Fair or foul?

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

WLMP contract.

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."