STATEMENT
BY
BOBBY
L. HARNAGE, SR.
NATIONAL
PRESIDENT
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES,
AFL-CIO
BEFORE
THE
SENATE GOVERNMENTAL AFFAIRS COMMITTEE
ON
FEDERAL SERVICE CONTRACTING
MARCH 6, 2002
INTRODUCTION
Chairman
Lieberman, Ranking Member Thompson, Chairman Durbin, Ranking
Member Voinovich, and other distinguished members of the
Senate Governmental Affairs Committee, on behalf of the
600,000 federal employees across the nation and around the
world represented by the American Federation of Government
Employees, AFL-CIO, I appreciate this opportunity to discuss
the serious and longstanding problems in federal service
contracting policy. Let
me also take this opportunity to thank you, Senator Durbin,
for leading the effort to correct those problems through the
introduction of the Truthfulness, Responsibility, and
Accountability in Contracting (TRAC) Act (S. 1152).
I also want to thank the 17 Senators who have
cosponsored this important legislation, including Senators
Lieberman, Torricelli, and Dayton who sit on this committee.
We
speak and act in the long and looming shadow of the Bush
Administration’s scheme to throw up for grabs the jobs of at
least 425,000 federal employees over the next three years,
either through direct conversions to contractor performance
(i.e., giving work to contractors without public-private
competitions) privatizations (again without competition) or
public-private competitions.
Not since the “spoils system” at its very worst
have the American people seen an incoming Administration
attempt on such a massive scale to gut the civil service,
replacing the working and middle class Americans in the
federal workforce with their political supporters in the
business community.
As
AFL-CIO President John Sweeney pointed out last year to the
General Accounting Office’s (GAO) Commercial Activities
Panel:
“After abuses too infamous to
ignore, the nation as a matter of law and policy rejected a
`spoils system’ that allowed new presidents to replace their
predecessors’ workforces with cronies and political
supporters. We
adopted, instead, a civil service system to ensure that the
American people would always be served by women and men who
chose to devote their lives to public good rather than private
gain.
“Rank-and-file federal employees
provide the continuity, attention to details, and
institutional memory necessary to ensure that the American
people continue to be the best governed in the world.
Because they are not political appointees, these civil
servants can do their job of serving the public without fear
or favor. And
because civil servants are part of the enduring fabric of
government, the American people can always count upon them for
service, regardless of a President’s political affiliation
or ideological bent.
“The idea that as much as
one-fourth of the federal government’s executive branch
workforce could be outsourced over the next four years raises
grave concerns that, under the banner of `efficiency,’ the
nation could well return to a latter day `spoils system.’”
GENERAL
ACCOUNTING OFFICE’S COMMERCIAL ACTIVITIES PANEL
Over
the last several months, we have heard a lot of talk about the
GAO’s Commercial Activities Panel.
Specifically, contractors have insisted that AFGE
members stop lobbying in support of the TRAC Act until the
panel has submitted its recommendations to the Congress in
May.
AFGE
did not believe it was necessary to establish a panel to
correct the serious and longstanding problems in federal
service contracting policy.
The two worst problems—the absence of mechanisms to
track the cost of service contracting and the refusal to
permit federal employees to compete in defense of their own
jobs, for new work, and for contractor work—are obvious, and
their solutions don’t require the intervention of a panel.
Rather,
the time to establish a panel to look at outsourcing was when
the controversial “acquisition reform” effort was first
undertaken, not after the damage had been done: the creation
of the “human capital crisis,” audits of service contracts
so bad they left the Department of Defense Inspector General
“startled,” almost no public-private competition and
levels of private-private competition so low that even Bush
Administration officials are alarmed, the finding that more
than one-tenth of the federal contractor workforce made
poverty-level wages and that less than one-third of the
federal contractor workforce was covered by prevailing wage
laws, etc.
Moreover,
the panel was clearly stacked to favor contractor interests.
Seven of the twelve panelists are either contractors or
officials in the Bush Administration.
In fact, I would not have even joined the panel had
Senate Armed Services Committee Chairman Carl Levin not
assured me that his committee would not take up proposals from
the panel that did not represent a consensus of views. At the same time, I must also emphasize that I have the
utmost respect for all of my colleagues on the panel.
I can’t say that I agree with all of them as far as
federal service contracting issues are concerned.
However, I will readily agree that all panelists have
conscientiously and capably advocated for their particular
points of view.
It
is expected that federal employees and their unions wait
patiently for the panel’s report. Have contractors and their
friends in the Bush Administration waited on the panel’s
report? No,
clearly not. Here
are some examples of how the other side has failed to wait for
the panel:
1.
OMB officials have committed the Bush Administration to
privatizing, converting to contractor performance without
public-private competition or subjecting to public-private
competition at least 425,000 federal employee jobs by the end
of 2004.
2.
As part of that scheme, agencies were required to
convert or compete at least 5% of the jobs (42,500) listed on
their Federal Activities Inventory Reform (FAIR) Act
inventories during Fiscal Year 2002.
3.
During Fiscal Year 2003, the quota is at least 10% of
the jobs (85,000) on the FAIR Act inventories.
4.
In FY03, agencies will be encouraged to use
privatizations to hit their arbitrary quotas.
5.
OMB has pressured agencies to contract out jobs that
senior agency managers have always insisted be performed by
reliable and experienced federal employees by requiring that
agencies publish lists of their inherently governmental jobs.
This would, of course, constitute a unilateral
expansion of the FAIR Act beyond its carefully delineated
boundaries—and one that would clearly require the enactment
of additional legislation.
6.
OMB sent out guidance on July 11, 2001, that instructed
the Department of Defense (DoD) to consider contracting out
work that have historically been performed by reliable and
experienced civilian employees, including “Installation
Services; Other Nonmanufacturing Operations, Real Property
Management, Operations and Maintenance; Intermediate, direct
or General Repair Work; and Education and Training.”
7.
OMB has proposed a dramatic change in OMB Circular A-76
with respect to interservice support agreements (ISSAs),
contracts for services between agencies that may ultimately be
performed by civilian employees or contractors.
In a Federal Register notice, the Administration proposed that all ISSAs,
old and new, be competed, usually at least every three to five
years.
8.
In its own package of recommendations for last year’s
defense authorization bill, DoD asked for authority to
directly convert to contractor performance without
public-private competition work performed by civilian
employees, contract out depot maintenance work, and privatize
the commissaries.
9.
In last year’s defense authorization bill, the
Congress moved forward on a range of service contracting
issues, ranging from a Base Realignment and Closure process
last year that institutionalizes the controversial
privatization-in-place mechanism to a recovery audit mandate
with an inadequate public-private competition requirement to
an extension of streamlined procedures for commercial items
with values less than $5 million.
The
Administration has not waited for the panel’s report, the
Pentagon hasn’t waited for the panel’s report, the
contractors haven’t waited for the panel’s report, and the
Congress hasn’t waited for the panel’s report.
Only federal employees and their unions are supposed to
wait for the panel’s report—and wait not just for any
panel’s report: rather, we are told to wait for a report
from a panel stacked in favor of contractor interests.
While contractors and the Administration continue to
attack federal employees, we are told to lay down our arms
until they get some
reinforcements. Even
by inside-the-beltway standards, the bald assertion that
federal employees and their unions must wait for the panel’s
report racks up a level of disingenuousness that takes one’s
breath away.
AFGE
was urging the Congress to require agencies to carefully track
the costs of contractors, uphold the use of costs as the
ultimate criterion in any public-private competition process,
ensure that federal employees have opportunities to compete
for work they are doing as well as for new work, abolish the
use of arbitrary in-house personnel ceilings that prevent
federal employees from competing for work, ensure that
agencies emphasize contracting in to the same extent as
contracting out, and provide federal employees with the same
appellate rights as contractors before the GAO Panel was
established because those principles promote the interests of
taxpayers and everyone who depends on the federal government
for service. Regardless
of the recommendations offered by the panel, AFGE will still
be fighting for those principles.
THE
PROBLEMS IN FEDERAL SERVICE CONTRACTING POLICY AND THE
SOLUTION: THE TRAC ACT
Federal
service contracting policy is in desperate need of reform.
As a result of wholesale downsizing of the in-house
workforce and indiscriminate service contracting, the federal
government, DoD in particular, is experiencing an entirely
self-inflicted “human capital crisis.”
Despite the relative absence of competition between
contractors for government work, contractors still acquire and
retain almost all of their work without public-private
competition. Agencies,
even those with experience with service contracting, still
lack reliable and comprehensive systems for tracking costs.
Evidence mounts that to the extent savings are achieved
through service contracting they come at the expense of
workers. The
entire competition process remains unaccountable because only
contractors, not federal employees, have the appellate rights
necessary to contest agencies’ service contracting
decisions.
And
the situation is not getting any better.
OMB has imposed arbitrary, one-size-fits-all conversion
/ competition / privatization quotas on all agencies,
deliberately encouraging agencies to give federal employee
jobs to contractors without any public-private competition.
(OMB
insists that direct conversions that occur without a cost
comparison must be justified by the contracting officer and
must result in reasonable contract prices or a significant
quality improvement or both.
That’s a pretty loose arrangement, however. It’s one thing to allow agencies the discretion to
undertake a direct conversion involving a few employees.
It’s another thing entirely to require agencies to
hit large, arbitrary targets in very short time periods, using
at least in part direct conversions.
A federal employee would be very justified in believing
that, in such an environment, direct conversions are
vulnerable to abuse, either by contracting officers who want
to contract out because of management prejudice and their
power to do so is unchecked since there is no public-private
competition process or by contracting officers who are trying
desperately to hit their large and arbitrary targets in very
short time periods.)
Moreover,
DoD’s high-level Business Initiatives Council is reportedly
considering a wide variety of mechanisms to convert work to
contractor performance without public-private competition that
would take jobs away from tens of thousands of employees.
That’s
why today’s hearing is so important. We will have an opportunity to review those problems and
consider pending legislation—the TRAC Act—that
would go a long way towards resolving those problems.
No piece of legislation is perfect, especially one that
attempts to solve the serious and longstanding problems in
federal service contracting.
Indeed, AFGE, at a 2001 hearing of the House Government
Reform Subcommittee on Technology and Procurement Policy, has
already indicated its willingness to work with all lawmakers,
conservative and progressive, Republican and Democratic, to
further refine the TRAC Act.
And
we translated those good intentions into real action when we
worked last year with Republican and Democratic lawmakers who
care about readiness and efficiency on the House Armed
Services Committee to attach a modified, DoD-specific version
of the TRAC Act to the defense authorization bill.
Contractors were only able to remove the service
contracting reform provisions from the legislation after the
House leadership threatened to prevent the defense
authorization bill from ever going to the floor and committing
to deal with the concerns raised by the pro-taxpayer
provisions in conference.
It came as no surprise to AFGE that those commitments
were never kept.
1.
Problem:
Indiscriminate Downsizing and Service Contracting Have Created
a “Human Capital Crisis”
No
solution to the “human capital crisis”—the current and
looming shortages of federal employees in critical
occupational categories in agency after agency—is possible
without a serious reform of federal service contracting
policy. The
“human capital crisis” did not happen by accident. It is the natural result, in large part, of arbitrary
in-house personnel ceilings that force agencies to reduce
their workforces and then prevent them from growing their
workforces, irrespective of their workloads, in favor of an
excessive reliance on service contractors.
The TRAC Act would allow agencies to carefully recover
from this self-inflicted crisis by preventing work from being
contracted out without public-private competition and ending
the use of arbitrary personnel ceilings.
a.
Solution: The TRAC Act Would Ensure Public-Private
Competition In Most Cases Before Work Could Be Given
Contractors
The
TRAC Act would neither prevent agencies from downsizing,
whether the staff cuts were the result of BRAC or regular
reductions-in-force, nor prevent agencies from contracting out
work performed by federal employees.
However, the TRAC Act would prevent agencies from
replacing federal employees with contractors without first
demonstrating the value of service contracting to taxpayers.
As
I mentioned earlier, the federal workforce has not just been
cut. In order to
stay under arbitrary personnel ceilings, many agencies have
essentially stopped hiring federal employees and let attrition
take its inexorable toll.
Instead, agencies have contracted out the work,
starving the workforce of new blood, new skills, and new
ideas. The TRAC
Act would ensure that agencies consider the appropriateness
through a public-private competition process of performing
some new work in-house. In
other words, federal agencies would undertake the same
“make-or-buy” decisions that are made by private sector
firms, including contractors, on a daily basis.
The
TRAC Act would make the federal government a more attractive
employer. Although
nobody is going to get rich from a career in the civil
service, the work has traditionally been relatively immune
from politics. Such is no longer the case.
Why would a person join the civil service today when
his or her job could be contracted out tomorrow, perhaps even
without public-private competition?
As
mentioned earlier, the TRAC Act would not end service
contracting. However,
it would ensure that federal employees have opportunities to
compete in defense of their jobs before they were contracted
out. That is,
with respect to the competitive process, whether their jobs
were kept in-house would depend on an objective cost
comparison process, and not whether their work was coveted by
politically well-connected contractors.
Indeed, if their installations or offices were
productive, federal employees would be allowed, under the TRAC
Act, to compete with the private sector for additional federal
government work. This
more enlightened approach for the determination of work
assignments obviously creates many recruitment and retention
incentives for productive careers in the federal government.
The
TRAC Act also provides the framework for appropriately growing
the federal workforce. It
is commonly acknowledged that agencies will have to hire
additional staff if the federal government is to begin
recovering from the “human capital crisis.”
The TRAC Act does not require that certain amounts or
categories of work be brought back in-house.
Rather, the legislation gives agencies the discretion
to determine how many and which contractor jobs will be
reviewed to determine the appropriateness of in-house
performance through public-private competition; the measure
also ensures that agencies will review new categories of work
to determine whether it makes more sense to have the work
performed by contractors or federal employees.
The TRAC Act would allow agencies to recover from the
“human capital crisis” by carefully considering, on a
case-by-case basis, which categories of work are appropriate
for in-house performance.
The
TRAC Act would also give managers incentives to improve.
Currently, when managers run into trouble, they all too
frequently contract out the work.
They outsource their problems, instead of working to
solve them. Because it is so easy to contract out, and because they can
often count on working for the contractor, managers sometime
have little incentive to improve in-house service.
There
will be no shortage of candidates to perform additional work
in-house. Many federal employees will lose their jobs through direct
conversions, public-private competitions, privatizations,
downsizing, and BRAC over the next several years.
The cost comparison requirements for new work and
contractor work will give federal agencies an opportunity to
retain that valuable human capital.
Additional staff may well come from the private sector,
particularly with respect to work acquired from contractors.
Just as contractors sometimes “staff up” to perform
work by hiring some of the federal employees who used to do
the work, so would federal agencies “staff up” by hiring
former contractor employees.
b.
Solution: The TRAC Act Would Eliminate Arbitrary
In-House Personnel Ceilings
The
TRAC Act would eliminate the arbitrary in-house personnel
ceilings that have been instrumental in bringing about the
“human capital crisis.”
Arbitrary personnel ceilings keep agencies from hiring
new staff or force the firing of existing staff, irrespective
of budgets and workloads.
When workload exceeds the in-house workforce, agencies
simply contract out the work—often at higher costs.
The TRAC Act would ensure that agencies manage their
workforces by workloads and budgets, not by arbitrary numbers,
empowering agencies to use federal employees or contractors,
depending on which workforce is more efficient.
According
to OMB, during the Clinton Administration, several
agencies—including the Departments of Agriculture, Health
& Human Services, Housing & Urban Development, State,
Education, and Treasury, as well as the Environmental
Protection Agency—said that they each could have saved
millions of dollars by performing work with federal employees
instead of contractors but did not do so because they were
forced to work under arbitrary personnel ceilings.
GAO has also reported that agencies sometimes manage
their in-house workforces by personnel ceilings set by OMB
that “frequently have the effect of encouraging agencies to
contract out regardless of the results of cost, policy, or
high-risk studies.”
The
problem is particularly bad at DoD.
In 1995, the personnel directors of the four branches
of the Armed Forces told the Congress that arbitrary personnel
ceilings—not workload, cost, or readiness concerns—were
forcing them to send work to contractors that could be
performed more cheaply in-house.
GAO reported in 1997 that a “senior command official
in the Army stated that the need to reduce civilian positions
is greater than the need to save money”.
An earlier report by the DoD Inspector General noted
that the goal of downsizing the public workforce is widely
perceived as placing the DoD in a position of having to
contract for services regardless of what is more desirable or
cost-effective.
And
it’s gotten worse. The Bush Administration’s direct conversion and
privatization quotas are nothing more than arbitrary
reductions in the number of federal employees so that they can
be replaced by contractors without any public-private
competition.
The
TRAC Act would move us away from sterile debates about
downsizing and upsizing so that we can finally talk about
rightsizing. If
agencies prove they can do work more efficiently through a
public-private competition, they can hire the additional
employees necessary to perform the work, notwithstanding any
arbitrary personnel ceilings. If they can’t perform the work more efficiently, then the
agency couldn’t hire any additional employees.
The legislation would ensure that agencies always use
the most efficient, most effective, and most reliable service
provider, instead of having to always choose contractors.
For
DoD, management by arbitrary personnel ceilings has been
statutorily prohibited, both in Title 10 as well as in a
perennial general provision in the defense appropriations
bill. Nevertheless,
DoD’s high-level Business Initiatives Council recently
repudiated the use of “civilian full-time equivalent
targets…in order to make the most efficient use of civilian
personnel,” implicitly acknowledging that DoD continues to
manage its workforce by personnel ceilings.
The
TRAC Act’s requirement for public-private competition would
eliminate any incentive for the Pentagon to continue to defy
the prohibitions against artificially constraining the
civilian workforce: since the work has to be competed in most
cases, there’s no reason to unfairly discriminate against
federal employees.
c.
Solution: The TRAC Act would allow lawmakers to develop
a better understanding of the human toll from service
contracting as well as the impact of inferior private sector
pay and benefits on contractor performance.
The
Office of Personnel Management and the Department of Labor
would be charged under the TRAC Act with comparing the pay and
benefits of federal employees to their contractor counterparts
and then reporting back to the Congress in order to determine
the human toll from contracting out.
It
is well-established that contracting out has been used in the
private sector and in the non-federal public sector to
shortchange workers on their pay and benefits and to avoid
unions. It is
likely that this pernicious practice exists at the federal
level as well. In
1998, at the request of AFGE, Representatives Steve Horn
(R-CA) and Dennis Kucinich (D-OH) asked the GAO to examine the
pay and benefits of the federal service contractor workforce.
Congressional auditors, however, came back
empty-handed: agencies couldn’t be helpful because they did
not keep the relevant information and contractors did not
respond to surveys. A
survey conducted by GAO in 1985 of federal employees who were
involuntarily separated after their jobs were contracted out
revealed that over half "said that they had received
lower wages, and most reported that contractor benefits were
not as good as their government benefits."
The
Economic Policy Institute (EPI), in a ground-breaking 2000
study, has determined that more than one in ten federal
contractor employees earn less than the “living wage” of
$17,000 per annum, i.e., the amount of money necessary to keep
a family of four out of poverty.
“The
federal government saves money by contracting work to
employers who pay less than a living wage ($8.20 per hour).
Even the federal government jobs at the low end of the
pay scale have historically paid better and have had more
generous benefits than comparable private sector jobs.
As a result, workers who work indirectly for the
federal government through contracts with private industry are
not likely to receive wages and benefits comparable to federal
workers…
Economic
Policy Institute; “The Forgotten Workforce: More Than One in
10 Federal Contract Workers Earn Less Than a Living Wage”;
November 27, 2000; page 2.
Contractors
ritualistically invoke the Service Contract Act whenever the
human toll from service contracting is raised.
However, EPI’s research reveals the very limited
reach of prevailing wage laws.
“In
1999, only 32% of federal contract workers were covered by
some sort of law requiring that they be paid at least a
prevailing wage…But even this minority of covered workers is
not guaranteed a living wage under current laws.
For example, the Department of Labor has set its
minimum pay rate at a level below $8.20 an hour for the
workers covered by the Service Contract Act in 201 job
classifications.”
Economic
Policy Institute; “The Forgotten Workforce: More Than One in
10 Federal Contract Workers Earn Less Than a Living Wage”;
November 27, 2000; page 2.
GAO
has been unable to determine the extent to which contracting
out undercuts workers on their wages and benefits.
And despite its pioneering work in this area, EPI
acknowledges that
“Further
research, such as a survey of contracting firms, is needed in
order to know more about these workers and their economic
circumstances.”
The
issue of contractor pay and benefits received considerable
attention during the recent debate on aviation security.
Virtually all participants in that debate, regardless
of their political affiliation or position on the ideological
spectrum, agreed that the failure of contractors to provide
workers with decent pay and benefits contributed significantly
to the crisis in aviation security that ultimately led to
broad and bipartisan support for the function’s
federalization.
While
there is much talk about the “human capital crisis” in the
federal workforce, the debate over aviation security focused
much-needed attention on the “human capital crisis” in the
contractor workforce, one that has been shrouded in secrecy
because of poor contract administration and contractors’
stubborn opposition to even the most basic efforts to
determine what work contractors are performing and how much
they cost.
(The
TRAC Act, as discussed elsewhere in this testimony, would
require agencies to track the cost and quality of all service
contracting efforts, allowing managers to finally begin to
understand the impact of inferior contractor pay and benefits
on the delivery of services.)
In
fact, the Aviation and Transportation Security Act (S. 1447)
established a valuable precedent with respect to the pay and
benefits of federal employees.
Concerned about the impact of substandard compensation
on the quality of work of airport screeners, the legislation
requires future contractor screeners to provide their
employees with no less compensation than that earned by
federal employee screeners.
This precedent should eventually pave the way for
excluding pay and benefits from consideration during the
competition process, so that awards can be based on systems
and staffing levels, rather than what’s worse for workers.
2.
Problem: Federal employees are unfairly prevented from
competing in defense of their own jobs, for new work, and for
contractor work. Taxpayers
are prevented from learning which sector is able to deliver
government services in the most cost-effective manner.
a.
Solution: The TRAC Act would ensure federal employees have
opportunities to compete for their own work as well as for
some new work.
Contrary
to the interests of taxpayers and federal employees, almost
all work is given to and retained by contractors without any
public-private competition, even though federal employees win
60% of the competitions actually conducted.
“(C)ontracts
resulting from a cost comparison performed in accordance with
OMB Circular A-76 represent an extremely small portion of the
total number of service contracts awarded by the Department
during fiscal year 1999 (less than 1 percent).
Further, these contracts represent a very small portion
of the total dollars awarded by DoD to private sector
contractors during fiscal year 1999.”
Jacques
Gansler, Under Secretary for Acquisition & Technology,
Department of Defense; Senate Report 106-53; December 26,
2000.
At
the same time that DoD’s civilian workforce has been
significantly downsized, service contracting in DoD has
increased dramatically.
“From
FY 1992 through FY 1999, DoD procurement of services increased
from $39.9 billion to $51.8 billion annually.
The largest subcategory of contracts for services was
for professional, administrative, and management support
services, valued at $10 billion.
Spending in this subcategory increased by 54 percent
between 1992 and 1999.”
Robert
J. Lieberman, Assistant Inspector General, Department of
Defense; “Federal Acquisition: Why Are Billions of Dollars
Being Wasted?” (testimony before the House Subcommittee on
Government Management, Information, and Technology); March 16,
2000.
That
is, DoD has dramatically increased service contracting and, as
discussed earlier, reduced its civilian employee
workforce—while almost never using public-private
competitions.
There
is actually even less public-private competition outside of
DoD. According to
GAO, in the handbook for the Commercial Activities Panel’s
organizing meeting, “OMB reports that one-tenth of one
percent of civilian agency commercial activities has been
competed using OMB Circular A-76.”
It is important to keep in mind that non-DoD agencies
contract out for more than $40 billion worth of services
annually.
At
the Department of Housing and Urban Development (HUD), for
example, despite hundreds of millions of dollars worth of
service contracting over the last several years involving work
that has historically been performed by federal employees, the
A-76 public-private competition process has never been
used. HUD managers systematically invoke exceptions that allow
contractors to acquire work without any public-private
competition. And
according to a Department of the Interior (DoI) internal
memorandum, “it is DoI’s policy to use exemptions to
formal A-76 cost comparisons to the maximum extent
possible.”
Moreover,
there is often little competition among contractors for work.
The DoD Inspector General reported to the House
Government Reform Subcommittee on Government Management that
in excess of three-fifths of the contracts he and his staff
surveyed suffered from “inadequate competition.”
Regardless of the level of private-private competition,
77% of the surveyed contracts had “inadequate cost
estimates” that “clearly left the government
vulnerable—and sometimes at the mercy of the contractor to
define the cost.”
The
relative absence of private-private competition holds true
even with regard to markets considered more active.
“Most
of the 22 large (information technology goods and services)
orders we reviewed were awarded without competing proposals
having been received. Agencies
made frequent use of statutory exceptions to the fair
opportunity requirement.
Further, contractors frequently did not submit
proposals when provided an opportunity to do so.
Only one proposal was received in 16 of the 22
cases—the 16 cases all involved incumbent contractors and
represented about $444 million of the total $553 million
awarded.”
General
Accounting Office, “Contract Management: Few Competing
Proposals for Large DoD Information Technology Orders”
(GAO/NSIAD-00-56), p. 4.
Bush
Administration officials have noticed with alarm the
inadequacy of competition between contractors.
“Because
we are spending the public’s money, there are some goals
that cannot be compromised in the name of efficiency.
Since the beginning of the (acquisition) reform
movement, over a decade ago, I have not seen a serious
examination of the effects of reform on competition, fairness,
integrity, or transparency.
As a result, I think we are seeing some serious
competitive problems surface with the proliferation of
government-wide contracting vehicles and service
contracting.”
Angela
Styles, then the Nominee to be Administrator of the Office of
Federal Procurement Policy, Hearing of the Senate Governmental
Affairs Committee; May 17, 2001; p. 2.
Federal
agencies need not be at the mercy of sole-source contractors,
however. If GAO
reports that savings are possible from individual A-76
competitions, and if OMB insists that savings are generated
through A-76 competitions generally, whether the work stays
in-house or is contracted out, and if federal employees win
60% of the public-private competitions actually conducted,
then federal employees should be competing for more work, both
for their own as well as for new work and currently outsourced
work.
If
agencies were being run in the interests of taxpayers and the
people who depend on the federal government for services,
managers would be actively considering in-house performance of
work. Would a
firm in the private sector—a big defense contractor, let’s
say—automatically contract out almost all new work, as DoD
does now? Of
course not.
It
is a homely metaphor, but today, in the federal services
marketplace, there are two shops, a civilian employee shop and
a contractor shop. However,
agencies never use the civilian employee shop—no matter how
much less costly, no matter how much more efficient we are,
and no matter how much more reliable we are.
The
TRAC Act would require that agencies subject work performed by
federal employees as well as new work to public-private
competition before it is given to contractors.
The public-private competition requirement was
carefully written to ensure that it would not apply to work
performed by the private sector prior to the enactment of the
legislation. The
public-private competition requirement also does not apply to
contracts with values less than $1 million for work not
performed at the time by federal employees.
The legislation also completely exempts contracts for
design, construction, and engineering, as well as specialized
scientific and technical contracts for work not performed at
the time by federal employees that are undertaken for research
and development.
The
establishment of regular public-private competitions will
reduce the time necessary to complete the competitions.
Currently, agencies have no incentive to become quicker
and more adept at performing public-private competition
because managers are accustomed to simply giving work to
contractors. The
more competitions they conduct, the more expert managers will
become. Once
agencies understand that public-private competition is not
optional, managers will have no choice but to develop the
capacity to conduct the competitions expeditiously, equitably,
and efficiently. With
respect to new work that is subject to the public-private
competition requirement, agencies can perform that work in the
interim with federal employees—either existing or
newly-hired temporary or permanent employees in that agency or
in another agency—or even temporary contractors.
b.
Solution: The TRAC Act would ensure that federal employees
have fair opportunities to compete for some work that is
currently outsourced.
Despite
acquiring their work with virtually no public-private
competition and little private-private competition,
contractors are never subjected to much-needed public-private
competition to see if their work could be performed more
efficiently by reliable and experienced federal employees.
The
prospect of contracting in would keep contractors from forcing
taxpayers to swallow costly post-award mark-ups. Usually,
there is very little competition among contractors for work,
especially when the initial contract comes up for renewal.
Columbia University Professor Elliot Sclar, who testified
before the House Government Reform Subcommittee on Government Management
in 1998 on contracting out, has described service contracting
as a
"...dynamic political process
that typically moves from a competitive market structure
towards a monopolistic one.
Even if the first round of bidding is genuinely
competitive, the very act of bestowing a contract transforms
the relative market power between the one buyer and the few
sellers into a bilateral negotiation between the government
and the winning bidder.
The simple textbook models of
competition so prized by privatization advocates provide no
guidance to what actually occurs when public services are
contracted. Over time, the winning contractor moves to secure
permanent control of the `turf’ by addressing threats of
potential returns to (contracting in) or from other outside
competitors. To
counteract the former threat, they move to neutralize
competition, most typically through mergers and market
consolidation among contractors.
This trend helps to explain why two-thirds of all
public service contracts at any time are sole-source
affairs...."
AFGE
has long believed that if savings were possible from competing
the jobs of federal employees, then they were possible from
competing the jobs of contractors as well.
As you know, OMB Circular A-76 provides for insourcing
as well as outsourcing. The
same rules and the same rationales apply.
The
Clinton Administration agreed with us—or so we believed.
A senior OMB official even committed to ensure that
agencies undertook more contracting in.
In a February 2, 1999, letter to me, Acting Deputy
Director for Management G. Edward DeSeve wrote,
“I also agree with you that we
should ask federal managers to `take pause’ and consider the
potential benefits of converting work from contract to
in-house performance. As
I indicated at our October meeting, OMB will encourage
agencies to identify opportunities for the conversion of work
from contract to in-house performance…”
No
such guidance was ever offered.
We were not deterred, however.
Working with lawmakers on the House and Senate defense
appropriations subcommittees, principally Senator Durbin, we
secured the enactment of this report requirement:
“The
Secretary of Defense shall submit a report to…identify those
instances in which work performed by a contractor has been
converted to performance by civilian or military employees of
the Department of Defense…In addition, the report shall
include recommendations for maximizing the possibility of
effective public-private competition for work that has been
contracted out.”
U.S.
Congress, FY 2000 Defense Appropriations Act, Section 8109.
The
resulting report on DoD’s contracting in activities—or,
more precisely, the lack of contracting in activities—was
hardly a surprise. DoD’s
compliance—or, more precisely, DoD’s complete failure to
comply—with the second requirement to develop a contracting
in policy did cause some surprise.
“Eight
of the 286 (OMB Circular A-76 public-private competition)
studies (completed during the previous five years) involved
work which was being performed by the private sector.”
(Note: Federal employees were victorious in five out of
the eight cases.) “In
responding to the Section 8109 requirement to present
recommendations for maximizing the possibility of effective
public-private competition for work that has been contracted
out, the Department reiterated existing policy guidance on the
subject.”
General
Accounting Office, DoD Competitive Sourcing (01-20), December
2000.
At
a time when the Pentagon is supposedly championing
public-private competition, less than 3% of all A-76 studies
performed by DoD were directed at work performed by
contractors. In
other words, public-private competition is being used to
replace federal employees with contractors, instead of to make
DoD as a whole more efficient.
Moreover, after being directed to come up with a plan
for increasing its contracting in, the Pentagon thumbed its
collective nose at the Congress.
As usual, the situation is worse in non-DoD agencies
where contractors’ work is never subjected to the scrutiny
of public-private competition.
With
respect to contracting in, it’s illustrative to look at
local government, using survey data collected by the
International City / County Management Association.
“Our data show significant
incidence of reverse privatization or contracting back in
previously privatized services…From 1992-1997, 88 percent of
governments had contracted back in at least one service and 65
percent had contracted back in more than three services.
On average across all places, 5 services were
contracted back in from 1992 to 1997.”
Mildred
Warner and Amir Hefetz, Privatization and the Market
Structuring Role of Local Government, Cornell University
Department of City and Regional Planning Working Paper #197,
December 2000.”
Why
so much contracting in? The
authors explain:
“Contracting back in reflects
problems with the contracting process itself, concerns over
limited efficiency gains and maintenance of service
quality…Analysis of cases of contracting back in shows that
it is motivated by desire to maintain service quality and
local control and to ensure cost savings in the face of
changing markets.”
What
is the explanation as to why there is so much contracting in
at the local level and so little at the federal level,
especially given the strong likelihood that there is much less
private-private competition for the federal government’s
work because of the much greater complexity of the work
required and contract administration problems are so much more
severe?
Here’s
the most likely explanation, according to the authors:
“Ideology does not dominate
local service delivery decisions; rather, pragmatic local
government demonstrate the continued importance of public
investment, innovation and direct involvement in service
delivery.”
In
other words, local officials want to do what’s right for
their communities. Can
the same good intentions be attributed to those who have run
federal service contracting in recent years?
The
TRAC Act would neither prohibit contracting out nor require
contracting in. Rather, the legislation would simply require agencies to
subject approximately the same numbers of federal employee and
contractor jobs to public-private competition.
That is, agencies would choose how many and which
contractor jobs would be subject to public-private
competition.
c.
Solution: The TRAC Act would ensure that award decisions for
public-private competitions would continue to be based on the
objective criterion of costs and thus uphold the interests of
taxpayers.
Contractors
are not happy about losing almost three-fifths of the
public-private competitions conducted under OMB Circular A-76.
Rather than cut their costs and provide taxpayers with
a better deal, contractors want to junk the circular and
replace it with a pro-contractor system that emphasizes
“best value.”
Instead
of making the best decision for taxpayers, i.e., what costs
less, acquisition officers would be encouraged to use all
manner of subjective criteria to determine the winner of a
public-private competition process, including such whimsical
notions as a contractor’s ability to respond “flexibly”
to changing circumstances or the contractor’s use of
“innovative” approaches.
“Best value” would allow a contractor to exceed the
requirements of the solicitation with the understanding that
although she may charge more, her bid is more
“responsive,” and thus more closely follows the intent of
the solicitation. In
other words, what the contractors can’t win on costs, maybe
they can win with “fudge” factors.
Contractors
try to justify the use of “best value” by falsely
asserting that A-76 doesn’t allow for consideration of
qualitative factors. Wrong.
Agencies can already use a real “best value”
system—one that is being used today to improve the quality
of service while still ensuring that the ultimate decision on
who should provide the service is based on costs—a
bottom-line criterion that, even in the morally murky world of
federal service contracting, is objective.
Even
the strongly pro-contractor Clinton Administration strongly
disagreed with contractors on “best value.”
In a July 21, 1998, letter, a senior OMB official,
wrote that “The Administration fully supports the use of
`best value’ procurement techniques and is currently using
them in private-private competitions and public-private
competition, conducted in accordance with the requirements of
OMB Circular A-76. It
must be clear, however, that the Federal Acquisition
Regulations at Part 15 were not developed with public-private
competitions in mind…We are opposed to any language that
could be interpreted to permit DoD or any other agency to rely
simply on Part 15 in a public-private competition.”
By
retaining important elements of the OMB Circular A-76
process—the formal cost comparison, the 10% minimum cost
differential, and the most efficient organization—the TRAC
Act ensures that the interests of taxpayers will be paramount.
Problem
#3: Agencies don’t track the costs, size, and quality of
their contractor workforces, allowing waste, fraud, and abuse
to run rampant through federal service contracting.
I
shall speak a lot about the Department of Defense (DoD) in my
testimony. That
is because DoD has the most experience with service
contracting, spending the majority of service contracting
dollars. It is also one of the few agencies that has over the last
several years been subjected to more than cursory
Congressional oversight of its service contracting because of
the bipartisan concern generated over how service contracting
has undermined readiness and failed to come close to achieving
the savings goals established by its proponents.
No
one knows exactly how much DoD is spending on service
contracting, let alone if those billions of taxpayer dollars
are being spent wisely. We
do know that the cost to taxpayers for service contracting has
increased dramatically. Over
the last six years, Pentagon officials have systematically
replaced federal employees with contractors, often regardless
of whether or not it makes any sense. According to the Office of Personnel Management, the DoD
civilian workforce fell from 966,000 to 640,075 in 2001. Service contracting, on the other hand, increased from $39.9
billion in 1992 to $55.9 billion in 1999, according to the
Federal Procurement Data System.
(As discussed below, GAO estimates that the annual bill
for taxpayers for DoD service contracts is almost $100
billion.)
It
is clear that the emphasis in DoD’s service contracting
crusade has been giving the jobs of federal employees to
contractors, not in making sure that work has been well done.
“…DoD
managers and contracting personnel were not putting sufficient
priority during the 1990’s on (service contracting), which
likewise was virtually ignored for the first few years of
recent acquisition reform efforts.
Consequently, we think the risk of waste in this area
is higher than commonly realized…We reviewed 105 Army, Navy,
and Air Force contracting actions, valued at $6.7 billion, for
a wide range of professional, administrative, and management
support services amounting to about 104 million labor hours,
or 50,230 staff years. We
were startled by the audit results, because we found problems
with every one of the 105 actions.
In nearly 10 years of managing the audit office of the
IG, DoD, I do not ever recall finding problems on every
item…”
Robert
J. Lieberman, Assistant Inspector General for Audits,
Department of Defense; “Federal Acquisition: Why Are
Billions of Dollars Being Wasted?” (testimony before the
House Subcommittee on Government Management, Information, and
Technology); March 16, 2000.
One
of the principal architects of DoD’s massive transfer of
work from federal employees to the private sector, Dr. Jacques
Gansler, was sheepish when asked during a Senate Readiness
Subcommittee hearing later that year about the IG’s damning
report:
“…I
agree with (the IG about) needing significant improvements in
service contracting…(T)his has become a major challenge for
us…(W)e have to really significantly improve our service
buying…(I)t’s probably going to take us a few years…to
shift towards really professional service buying.”
Jacques
Gansler, Under Secretary for Acquisition & Technology,
Department of Defense; “A Hearing on Acquisition Reform”
(testimony before the Senate Subcommittee on Readiness); April
26, 2000.
GAO
has weighed in as well, both with respect to service
contracting undertaken pursuant to OMB Circular A-76 and
service contracting generally.
“Efforts
to improve the accuracy of data on savings from A-76
(public-private competition) studies at the time the studies
are completed are warranted, as are efforts to assess savings
over time. Both
are key to establishing more reliable savings estimates and
improving the credibility of the A-76 program amidst
continuing questions in Congress and elsewhere.”
General
Accounting Office, DoD Competitive Sourcing (NSIAD 01-20),
December 2000.
In
an earlier report on A-76, GAO had noted that entries in the
Commercial Activities Management Information System (CAMIS),
the system that is supposed to be used to monitor contracts
undertaken pursuant to the circular,
“are not modified and are being
used continuously without updating the data to reflect changes
in or even termination of contracts.
DoD officials have noted that they could not determine
from the CAMIS data if savings were actually being realized
from A-76 competitions. Our
work continues to show important limitations in CAMIS
data…During our review, we found that CAMIS did not always
record completed competitions and sometimes incorrectly
indicated that competitions were completed where they had not
yet begun or were still underway.
We also identified where savings data recorded for
completed competitions were incorrect based on other data
provided by the applicable service.”
General
Accounting Office, DoD Competitive Sourcing: Results of Recent
Competitions (NSIAD-99-44), March 2000.
According
to GAO, DoD has chosen not to keep its commitment to the
Congress to improve its system for reporting the costs of
contract services.
Moreover,
the establishment of a public-private competition requirement
will give agencies real choices in the delivery of services
and ensure that careful consideration is given before the
taxpayers are billed for additional service contracting.
By ensuring that they are allowed to compete, federal
employees will be able to keep contractors honest—and
vice-versa, of course.
A
former senior OMB official once said when asked about the size
of the contractor workforce, "You
can use any number you want. . . But whatever it is...it is a
lot of people." Indeed, it is. Research
by Paul Light of the Brookings Institution who is the author
the ground-breaking book, The True Size of Government,
indicates that the service contractor workforce is
approximately 4 million employees.
In contrast, there are just over 1.8 million executive
branch federal employees.
This means the service contractor workforce may well
have grown to at least twice the size of the federal
government's in-house staff.
The
shadow workforce of contractors has been built up over many
years. As Light
observed, the shadow workforce reflects in large part
"decades of personnel
ceilings, hiring limits and unrelenting pressure to do more
with less. Under pressure to create a government that looks
smaller and delivers at least as much of everything the public
wants, federal departments and agencies did what comes
naturally. They pushed jobs outward and downward into a vast shadow that
is mostly outside the public's consciousness."
OMB
officials and contractors have long dismissed the need to
document the size of the contractor workforce, both at the
micro (i.e., number of workers employed under specific
contracts) and macro (i.e., number of contractor workers
employed agency-wide and government-wide) levels.
"Numbers are not important," they blithely
insist. "What
really matters is how well the job is done."
(Of course, because of the problems discussed above, we
can’t say how well contractors are actually performing.)
In
documents ranging from the federal budget to the Federal
Activities Inventory Reform Act, detailed information is kept
on the number of federal employees, at both the micro and
macro levels. Clearly,
Bush Administration officials, like those who came before
them, believe it is very important to maintain meticulous
records about the size of the federal government's in-house
workforce. However,
they have historically professed no interest whatsoever in
keeping the same statistics about the contractor workforce.
Light
reminds us that we cannot talk intelligently about what
government does and what it needs to do without an accurate
head count of the contractor workforce:
“It is impossible to have an honest debate about the role of
government in society if the measurements only include part of
the government. The
government also is increasingly reliant on non-federal workers
to produce goods and services that used to be delivered
in-house. Not
only does the shadow workforce create an illusion about the
true size of government, it may create an illusion of merit as
jobs inside the government are held to strict merit standards
while jobs under contract are not.
It may also create illusions of capacity and
accountability as agencies pretend they know enough to oversee
their shadow workforce when, in fact, they no longer have the
ability to distinguish good product from bad.
“Expanding
the headcount (to include, among others, contractor employees)
would force Congress and the President to confront a series of
difficult questions. Instead
of engaging in an endless effort to keep the civil service
looking small, they would have to ask just how many (employees
working directly and indirectly for the government) should be
kept in-house and at what cost.
One can easily argue that the answers would lead to a
larger, not smaller, civil service, or at least a civil
service very differently configured.”
The
Department of the Army is to be commended for its development
of a reliable, comprehensive and unobtrusive methodology for
tracking the costs and size of its contractor workforce.
It is unfortunate that some contractors and some of
their allies in the “acquisition reform” establishment
have worked so hard to kill this important initiative.
In addition to tracking costs and size, the information
collected would be used by the Army to determine the extent to
which inherently governmental work had been given to
contractors and whether readiness is undermined if commercial
activities are contracted out to an excessive extent.
It is this methodology—endorsed by organizations
ranging from the AFL-CIO to the Reserve Officers Association
to the National Association of Public Administration—which
agencies could use in fulfilling the TRAC Act’s requirement
for tracking the contractor workforce.
The
TRAC Act’s Enforcement Mechanism
The
TRAC Act includes an enforcement mechanism to ensure
agencies’ prompt compliance with the TRAC Act’s
requirements to track contractor costs, ensure public-private
competition for our work and new work before it is given to
contractors, abolish the use of arbitrary in-house personnel
ceilings that prevent federal employees from competing for
work, and emphasize contracting in to the same extent as
contracting out.
AFGE
worked seriously and constructively with the Clinton
Administration to deal with the concerns of federal employees
about the service contracting process.
Despite commitments—to develop a contractor
inventory, start contracting in work, stop managing federal
employees by arbitrary in-house personnel ceilings, and
establish a system to track contractor costs—and laws—to
end the practice of managing the DoD civilian workforce by
personnel ceilings, develop a plan for contracting in work,
regularly consider contracting in DoD work, stop replacing
downsized employees with contractors without public-private
competition—the situation has not improved.
And the Bush Administration, with its aggressively
pro-contractor agenda, is making this situation far, far
worse.
The
TRAC Act requires
agencies to have made “substantial progress” during the 180 days after
enactment towards meeting the legislation’s requirements.
OMB is responsible for certifying “substantial
progress” towards compliance on an agency-by-agency basis.
If OMB, which is commonly acknowledged to be run and
staffed by those who are predisposed towards downsizing and
service contracting, is unable to certify that a particular
agency is in compliance, that agency may not undertake any new
service contracts. That
agency, however, may ask OMB at any time—the next week, the
next day, or later that afternoon—for another chance to be
certified, presumably as a result of making “substantial
progress” towards reforming its service contracting
processes.
During
any agency’s temporary suspension of service contracting,
OMB may waive it, on an agency-by-agency basis, for service
contracts necessary for national security, patient care, and
extraordinary economic harm. There are no administrative,
legislative, or judicial reviews or appeals to the use of the
exceptions. AFGE
can’t tie up agencies in courts or Congress over the use of
those three very broadly-worded exceptions.
This
enforcement mechanism was based on a bipartisan,
non-controversial provision in the Senate FY01 defense
authorization bill that imposed a moratorium on further
downsizing of the DoD acquisition workforce unless the
Secretary could certify that certain criteria had been met.
Responding
to OMB Criticism of the TRAC Act
A
representative of the Bush Administration harshly criticized
the House TRAC Act (H.R. 721) at a June 28, 2001, hearing of
the House Government Reform Subcommittee on Technology and
Procurement Policy. While
we do not concede the accuracy of the OMB criticism, I am
sure, Senator Durbin, you are pleased to know that your
legislation satisfactorily addresses that criticism.
- "...TRAC
would freeze all currently contracted activities to see if
they could be performed more cost effectively by the
public sector..."
This
is false. Under no circumstances would any temporary
suspension in the House or Senate TRAC Acts affect
"currently contracted activities." Besides, as
discussed above, there is no immediate temporary suspension in
the Senate bill. Under
the Senate TRAC Act, agencies have 180 days to start making
progress towards complying with the requirements of the
legislation to track contractor costs, giving federal
employees opportunities to compete in defense of their jobs
and for new work, abolishing arbitrary in-house personnel
ceilings, and emphasizing contracting in to the same extent as
contracting out.
If
the Office of Management and Budget (OMB) certifies six months
after enactment that an agency is making "substantial
progress", then there are no consequences. If not, then
there would be a temporary suspension on new service
contracting-with broad exceptions for national security,
patient care, and extraordinary economic harm-until such time
as that agency was certified as being in compliance—the next
week, the next day, or later that afternoon.
- "...and
would require an entirely new set of financial and other
reporting systems that would not contribute to the
government's ability to administer contracts, improve
performance, or enhance accountability.
This
is half-right. Yes, the TRAC Act would require new contractor
tracking systems. However, these tracking systems would
actually be helpful in ensuring better contract
administration, as the witness from GAO pointed out during the
question and answer session at the June 28th hearing on the
House side and as the leader of a major contractor group (the
Contract Services Association of America) has already
admitted.
- "By
suspending all facilities and operations contracts
including, for example, all federal scientific and
criminal lab contracts, many of the primary functions of
government would be seriously affected-constituting a
serious threat to our national defense.
As
noted above, the Senate TRAC Act does not have an immediate
temporary suspension. Rather, agencies have six months to make
"substantial progress" towards implementing the
reforms required by the TRAC Act until OMB is charged with
determining whether they are in compliance. Unlike the House
bill, the Senate TRAC Act exempts from the legislation
"specialized scientific and technical contracts for work
not performed at the time by federal employees that are
undertaken for research and development..." Moreover, the
TRAC Act's enforcement mechanism poses no threat to
"national defense" because there is an exemption for
all future contracts necessary for "national
security."
- "Even
Medicare would not be able to issue payments since this is
performed by contract."
This
is really grasping at straws. If it is not already clear that
the legislation is not intended to address Medicare contracts,
an exemption can easily be written in the bill at its mark up.
- "TRAC
also would require public-private competitions for all
future contracts, including the exercise of all options,
extensions, and renewals by any contracting officer. We
estimate that TRAC would affect over 230,000 contract
actions involving contracts over $25,000 totaling $100.3
billion in 2000-an untenable outcome."
That
the TRAC Act is serious about ensuring that federal employees
have opportunities to compete is true. However, the Senate
TRAC Act does not require public-private competitions for
"all options, extensions, and renewals." Moreover,
the legislation also includes a threshold exempting contracts
for new work below $1,000,000 in value from the public-private
competition requirement.
Giving
work performed by federal employees to contractors without
public-private competition is pork-barrel politics at its
worst. AFGE’s
opposition to direct conversions, whether through
share-in-savings contracts, Native American direct
conversions, or the myriad of exceptions loopholes, and
waivers in the A-76 process is non-negotiable, whether five
jobs or five hundred jobs are at stake.
At
the same time, public-private competition must be used to make
the federal government more efficient, not as a “spoils
system” by the new Administration to replace federal
employees with the businesses of politically well-connected
contractors. Contractors
and their allies can no longer have it both ways, the federal
sector always under scrutiny, the contractor sector immune
from review; competitions and conversions mandatory for the
jobs of federal employees but strictly off-limits for
contractors; showering new work on contractors while putting
federal employees on a starvation diet.
The
establishment of a process that subjects work to
public-private competition before it is given to contractors
and holds contractors to the same scrutiny as that experienced
by federal employees, like that in the TRAC Act, will benefit
taxpayers and all Americans who depend on agencies for
important services.
First,
taxpayers will save money because contractors will finally
have real competition. Second, the quality of work will be
improved because managers will finally have real choices in
the delivery of services.
Third, a real public-private competition process will
bolster contract administration and thus reduce waste, fraud,
and abuse. Fourth,
ensuring that agencies at least consider the appropriateness
of in-house performance will help to end the “human capital
crisis.”
It’s
time for the Congress to face a fundamental and inescapable
truth: if public-private competition works, then it works for
new work and contractor work—not just federal employee work.
If public-private competition isn’t right for
contractor work or new work, then it’s not right for federal
employee work either—and the entire outsourcing process must
be shut down.
It
is time to stop blaming the hard-working men and women in
DoD’s acquisition workforce for service contracting
waste, fraud, and abuse.
AFGE has strongly opposed the ruinous cuts in
DoD’s acquisition workforce
that have been jointly imposed by the Pentagon and the
Congress over the last several years.
AFGE has warned lawmakers that DoD would lack
sufficient in-house staff to keep contractors from
perpetrating waste, fraud, and abuse.
AFGE has also insisted that the Pentagon is
replacing—at higher cost—federal employees in the
acquisition workforce with contractors.
And according to a 2000 Inspector General report,
AFGE’s suspicions were completely correct.
The
IG told the Senate Armed Services Subcommittee on
Readiness last year that DoD has
“reduced
its acquisition workforce from 460,516 people in September
1991 to 230,556 in September 1999, a reduction of 50
percent. Further
cuts are likely and, in fact, one of defense acquisition
goals (for FY01) is to achieve another 15 percent
reduction in the DoD acquisition related workforce.”
These
staffing cuts have come at the same time the acquisition
workload has increased significantly. According to the IG, from FY 1990 through FY 1999,
“the
number of procurement actions increased (emphasis
original) about 12 percent, from 13.2 million to 14.8
million. The
greatest amount of work for acquisition personnel occurs
on contracting actions over $100,000, and the annual
number of those actions increased about 28 percent from FY
1990 to FY 1999, from 97,948 to 125,692.”
Among
the adverse consequences reported by multiple acquisition
organizations:
insufficient
staff to manage requirements efficiently, reduced scrutiny
and timeliness in reviewing acquisition actions, increased
backlog in closing out completed contracts, and lost
opportunities to develop cost savings initiatives.
Ominously,
the IG warned that the appalling litany of problems caused
by the indiscriminate reductions of the acquisition
workforce
“appears
to be a conservative summary of the overall impact of the
problem and, if further downsizing occurs, these staffing
management problems and performance shortfalls can only
get worse.”
AFGE
has warned that precipitous reductions in in-house
acquisition personnel were forcing DoD to contract out
acquisition work at higher costs.
The IG reports that seven different acquisition
organizations report “increased program costs resulting
from contracting for technical support versus using
in-house technical support.”
As an example, the IG reported that the
“lack
of in-house engineering staff at an Army acquisition
organization caused an increase in customer costs of
$20,000 to $50,000 per each work year of support services
for weapons programs because of the need to hire
contractors to perform the work.”
Considering
that DoD essentially stopped hiring acquisition personnel
several years ago and that the IG reports 42 percent of
the remaining acquisition workforce being lost through
attrition by FY 2005, it is imperative that the Congress
take steps to actually increase the size of the
acquisition workforce.
As the IG sagely concluded,
“a
reasonably sized, well-trained and highly motivated
workforce is by far our best safeguard against
inefficiency, waste, and fraud.”
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