FAIR Act at its most basic level. The FAIR Act, which put into law much
of the guidance in the Office of Management and Budget's Circular A-76,
calls for government agencies to compete with commercial contractors to
prove that they can accomplish the agency's mission more efficiently and
less costly than a contractor. Army headquarters gave the Army Materiel
Command a waiver from A-76, enabling AMC to proceed with WLMP without having
to first compete the work between contractors and Army organizations and
workers whose jobs would be displaced.
During a congressional hearing last year, AFGE national vice president
David Schlein argued that if public/private competition is appropriate for
jobs that are to be filled by federal workers, then such competition ought
to be appropriate for federal jobs filled by commercial contractors. As
the process now stands, federal workers do not get a chance to recompete
once they've lost a competition to a contractor.
More than 90 agencies recently released inventories of jobs considered
as commercial in nature and, therefore, candidates for outsourcing. Such
jobs include automated data processing activities, data center operations,
office equipment maintenance and repair, software services and telecommunications.
But many of the civilian agencies argued that many their activities
are exempt from outsourcing because their jobs are inherently governmental
and part of their core missions. The inventories beg the question: Are the
jobs at NASA and in the departments of Agriculture, Commerce and Education
more "inherently governmental" than those in the Defense Department?
The answer appears to be yes. DOD leads all other federal agencies in
A-76 studies and competitions. According to AFGE, taxpayers have paid commercial
contractors working on Defense projects more than $60 billion annually during
the past several years. By comparison, commercial contractors receive about
$45 billion per year from civilian agencies, AFGE said. Moreover, AFGE said,
virtually no A-76 competitions have taken place outside of DOD.
"How can DOD say that 500,000 of their jobs are not government jobs
by nature? What business are we in here?" asked John Morris, president of
NFFE's Local 1763, which represents the workers affected in the WLMP deal.
Morris, along with NFFE, continues to challenge the Army's decision last
year to deny 500 federal workers the right to compete against CSC for the
Moreover, AFGE says the Clinton administration's claim that it will
save 30 percent to 40 percent by allowing contractors to perform outsourced
work is dubious. Schlein submitted a statement to a congressional subcommittee
in October concluding that privatization costs often rise when contracts
are modified and renewed by sole-source contractors.
ITAA, which represents 11,000 commercial IT developers and suppliers,
agrees with the federal workers' representatives that "very little" outsourcing
is taking place in government. There is plenty of "contracting out," Grkavac
said, but that does not involve the transfer of high-level management responsibilities
to the private sector as outsourcing does.
But ITAA also contends that the competitive process favors government
by not accounting fully for costs, such as overhead and taxes. "Government
agencies are not fully accounting for their costs," Grkavac said. "That's
why the [A-76] waiver was the right step for the Army in the [WLMP] program.
It will be a landmark contract."
NFFE's Morris and AFGE say that contractors are able to win outsourcing
deals like WLMP and others by low-balling the government with bargain-basement
bids. "It's only a firm-fixed-price contract until you have the first change,"
Morris said. AFGE has made the same argument, suggesting that the Clinton
administration require strict accounting of the actual cost of these contracts
at both the time of the bid and during all modifications and renewals.
In this argument, middle ground can't be found between federal workers
and industry. But it might be found in a recent book by Paul Light, a Brookings
Institution political scientist.
In The True Size of Government, Light estimates the size of the contractor
work force, placing it at about 4 million. But in an interview posted on
Brookings' World Wide Web site, Light doesn't denounce the outsourcing trend.
"The new public service remains just as deeply committed as the old public
service," he said. "The difference is that they can make that difference
in many different places."
But commitment from contractor personnel doesn't wash with government
employees who say the FAIR Act could be fairer. "Fair is in the eye of the
beholder," said one government contracting officer whose department is undergoing
two A-76 studies. "Whether a job should be performed by a public-sector
employee or a private-sector employee is fundamentally a political question,"
the official said.
An Army contracting official whose department recently survived a competition
with the private sector said the process simply fools the government into
believing that outsourcing continues to cost less in the long term.
"The government will not pay market rates for IT people, yet deludes
itself that it doesn't through contractors," the official said. "Contractors
will use entry-level people to cut costs and accept high turnover. That
is the reality."