SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 14428 words

COMMITTEE: HOUSE ARMED SERVICES

SUBCOMMITTEE: MILITARY READINESS

HEADLINE: DEFENSE DEPARTMENT OUTSOURCING REVIEW

BILL-NO:  
H.R. 3832             Retrieve Bill Tracking Report
                      Retrieve Full Text of Bill
 
H.R. 2227             Retrieve Bill Tracking Report
                     Retrieve Full Text of Bill

TESTIMONY-BY: BOBBY L. HARNAGE, SR., NATIONAL PRESIDENT

AFFILIATION: AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

BODY:
STATEMENT OF BOBBY L. HARNAGE, SR. NATIONAL PRESIDENT AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

BEFORE THE HOUSE ARMED SERVICES COMMITTEE MILITARY READINESS SUBCOMMITTEE

JUNE 26, 2002

I. INTRODUCTION

My name is Bobby L. Harnage, Sr., and I am the National President of the American Federation of Government Employees (AFGE), AFL-CIO. On behalf of the 600,000 federal employees represented by AFGE who serve the American people across the nation and around the world, I thank you, Chairman Hefley, for the opportunity to discuss our concerns about the ongoing crisis in Department of Defense (DoD) service contracting with you, Ranking Member Ortiz, and other distinguished members of the House Armed Services Committee.

II. THE NEED FOR PROMPT PASSAGE OF THE ALLEN-ANDREWS AMENDMENT

Passage of the Allen-Andrews Amendment would ensure that more of DoD's commercial work, whether it be performed by federal employees or by contractors, is subject to full and fair public- private competition under a truly objective process that promotes the best interests of taxpayers. The crisis in DoD service contracting--words almost fail me. DoD fails to track the costs of the billions and billions of dollars it spends on service contracting. Much work is contracted out without any public-private competition. Indeed, the Office of Management and Budget (OMB), with its infamous outsourcing quotas, is encouraging DoD to fulfill arbitrary targets with direct conversions of federal employee jobs. In fact, the Pentagon intends to turn tens of thousands of jobs over to contractors with no public-private competition under a controversial process known as "divestiture." DoD officials continue to starve their workforce of possibilities for performing new work. Indeed, a senior Pentagon official insists that as federal employees retire, they will simply be replaced by contractors. And contractors, despite acquiring and retaining their work with almost no public-private competition and all too infrequent private-private competition, are almost never subject to the competitive scrutiny experienced by federal employees.

Fortunately, there is the Allen-Andrews Amendment, legislation that would require DoD to establish a reliable and comprehensive system for tracking the cost and size of its contractor workforce, guarantee public-private competition before work is given to contractors, and ensure that contractors are subject to the same public-private competition scrutiny as that experienced by federal employees. In short, the Allen-Andrews Amendment would allow DoD to reverse the calamitous consequences of years and years of thoughtless downsizing and indiscriminate contracting out that have culminated in the department's "human capital crisis." (Please find attached a document that was prepared before the House Armed Services Committee's markup that discusses DoD's objections to the Allen-Andrews Amendment as well as our responses.)

III. THE COMMERCIAL ACTIVITIES PANEL

a. Stacking the Panel

Would anyone be surprised if a bunch of contractors and their friends in the Bush Administration got together and came up with a recommendation for making the service contracting process even more biased in favor of contractors? Of course not.

And that's exactly what happened. The Commercial Activities Panel (CAP), with a solid majority of pro-contractor representatives, quite naturally served up a recommendation that would benefit contractors, switching from an objective, cost- based public-private competition process to an explicitly subjective one based on the Federal Acquisition Regulation (FAR), known as "best value." Of course, that won't stop contractor flacks from touting the pro-contractor panel's pro-contractor recommendation as one that would "offer a path to the development of sound sourcing policies for the federal government."

Well, they have their work cut out for them. After all of that time and all of that money, the panel did little more than dust off a FAR-based best value proposal that has been on contractor wish-lists for years, one which had even been categorically rejected by the Clinton Administration just four years ago when contractors strove, unsuccessfully, to attach it to the defense authorization bill. Anyone who has watched the crisis in federal service contracting grow over the last ten years knows that the Clinton Administration was aggressively pro-contractor, and that its officials were completely possessed by the spirit of "acquisition reform." However, even Clinton Administration officials, as eager as they were to cater to contractors and experiment with procurement procedures, wanted nothing, absolutely nothing, to do with FAR-based public-private competitions, and FAR-based best value public-private competitions in particular.

b. The Panel's Strange Origins

The establishment of a panel that equitably took into account the interests of warfighters, taxpayers, customers, federal employees and their unions, as well as contractors, instead of just contractors, might have been useful before the crisis in federal service contracting that resulted from the failed "acquisition reform" effort.

It was clearly not necessary, however, to establish a panel to correct the serious and longstanding problems in federal service contracting policy. The two worst problems--1) the absence of mechanisms to track the cost of service contracting and, 2) 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 failed "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 DoD Inspector General (IG) "startled," almost no public-private competition before work is given to contractors, 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 makes poverty-level wages and that less than one-third of the federal contractor workforce is covered by prevailing wage laws, etc.

Of course, one need not be jaded or cynical to understand that the motivation for the establishment of the panel was to divert attention from the growing bipartisan support for the TRAC Act.

Because the panel was packed to disproportionately represent contractor interests, I would not have even joined had Senate Armed Services Committee Chairman Carl Levin not assured me that his committee would not take up any recommendation from the panel that did not represent a consensus of views. True to his word, Chairman Levin has already declared his opposition to the panel's recommendation. (In fact, Chairman Levin has even said that he would support efforts to prevent the recommendation of the panel from being applied to non-DoD agencies.) I am confident that all fair-minded lawmakers will emulate his example. Important public policy issues should not be decided on the basis of a popularity contest, particularly when one faction is given an unfair advantage at the polling booth. Finally, it must be noted that the panel's pro-contractor majority started off with eight votes- -and finished with eight votes. They were unable to change the mind of any panelist that did not share their point of view.

c. Not Waiting for the Panel

While the panel's pro-contractor majority prepared its report, pro-contractor lawmakers used the panel's existence as a rationale for blocking much-needed and long-overdue reforms of federal service contracting. In fact, it was expected that federal employees and their unions wait patiently for the issuance of the panel's report. Did contractors and their friends in the Bush Administration wait patiently for the panel's report? No, they did not. Here are just a few examples of how they pushed ahead:

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 constitutes a unilateral expansion of the FAIR Act beyond its carefully delineated boundaries.

6. OMB sent out guidance on July 11, 2001, that instructed DoD to consider contracting out work that has historically been performed by federal 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, proposing 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. In this year's package, DoD is attempting to contract out the work performed by security guards.

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 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.

10.The Service Acquisition Reform Act (SARA) (H.R. 3832) deals explicitly with issues affecting federal service contracting-- particularly Section 301, which would allow all agencies to enter into share-in-savings (SIS) contracts. According to a GovExec.com posting, on April 5, a contractor lobbyist, "whose group helped write the (SARA) bill," insisted that support for the SIS provision will be forthcoming "once OMB realizes how share-in- savings contracts can support its competitive sourcing agenda," i.e., outsource as many as 425,000 federal employee jobs by the end of 2004, 225,000 of them in DoD alone. In an effort to move this legislation, the sponsor, who happens to be chair of the subcommittee of jurisdiction, has already held two hearings on SARA.

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 were supposed to wait for the panel's report--and wait not just for any panel's report: rather, we were told to wait for a report from a panel stacked in favor of contractor interests. While contractors and the Administration continued to attack federal employees, we were told to lay down our arms until they got some reinforcements. Even by inside-the-Beltway standards, the insistence that federal employees and their unions wait for the panel's report racked up a level of disingenuousness that takes one's breath away.

d. Picking & Choosing

With the release of the panel's report, the Bush Administration is carefully picking and choosing which parts of the pro- contractor's faction recommendation to implement.

For example, Pentagon officials have told the Congress in no uncertain terms that their objective is to "divest" all work that they classify as "non-core," involving hundreds of thousands of jobs. "Divestiture" was defined earlier this year by a DoD official to mean the "transfer (of) assets to the private sector. . .and the employees as well." Even the panel's big contractor faction stopped short of endorsing such a manifestly anti-taxpayer, anti-warfighter, anti-federal employee policy.

OMB's arbitrary outsourcing quotas are another example. Rather than repudiate them, per the report's recommendation, OMB officials are attempting to rationalize them, claiming they are "revising (their) criteria for success." Well, Mr. Chairman, there's no redeeming the irredeemable.

Another example is High Performing Organizations (HPO's): investing in workforce training and encouraging labor-management cooperation in order to improve an agency's delivery of services. Although the panelists from the Bush Administration voted in favor of the recommendation that included a call for the establishment of HPO's, don't expect to see them at an agency near you. Neither the DoD nor the Office of Personnel Management (OPM) panelists mentioned HPO's in their additional remarks. The OMB panelist did--but only to denounce them.

Quite simply, the Bush Administration is going to do what it wants to do with respect to federal service contracting policy. If part of the panel's recommendation coincides with an Administration objective--like junking OMB Circular A-76 in favor of a FAR-based best value process--then the Administration will follow the report. If part of the panel's recommendation is in conflict with an Administration objective, then the Administration will defy the report. If the Administration wishes to pursue an objective that failed to attract the support of even the panel's big contractor faction, it will not hesitate to do so.

Summary: The panel has proven to be little more than an elaborate public relations exercise, something to give the Administration's effort to gut the civil service and replace hundreds of thousands of reliable and experienced federal employees with politically well-connected contractors a patina of respectability. Packing the panel to ensure a pro-contractor recommendation was just the beginning. Now, OMB and DoD officials can decide which parts of the panel's pro-contractor recommendation to implement and which parts to ignore for being insufficiently pro-contractor. Moreover, they are also free to pursue other pro-contractor objectives, like wholesale divestiture, that were too outlandish to be recommended by the panel. To say that the deck is stacked in favor of contractors is to engage in understatement on a colossal scale.

IV. THE BIG CONTRACTOR FACTION'S CASE AGAINST OMB CIRCULAR A-76

The essence of the CAP report is the recommendation that OMB Circular A-76 be replaced by an unprecedented FAR-based best value public-private competition process. Rather than make an enthusiastic case for a FAR-based best value process, or to address the multitude of criticisms that have been leveled against the FAR-based best value process (because of how it has been used and abused in private-private competitions), the panel's big contractor faction contented itself with merely bashing A-76. This approach was obviously to their advantage. Although the essentially unchecked subjectivity that is intrinsic to the FAR-based best value process has been as documented as it has been criticized, that process has not been used for public- private competitions.

Such cannot be said of OMB Circular A-76. Of course, any public- private competition process would be a lightning rod for criticism because so much is at stake with respect to federal employee jobs and contractor profits, whether it is called A-76, Z-67, or best value.

Blaming OMB Circular A-76 for the controversy that has been created by the indiscriminate downsizing and wholesale contracting out over the last several years demonstrates profound ignorance. It also serves to conceal ulterior motives on the part of many of those critics who seek either to replace OMB Circular A-76 with a more pro-contractor process, or to eliminate public- private competition entirely. Indeed, Mr. Stan Soloway, one of the panel's contractor representatives, in his additional remarks to the report, insists that "it is difficult to envision a government agency seeking to perform any work that is not core to its mission and / or inherently governmental." (Emphasis original)

Federal employees and their unions also have concerns about OMB Circular A-76, including the absence of comprehensive and reliable systems to track the costs of contracting out, the reliance on wages and benefits in the cost comparison process, the abuse of discretion by agencies not to use the circular to allow federal employees to compete for new work and contractor work, the absence of legal standing for the in-house workforce, the loopholes in the circular which allow for much work to be directly converted without any public-private competition, the failure of agencies to develop in-house expertise with respect to conducting public-private competitions, and the heavy-handed way in which the circular has been used in DoD during the Clinton Administration and in all federal agencies during the Bush Administration because of the use of arbitrary outsourcing quotas. But the panel refused to take real action on any of these issues.

And, of course, none of those flaws is intrinsic to OMB Circular A-76. That is, the circular and the law could be changed to address the concerns listed above. At the same time, it should be noted that federal employees and their unions are not wedded to OMB Circular A-76. It would be entirely possible to devise another cost-based public-private competition process that takes into account those concerns.

Let us examine the criticisms, one by one, leveled against OMB Circular A-76 by the panel's big contractor faction.

1. "Complicated Process"

The big contractor faction insists that A-76 is an unduly complicated process. Only one "fact" is offered in support of this assertion: although the vast majority of A-76 decisions are not protested, the GAO's sustain rate for the handful of A-76 decisions that are actually contested is higher than the GAO's sustain rate for protests overall.

However, that is an apples-to-oranges comparison. Because it is an intrinsically subjective process, it is difficult to successfully challenge agencies' decisions in the context of the FAR. As noted by Mr. Marshall Doke, Jr., the distinguished conservative legal scholar,

"The discretion granted to agencies in the selection process precludes an effective policing system. The Comptroller General, for example, generally reviews agency decisions in the source selection process only to see if they have any reasonable basis and are consistent with the solicitation. This standard of review applies to determining requirements, minimum needs, evaluation of proposals, cost/technical tradeoffs, the source selection decision, and conflicts of interest. The Comptroller General's standards of review are even more difficult to overcome in decisions involving other issues. . ."

GAO has a higher sustain rate for A-76 proposal protests because it is a more objective process, and, thus more accountable to offerors--as long as you're a contractor, of course. (Contractors, and only contractors, have rights to appeal A-76 decisions; as mentioned earlier, this isn't a flaw intrinsic to A- 76.)

After offering that misleading comparison, the big contractor faction insists that the FAR would be an improvement on A-76 because the former constitutes a "common language." But then the big contractor faction acknowledges that several significant chunks of A-76 would have to be added to the FAR in order to allow this unprecedented regulatory hybrid to actually work. That must mean that the FAR is not such a "common language" after all, or that A-76 is more of a "common language" than the big contractor faction is willing to admit. Either way, the big contractor faction's argument clearly cannot withstand scrutiny.

There is, however, no question that agencies need to do a better job of conducting public-private competitions. There are two ways to make sure that happens: a) ensure that public-private competition before work is given to contractors actually occurs, instead, of leaving it as an option, so that agencies have an institutional investment in developing the capacities to conduct efficient, effective, and expeditious competitions; and b) provide agencies' acquisition workforces with sufficient staff and training to better manage their competitions.

Unfortunately, the big contractor faction refused to close loopholes allowing work to be contracted out without any public- private competition, even the notorious loophole that allows for the direct conversions of hundreds of jobs at a time without public-private competition to any firm claiming to be 51% Native American owned. Moreover, the big contractor faction stubbornly opposed efforts to strengthen the federal government's acquisition workforce. That is, when presented with opportunities to undertake measures that would actually improve sourcing practices, the big contractor faction ran in the other direction.

2. "Inconsistent Application"

This is nothing more than a shorter version of the first point. In fact, the first sentence in the first point asks whether A-76 is a "consistently applied process." Owing to the flimsiness of its arguments, perhaps the big contractor faction felt the need to pad its case by making some of its points more than once.

3. "Unequal and Unfair"

After acknowledging that differences are not necessarily inequities, the big contractor faction insists that in some A-76 competitions one set of evaluators reviews the private-sector offerors while another set of evaluators reviews the in-house proposal, and that this might result in the inequitable application of standards.

The big contractor faction offers no evidence to suggest that a protest is more likely to be sustained when two different sets of evaluators are used on an A-76 competition. Therefore, it cannot even be said that this difference is actually an inequity. Moreover, GAO has not required agencies to use the same evaluators to review both proposals and on more than one occasion specifically upheld the use of different evaluators (in the absence of a showing that any of the evaluators' conclusions were unreasonable or inconsistent with the solicitation).

Among the big contractor faction's recommendations for reforming A-76 is one that calls for ensuring that "at least one individual" review "both the MEO (Most Efficient Organization) and private-sector proposals." That is, correcting the single example identified by the panel's big contractor faction of how A- 76 is "unfair and unequal"--although in truth it can't be said that it is an inequity at all--is that simple.

4. "Inadequate Support for Employees"

In shedding crocodile tears for the plight of employees forced to fend for themselves in an acquisition process that is designed by past and future contractors for the benefit of current contractors, the big contractor faction takes disingenuousness to new and heretofore unimaginable depths. That DoD civilians feel beleaguered has nothing to do with the circular and everything to do with the Pentagon being staffed by officials who are determined to divest hundreds of thousands of their jobs, regardless of the cost and regardless of the impact on military readiness. Even worse, the big contractor faction's manufactured sympathy for federal employees is being used to justify replacing A-76 with an even more pro-contractor process. Thanks for the support--but you can keep it.

5. "Conflicts of Interest"

This point is almost as disingenuous as the previous point. Here's a news flash for our friends who make up the panel's big contractor faction: conflict of interest is a part of federal service contracting, period. To single out OMB Circular A-76 for criticism because there is a possibility for conflicts of interest is like saying that only politicians from Idaho like to hear the sound of their own voices, or that only journalists from the print media prefer colorful controversy to complicated substance.

GAO attorneys know this very well, as the Comptroller General has had to adjudicate conflict of interest cases in the FAR involving, among other issues, the composition of evaluation boards, bias, and bad faith. To his credit, even Mr. Mark Filteau, a member of the big contractor faction, acknowledged, in his additional remarks, that "Public-private competitions under a FAR-type process, that allow for negotiated best value decisions open new dangers for conflicts of interest for source selection personnel."

In contrast, the only conflict of interest scenario cited by the big contractor faction in the panel's report, where employees whose positions were under study were also participating in the evaluation process, has, according to the big contractor faction, already been corrected.

If only it were so easy to fix the conflict of interest problems that are intrinsic to the FAR. Because government agencies enjoy broad discretion in the selection of evaluation factors and in the determination of the relative weight of those evaluation factors and in the use of subjective and unnecessary evaluation factors, and because, as noted earlier, the intrinsic subjectivity of the FAR leaves agencies' broad discretion beyond judicial review, the possibility for conflicts of interest are dramatically multiplied.

I divide up the conflict of interest cases that AFGE members bring to my attention into two types: 1) actually awarding contracts for reasons other than merit and 2) establishing policies and procedures that allow for the awarding of contracts for reasons other than merit.

Perhaps the most vivid and entertaining example of the first type is the tale from three years ago of Rear Admiral John Scudi who was relieved of his command and then forced to retire at reduced rank after having been accused of steering training contracts worth more than $150,000 to his girlfriend over a four- year period.

At the time charges were brought against him, Scudi served as director of the Navy's offices of privatization and base management and was one of the Pentagon's most enthusiastic champions of outsourcing tens of thousands of federal employee jobs. Scudi had reportedly been rigging contracts for his girlfriend during previous assignments at the Pentagon and in San Diego. According to The Washington Times, the Admiral's contractor girlfriend told Navy investigators that "the scheme grew grander when he moved to Washington, made admiral and became director of outsourcing and privatization on the staff of the chief of the naval operations...The ultimate plan called for Admiral Scudi to retire and become a partner in the business to which he had funneled contracts, she said."

So how did this story finally become public? Was it because the Pentagon's surveillance of its contract administration system is so thorough and comprehensive that no official--no matter how shrewd, crafty, or diabolical--could long escape detection? No, it's because the Admiral's private-sector sweetheart turned him in after finding out that the married contracting out kingpin actually had a second girlfriend.

Although less colorful, the second problem is even more insidious: contractors being appointed to senior acquisition positions and using their offices to establish policies and procedures to benefit contractors. Nowhere is this more of a problem than at the Pentagon. The "human capital crisis" in DoD didn't just happen. Senior DoD officials made the decision to stop hiring federal employees and to impose rigid personnel ceilings, contrary to the law, and then contract out the work that could no longer be performed by a drastically downsized civilian workforce. 10 U.S.C. 129a, which requires DoD to shift work back and forth between the contractor, military, and civilian workforces for reasons of cost, has not been ignored by accident. The reason why DoD doesn't know how much is even being spent on its service contracts is not a mystery. These and other derelictions are part of a larger effort to systematically replace--divest, if you will--the civilian workforce with contractors, irrespective of the impact on costs or readiness. And it couldn't have happened without deliberately blurring--and in the case of some appointees, who came directly from contractor associations and subsequently returned directly to contractor associations, destroying--the boundaries between public office and private interest, by making conflicts of interest almost breathtakingly routine.

Those are the conflict of interest problems that should have commanded the panel's attention. However, our efforts to raise these problems fell on deaf ears. Instead, the panel falsely singled out OMB Circular A-76 for conflict of interest problems, even though the only problem identified by the big contractor faction had, by its own admission, already been corrected.

6. Cost / Technical Tradeoffs

The big contractor faction insists, repeatedly and stridently, that agencies cannot make qualitative improvements in services without resorting to a FAR-based best value process. Interestingly, in the report itself and in the additional remarks of all eight members of the big contractor faction, no instances were cited where an agency was deprived of the opportunity to make the qualitative improvements it sought--as opposed to those being touted by contractors' salespersons--because of OMB Circular A-76.

Even in the shameful absence of a reliable and comprehensive system to track the cost and quality of individual contracting efforts, we all know of service contracts that have gone horribly wrong, through poor performance or increased costs. The absence of even a single A-76 quality "horror story," despite the combined propaganda resources of OMB, DoD, and the contractors leaves the objective reader to draw just one conclusion: the shift to a FAR-based best value process is based on the big contractor faction's determination to impose a more pro- contractor process, rather than an effort to improve the quality of government services.

OMB Circular A-76 has its own best value process, of course, one which was fiercely defended, even by the pro-contractor Clinton Administration. This process allows agencies to secure the highest quality services at the lowest possible prices, i.e., the best of both worlds for taxpayers and agencies. In the typical A- 76 best value situation, the in-house workforce provides the agency with a lower cost and more responsive offer. The contractor's proposal costs more but offers additional services. The agency must determine whether these additional services are necessary and desirable. If so, the solicitation is, in effect, changed to include those additional services, and the in-house workforce is required to revise its original response. If the in- house workforce can accommodate its response to the changed solicitation, then the competition continues on the basis of costs. That is, the agency gets what it wants in terms of quality, but at the lowest possible costs. Contractors gripe, unpersuasively, that this gives the in-house workforce two bites of the same apple. Clearly, continuing with the contractors' fruity metaphor, in the A-76 best value scenario, there are two different apples because the original solicitation was changed.

The only documented objection to the A-76 best value process included in the report by the big contractor faction was that "GAO has sustained protests where it was alleged that an agency failed to implement it fairly (or at all)." (Indeed, in Appendix D, a review of recent A-76 litigation, a handful of cases were identified in which GAO sustained a protest against the use of the A-76 best value process. In other words, the errors were rectified in the few instances when the A-76 best value process was used incorrectly.) This is a particularly weak and unenlightening criticism. Unlike in the first point, the big contractor faction is not contending that the sustain rate for A- 76 best value proposal protests is higher than the GAO's sustain rate for proposal protests overall. For all we know, the use of A- 76 best value may better withstand appellate scrutiny than the FAR, which would be quite an accomplishment considering that the subjectivity in the FAR leaves most agency decision-making beyond judicial review.

I would like to single this point out as a particularly unfortunate example of the "Alice in Wonderland" reasoning employed so often in the report by the big contractor faction. As I mentioned, the A-76 best value process is portrayed as vaguely suspect because the GAO has sustained protests related to its use. In the paragraph that precedes, the big contractor faction blithely asserts that protests related to the use of the FAR which had been sustained are testimony to the strength of the FAR. In other words, when the FAR is found by GAO to have been used in error it is good; but when the A-76 best value process is found by GAO to have been used in error it is bad. Curiouser and curiouser, indeed.

The big contractor faction writes that "Tradeoffs are widely credited with getting the federal government past the 'low proposal' mentality of the past, and with increasing consideration of factors such as quality and past performance."

I cannot let this canard pass without comment, especially given the inability of the big contractor faction to provide a single example of an agency being denied an opportunity to improve the quality of its service through an OMB Circular A-76 best value competition. Under any well-managed cost-based process, any agency can conduct a competition that leads to qualitative improvements while still being decided on the basis of costs-- without opening up the process to the corrupting subjectivity of FAR-based best value. An agency can simply identify the standards it needs by including them in the solicitation. If the offerors can realistically perform the work, then they are allowed to compete on the basis of costs. This is an objective process that is driven by agencies' actual needs, not whatever gold-plated bells and whistles are being touted that day by contractors' sales staff.

Mr. Doke puts it far more pithily and pungently:

"It is a popular misconception that a low price means low quality. If you are buying or selling gold and specify 98 percent purity, the price is irrelevant to quality if you specify the purity required, inspect to assure the product conforms, and reject any nonconforming products." (Emphasis original)

And what Mr. Dokes says about products is equally true of services.

7. "Protest Rights"

This is yet another disingenuous gripe about the circular, particularly so in that it uses the obvious inequity of federal employees and their unions being denied the same legal standing enjoyed by contractors as an excuse to recommend replacing A-76 with a more pro-contractor public-private competition process. There is nothing in OMB Circular A-76 that would prevent the Congress from taking action that would give federal employees and their unions legal standing. That federal employees and their unions don't have such standing is attributable not to the circular itself but rather to the nefarious process by which past and future contractors have historically used their public offices to write the rules and the laws of procurement to benefit contractors.

As every member of the panel's big contractor faction knows, out of deference to contractors, the Congress has not passed legislation to provide federal employees with standing to take their protests to the GAO and the Court of Federal Claims. In fact, a very modest standing bill (H.R. 2227) is pending before the House Armed Services Committee. The only thing more objectionable than launching an arbitrary tidal wave of A-76 reviews at federal employees knowing that they, unlike their contractor counterparts, have no legal standing is knowing that this indefensible act is being perpetrated and doing nothing, absolutely nothing.

8. "Time and Money"

The panel's big contractor faction criticizes the circular because the competitions conducted under its rules take too long. Only after a protracted behind-the-scenes struggle did the big contractor faction relent and reluctantly, very reluctantly, agree to include this admission in its report: "Whether and to what extent FAR-based public-private competitions would be faster than A-76 cost comparisons is unknown." (Historically, FAR-based best value competitions take longer, sometimes significantly so, than FAR cost-based competitions.)

In other words, after all of this effort, the big contractor faction has served up a recommendation that is not an improvement- -indeed, it may well be a step backwards--on the one widely- acknowledged flaw in OMB Circular A-76. Even at its debut when its advocates are in full flack mode and it is unsullied by experience, the big contractor faction cannot deny that the FAR- based best value competition process may take longer and thus cost more than competitions currently conducted under the circular.

As discussed earlier, the key to conducting more expeditious public-private competitions, regardless of what process is used, is by making competition prior to conversion to contractor performance a sure thing instead of an option, as it is today, and by strengthening the acquisition workforce through increased staffing and the provision of training.

The big contractor faction makes two sub-points here that deserve responses.

Concern is expressed over the money required to complete an A-76 competition. What the big contractor faction does not address here or elsewhere in the report is that contracts entered into under a FAR-based best value competition process historically cost more for the taxpayers than if the contracts had been undertaken as part of a FAR-based cost competition process. I know I wasn't asked, but I have, all modesty aside, crafted the perfect advertising slogan for the introduction of a FAR-based best value process:

FAR-BASED BEST VALUE-- COSTS MORE / TAKES LONGER.

No wonder the big contractor faction didn't want to see their controversial recommendation tested before it was implemented!

The big contractor faction also expressed concern about the impact of A-76 on small businesses. What the big contractor faction does not address here or elsewhere in the report is that small businesses have historically had very strong objections to the use of the FAR. As Mr. Doke writes,

"One of the most serious erosions of competition (and perhaps the most subtle) has been the adverse impact of current procurement practices on small business concerns and minority enterprises. . .It is relatively easy to eliminate small business concerns from competition merely by including responsibility-type evaluation factors in the solicitation and then comparing the small business concern's capabilities with much larger, more experienced companies (even if the greater capabilities or resources of the large businesses exceed the Government's actual needs). . .The effective elimination of small business concerns from competition excludes numerous qualified competitors and creates a subtle restriction on competition to larger, over qualified competitors without justifying that such a restriction is necessary to meet the Government's actual needs. . ."

That is, the big contractor faction's recommendation would disadvantage both federal employees and small contractors in order to advance the already considerable interests of the big contractors.

"Other Concerns"

It is difficult to know what to make of this section, an unfocused, stream-of-consciousness-style discussion by the big contractor faction of issues and concerns that are actually unrelated to OMB Circular A-76.

I would heartily agree that agencies should strive every day to hit their MEO's--without having to wait for an A-76 competition. That some don't because they lack enlightened management or sufficient resources cannot be blamed on the circular.

The big contractor faction asserts that the federal government should employ human capital strategies necessary to recruit and retain a "high-performing workforce." Of course, the imposition of a subjective FAR-based public-private competition process that makes it easier to contract out work for reasons other than merit will only make it harder for the government to recruit and retain a qualified workforce.

The only work done by the big contractor faction in relation to "human capital" is the HPO concept, which was reportedly important to the panel's chairman. Of course, the HPO part of the recommendation had to be scaled back significantly in the face of strong opposition from the contractor and the OMB panelists. And, as mentioned earlier, the Bush Administration has expressed no interest in following up on the part of the big contractor faction's recommendation to establish HPO's, even on the very "limited" basis called for in the report. Therefore, it can be said that the CAP report does next to nothing to improve the government's ability to recruit and retain a capable workforce; and in exacerbating the crisis in federal contracting by recommending the imposition of a more pro-contractor public- private competition process, the panel will only worsen the related "human capital crisis."

The section ends with a wordy tribute to the "innovative (human capital) initiatives that are common today in the commercial sector." Unfortunately, the very last time sustained attention was paid to the status of the contractor workforce in a particular industry the Congress and the President found the situation so abhorrent and contrary to the public interest that they effectively nationalized the industry. I am referring, of course, to the federalization of airport screening. 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, benefits, protections, and advancement opportunities constituted an intolerable contractor "human capital crisis." It is highly unlikely that the "human capital crisis" in the contractor workforce is limited to airport screening. Unfortunately, the extent of the "human capital crisis" in the contractor workforce is 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. It should be noted that the big contractor faction opposed any effort to document the "human capital crisis" in the contractor workforce and take remedial measures to correct this crisis.

Summary: As the foregoing made clear, the big contractor faction was unable to make a case for junking OMB Circular A-76, let alone for replacing it with a controversial, unproven, and subjective FAR-based best value public-private competition process.

1. "Complicated Process": This argument is flawed in that it relies on a misleading apples-to-oranges comparison.

2. "Inconsistent Application": This redundant argument is merely a restatement of the flawed first argument.

3. "Unequal and Unfair": The big contractor faction identified only one concern, although no documentation was provided to show that it actually is a problem. To the extent it is a problem, the big contractor faction acknowledged elsewhere in the report that it could easily be corrected.

4. "Inadequate Support for Employees": This is indeed a problem, but it has everything to do with the service contracting process being stacked against federal employees, rather than a flaw intrinsic to A-76.

5. "Conflicts of Interest": This is a problem for the entire federal service contracting process. Singling A-76 out for criticism on this score is manifestly mindless. Indeed, the big contractor faction acknowledged that the one identified conflict of interest problem related to A-76 has already been corrected.

6. "Cost / Technical Tradeoffs": The big contractor faction never bothered to demonstrate how the A-76 best value process had denied agencies opportunities to improve the quality of their services. The big contractor faction could identify only one concern with the A-76 best value process: that the GAO had sustained protests against its use. However, the big contractor faction could not say that the sustain rate for A-76 best value protests is higher than the sustain rate for protests generally, i.e., that it actually is a problem. Moreover, the big contractor faction used highly disingenuous reasoning in insisting that sustained protests against the FAR were a sign of strength whereas sustained protests against A-76's best value process were a sign of weakness.

7. "Protest Rights": There is nothing in OMB Circular A-76 that would prevent the Congress from providing federal employees with the same legal standing that is possessed by contractors. The problem is that the Congress has not passed the necessary legislation.

8. "Time and Money": The big contractor faction acknowledged that its recommended alternative may be slower and thus cost more than A-76.

It must also be noted that in most cases the imposition of a FAR- based public-private competition process would exacerbate most of the concerns identified by the big contractor faction, particularly with respect to conflicts of interest. Moreover, with respect to efforts to address concerns identified by the big contractor faction that were actually common to federal service contracting generally, instead of A-76 specifically, the big contractor faction ignored efforts by the pro-taxpayer faction to recommend genuinely remedial measures, even including such seemingly non-controversial recommendations as improving the acquisition workforce, strengthening conflict of interest rules, and ensuring that public-private competitions are always conducted before work is given to contractors.

V. THE SOURCING PRINCIPLES: SO MUCH LESS THAN MEETS THE EYE

Much is made by the panel's big contractor faction of the fact that one part of the CAP report--indeed, the only part of the CAP report--received unanimous support from the panel: the so-called sourcing principles. Unfortunately, there is much less to this unanimity than meets the eye. In some instances, the principles are so bland and soporific as to be almost meaningless. In other instances, the principles were not incorporated into the recommendations. That is, the big contractor faction played a classic game of bait-and-switch, asking the pro-taxpayer faction to support certain principles in order to provide the panel with a respectable air of unanimity while crafting a narrow and parochial recommendation that failed to pay even lip service to the principles. In still other instances, the big contractor faction's recommendation flatly contradicts the principles. And in several cases, the Bush Administration has already indicated that it will defy the principles that its representatives on the panel supposedly supported.

1. "Support agency missions, goals, and objectives."

This is almost too bland to bother discussing. How a narrowly- focused recommendation to replace OMB Circular A-76 with a subjective FAR-based best value process can be even remotely construed to "support agency missions, goals, and objectives" is unclear.

For example, does a recommendation that would greatly increase contracting out of services without in any way increasing agencies' abilities to track the cost and quality of the services performed by the federal government's ever-increasing contractor workforce "support agency missions, goals, and objectives?" Does a recommendation that does nothing to keep agencies from managing their in-house workforces by arbitrary personnel ceilings "support agency missions, goals, and objectives?" Does a recommendation that does nothing to ensure that federal employees will actually be allowed to compete for new work or contractor work "support agency missions, goals, and objectives?" Of course not. And those are just three examples.

In contrast, the Allen-Andrews Amendment would "support agency missions, goals, and objectives" by ensuring that DoD establishes reliable and comprehensive systems to track the cost and size of its contractor workforce, abolishing the use of arbitrary personnel ceilings, and providing federal employees with long overdue opportunities to compete against contractors for new and currently outsourced work under an objective cost comparison process that is designed to promote, first and foremost, the interest of taxpayers.

2. "Be consistent with human capital practices designed to attract, motivate, retain a high-performing federal workforce."

A small part of this principle was actually incorporated into the report's recommendation, specifically the call for agencies to provide federal employees with assistance from and access to management during the competition process. Of course, 10 U.S.C. 2467 already deals with such matters in large part, and, unlike the panel's approach, explicitly allows for the involvement of the employees' union representatives.

For the most part, however, this principle was not incorporated by the big contractor faction into the report's recommendation. The commentary to this principle insists that agencies should consider the impact of outsourcing on recruitment and retention and that the workforce should be treated as "valuable assets." In light of the Pentagon's adoption of a policy of divestiture of non-core work, i.e., giving it to contractors without any consideration of the impact on cost or readiness, can it be said that DoD civilian employees are viewed as "valuable assets?" Clearly, the Pentagon's acquisition executives, the vast majority of whom come from the contractor community, view the department's civilian employees as thoroughly dispensable and couldn't care less about the impact of wholesale privatization on the department's ability to recruit and retain employees. In fact, the department has no interest in recruiting and retaining civilian employees, period. Mr. Ray Dubois, the Deputy Defense Undersecretary, in an article in the March 4 edition of Federal Times, said that "'When public employees retire, they're (going to be) replaced with private sector employees. . ."' DoD has no intention of even replacing the part of the workforce that leaves through normal attrition, let alone recruiting new employees.

While the policies of divestiture and no additional in-house hiring are too outrageous to even be endorsed in the CAP report, the panel's big contractor faction knows that DoD is pursuing these policies--and refused any effort to use the report to address them, let alone call unambiguously for their reversal. In fact, the big contractor faction refused to include in the panel's recommendation any reference to ending the use of the arbitrary personnel ceilings that were so instrumental in bringing on the "human capital crisis" although a foundation for such easy and obvious language was provided by Principle #6.

It is surely self-evident that enlightened human capital practices are fundamentally in conflict with the widespread practice of privatizing work performed by federal employees in order to lower workers' wages and reduce their benefits.

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. 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. . ."

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."

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 big contractor faction refused to address this issue in any meaningful way, whether conducting a study to determine the extent to which contractors provided their workers with inferior compensation or removing wages and benefits from the competition process so that the federal and private sectors could compete on the basis of staffing levels and service delivery techniques, instead of how fast the contractors could transform the working and middle class Americans in the federal workforce into a poorly- paid contingent workforce with few if any benefits or protections. The big contractor faction never challenged the reliability of the EPI report. However, the only concession the big contractor faction would make is to call on agencies, in Principle #10, to make sure that the Service Contract Act is enforced. Of course, as the EPI report made clear, that law is irrelevant to the vast majority of contract workers.

In contrast, the Allen-Andrews Amendment would ensure that agencies treat their employees as valuable assets. Divesting work to pay off old cronies or campaign contributors in the contractor community would be forbidden. Instead, federal employees would be assured of the opportunity to compete in defense of their own jobs under an objective cost comparison process that puts the interests of the taxpayers first. Moreover, those federal employees who are effective, efficient, and reliable would receive opportunities to compete for new work and contractor work.

3. "Recognize that inherently governmental and certain other functions should be performed by federal workers." So what? It is commonly acknowledged by even senior Bush Administration officials that inherently governmental work has been privatized. In a December 26, 2001, memo to OMB asking for relief from the onerous outsourcing quotas, Undersecretary for Acquisition, Technology and Logistics Pete Aldridge, also a CAP member, wrote that "a reassessment may very well show we have already contracted out capabilities to the private sector, that are essential to our mission. . ." It was reported in a November 5, 2001, posting on GovExec.com that "Certain agencies have outsourced too many jobs and should consider bringing work currently done by contractors back in- house, the Bush administration's top procurement official said last week. Angela Styles, administrator of the Office of Federal Procurement Policy in the Office of Management and Budget, (also a CAP member,) said that some agencies have sent so much work to the private sector that they are unable to provide effective oversight of the contracted work." Of course, federal agencies don't know how much they spend on service contracting, how many service contractor employees are indirectly on their payrolls, or even what work these contractors are actually performing. What we do know is that agencies have contracted out inherently governmental work. The absence of a reliable and comprehensive tracking process prevents us from knowing which inherently governmental work has been contracted out. Moreover, as times change, so do perspectives. Just as work that had once been considered inherently governmental can become commercial, work that had once been considered commercial can become inherently governmental. Indeed, airport screening is an excellent example of work that had once been considered commercial but has since become inherently governmental. Again, however, there is no comprehensive and reliable process--indeed, there is no process at all, let alone one that is comprehensive and reliable--to track work performed by contractors to determine whether changing times demand that it be redesignated as inherently governmental so that it can be performed by reliable and experienced federal employees. In the panel's commentary for this principle, it is said that "(c)ertain other capabilities. . .or other competencies such as those directly linked to national security, also must be retained in-house to help ensure effective mission execution." Although far too narrowly stated, this is an excellent point. That is, commercial functions can be contracted out to such an excessive extent that it undermines the government's ability to perform its work. However, if agencies aren't tracking contractors' work, how do they know when too much commercial work has been contracted out? Therefore, it is meaningless to say that federal employees ought to be performing inherently governmental work and certain other work if there is no mechanism for determining whether inherently governmental work is being performed by contractors or whether commercial functions have been given to contractors to an excessive extent. AFGE and other members of the pro-taxpayer faction repeatedly recommended borrowing the methodology perfected by the Army to track the cost and size of its workforce, both specifically and globally. As the panel noted, "the FAIR Act has helped to identify commercial work being performed by the government." Surely, any panelist who was motivated by a determination to actually fulfill the promise of this principle would have supported our efforts to provide for a comparable inventory of work performed by contractors. In fact, the only actual contractor in the panel's big contractor faction, in an article posted on the GovExec.com website, on April 5, said that the Army inventory was both manageable and valuable. According to "Mark Filteau, president of Johnson Controls, a Florida-based contractor, the changes should make it fairly easy for contractors to comply with the study. 'So long as the Army doesn't invent new categories or require cross-correlation from old contract categories to some new set of definitions, then there won't be a significant cost impact on new bids or current contracts,' he said. While noting that contractors already report on a variety of topics to the government, Filteau praised the concept behind the study. 'Frankly, the Army ought to know what it is paying for contract labor,' he said. 'As a citizen, a taxpayer and an all-around fan of good management practice, I support what the Army is trying to do here."' However, the big contractor faction not only rejected any attempt to track the cost and size of the federal government's massive contractor workforce, it also refused to address the important principle of what's inherently governmental, period. But aren't inherently governmental issues the sort that a panel chaired by the Comptroller General should be considering? You'd think so, especially given the comments he made to GovExec.com before the panel began its work. According to a June 8, 2001, posting: "A high-level panel reviewing federal outsourcing policy is working to better define when and why federal jobs can be considered inherently governmental, Comptroller General David Walker said this week. "Walker is chair of the Commercial Activities Panel, a 12- member working group that is reviewing federal outsourcing issues. In an interview with GovExec.com, he addressed one of the most difficult aspects of outsourcing decisions: how to determine what functions must remain in-house to provide effective government. . .'One question that has to be on the table is what is a reasonable way to go about defining inherently governmental,' he said. 'It's not well-defined today, and arguably not being consistently applied [by agencies] today."' On May 1, less than a year later, the GovExec.com reporter followed up on this issue, and the Chairman told a different tale: "Some observers were disappointed that the panel did not spend more time studying broader contracting issues, such as the rules that govern what federal jobs are eligible for outsourcing. 'The hope is that with this process issue now out of the way we can get to the big picture,' said Dan Guttman, a fellow with the National Academy of Public Administration. 'The [panel report] looks more like an interest group battle than a discussion of issues of great public consequence.' "But most panel members weren't interested in studying the definition of 'inherently governmental' work, which by law is off-limits to outsourcing, according to Walker. 'That was not something that people felt we needed to spend a lot of time on,' he said." Wrong, Chairman Walker. That is an issue I and other members of the pro-taxpayer faction repeatedly pressed the panel to consider, but without success. Of course, it would be foolish to expect otherwise. After packing the panel with representatives that are either part of or who are beholden to a special interest group that is dedicated to substituting its own interest for the public interest, why would there be any interest in dealing with important questions, such as what work is inherently governmental and should always be performed by reliable and experienced federal employees? In contrast to the CAP report, the Allen-Andrews Amendment would help DoD to ensure that inherently governmental work as well as commercial functions critical to its mission are performed by reliable and experienced federal employees, through the use of the proven Army methodology. 4. "Create incentives to foster high-performing, efficient and effective organizations throughout the federal government." As discussed earlier, Chairman Walker attempted to incorporate this principle into the recommendation with his HPO proposal. However, due to strong opposition from other members of the big contractor faction, this proposal was significantly watered down. Moreover, the Bush Administration has no interest in HPO's. Neither the DoD nor the OPM panelists mentioned HPO's in their additional remarks. The OMB panelist did--but only to denounce them. Consequently, it can be written that although this principle was incorporated into the recommendation to a very limited extent, that part of the recommendation is already being ignored by the Bush Administration. That's being polite, however. Actually, the big contractor faction refused efforts that would have created real "incentives for its employees, its managers, and its contractors to seek constantly to improve the economy, efficiency, and effectiveness of the delivery of government services through a variety of means. . ." The only way to ensure that agencies actually have such incentives is by eliminating the easy out of privatization. Rather than take the time and expend the effort to reform and streamline operations internally, it's all too easy for agencies to contract out that work (along with the inefficiencies) without public-private competition, which ill serves taxpayer interests in the short-term as well as the long-term. The panel refused to eliminate the easy out of noncompetitive outsourcing, even to the point, as discussed earlier, of staunchly defending the ridiculous yet notorious direct onversion loophole for large contractors who claim to be 51% Native American-owned. Unlike the CAP report's recommendation, the Allen-Andrews Amendment actually gives agencies the necessary incentives to use the many appropriate alternatives to contracting out by ensuring that work cannot be privatized without public-private competition. Since agencies won't be allowed to quickly divest most of their workforces without public-private competition, managers will have incentives to use mechanisms like labor-management cooperation to improve the delivery of services. 5. "Be based on a clear, transparent, and consistently applied process." As we discussed earlier, the big contractor faction, in its lengthy attack on OMB Circular A-76, was unable to land even a single punch. The big contractor faction claimed that it was too complicated. However, as proof, it could only point to a higher sustain rate for A-76 proposal protest decisions than for proposal protests generally. Unfortunately, that conveniently ignores the fact that the circular, as an objective process, is eminently easier to litigate against than the FAR because the latter process' subjectivity places most agencies' decision-making beyond judicial review. Then the big contractor faction said that A-76 was unequal and unfair. Again, however, it could only point to one example of the circular being inequitable and then admitted that the problem could be easily corrected, and, indeed, included that fix in its recommendation. Finally, the big contractor faction turned its attention to A- 76's best value process. Unable to produce even a single example of how the circular's best value process had kept an agency from improving the quality of its services, the big contractor faction nonetheless insisted that the process was an utter abomination because it had been litigated--even though the replacement process it was recommending had also been litigated. However, the big contractor faction could not say if the number of sustained A-76 best value process protests was proportionately greater than the number of protests sustained generally or under a FAR-based best value process. So, after giving the big contractor faction its best shot and making the one minor change included in the report, A-76 easily qualifies as a "clear, transparent, and consistently applied process." Is that true of a FAR-based best value process? As discussed earlier, agencies have extensive discretion over that process, from beginning to end, and the standards of review established by the Comptroller General are difficult to overcome. The subjective scoring that is intrinsic to FAR-based best value, as Mr. Doke notes, "permits the judges to postpone deciding what they want until after the competitors have completed their participation." For example, a solicitation might indicate that the award was going to be based on technical and cost factors, and that technical factors would be more important than cost factors. However, judges are permitted to wait until until after the proposals are submitted to decide how much more important technical factors will be. That is, they decide after submission of proposals to assign the specific relative weights of the technical / cost split, be they 55 / 45, 70 / 30 or some other subjectively determined ratio. That's hardly a "clear, transparent, and consistently applied process." As Mr. Doke reports, the use of subjective or even unnecessary factors in the FAR-based best value process has been extensively litigated. Eyebrow-arching examples include: "creative or innovative thoughts", "visionary" approaches, the importance of the contract to the offeror, and the deeply strange "availability of pop-up dispensers for paper towels." Moreover, the FAR includes no rules, standards, or guidelines for the use of subjective standards. Consequently, how can the big contractor faction contend that its FAR-based best value recommendation would ensure that agencies use a "clear, transparent, and consistently applied process?" Similarly, small businesses have pointed out repeatedly that competition under a FAR-based best value process is, reports Mr. Doke, "prejudiced because there is no statutory or regulatory guidance to limit the evaluation of responsibility factors (e.g., corporate experience, risk) to the level that is adequate for the performance of the contract." (Emphasis original) Is that what we should expect of a "clear, transparent, and consistently applied process?" Under a FAR-based best value process, agencies never actually decide what they want until after the proposals have been submitted. In fact, agencies actually award points to offerors who exceed the requirements set forth in the solicitation. This is why a FAR-based best value process has historically been a burden on taxpayers. Instead of agencies telling contractors what they want, a FAR-based best value process has contractors telling agencies what they need. With the tail wagging the dog, is it any wonder contract administration is such a mess? Mr. Chairman, if you're at all like me, I doubt you've ever walked into an automobile dealer's showroom, walked up to the salesperson with the predatory smile, and blurted out: "Tell me everything you think I need--and I mean everything! And don't scrimp on those expensive optional extras!" Should acquisition personnel follow developments in the private sector so they can take advantage of those elusive opportunities to improve the quality of their services? Of course. That's why AFGE and other members of the pro-taxpayer faction strongly urged the panel to recommend bolstering the acquisition workforce with additional staff and training, so that agencies can decide what they need, based on what's best for the taxpayers, as opposed to what's best for the commissions of contractors' sales staff. However, even with sufficient staff and training, there will, of course, be times when an offeror will include in its proposal additional services or features that, although not required in the solicitation, are desirable to the agency. Under the A-76 best value process, the agency allows the other offeror an opportunity to match the competitor's proposal, ensuring that the agency secures all of the quality it needs at the lowest possible prices. Under the FAR-based best value process, however, taxpayers are out of luck- -as is that other offeror, even if it had submitted the lower-cost, more responsive proposal. As Mr. Doke writes, "Competitive evaluations that award points for exceeding the Government's requirements raise real questions as to whether there is genuine competition at all. It is difficult to compete to meet the requirements, but with undisclosed evaluation plans, undisclosed and subjective evaluation factors, etc., how can there be any meaningful competition to exceed the requirements? How much more than the requirements is desired (and will be awarded points)? In what areas are additional performance or capabilities desired? What will you be competing against? Finally, how can the Government justify paying a higher price for something that exceeds its actual needs as reflected by the specification requirements?" (Emphasis original) Moreover, agencies need not identify the "price premiums" that are paid for contracts awarded to other than the low offeror and the specific factors for which those premiums are paid. Although the agency's negotiating memorandum normally will discuss the relative position of the proposals with respect to various factors, there is no requirement specifically to identify the reasons the evaluators considered that the higher priced proposal should be accepted. Frequently, the documentation merely reflects that the higher priced offer was rated more highly. How much of a price premium (as a percentage over the low offer) should be permitted? Similarly, there is no government reporting requirement to disclose such information under any of the many contract reports required by law and regulation. Therefore, there is no way that anyone knows how much money the agency is spending under FAR-based best value procurements for contracts awarded to offerors that do not have the lowest price proposal. Clearly, the FAR-based best value process is not more "clear, transparent, and consistently applied process" than A-76. In contrast, the Allen-Andrews Amendment would establish an objective, cost-based public-private competition process that would exclude the subjectivity and bias that runs rampant throughout the FAR-based best value process in favor of putting the taxpayers' interests first. 6. "Avoid arbitrary full-time equivalent (FTE) or other arbitrary numerical goals." This principle was never incorporated by the big contractor faction into the report's recommendation. For example, the recommendation includes no provision to abolish the infamous OMB outsourcing quotas. In fact, there is not even a reference in the recommendation to elimination of the pernicious practice of managing the in-house workforce by personnel ceilings. Although illegal in DoD, the practice persists, both in DoD and in most other agencies. In fact, as discussed earlier, senior DoD officials are openly acknowledging their intention to let attrition take its inexorable toll by refusing to hire any additional staff. In other words, the backwards personnel policy of arbitrary personnel ceilings that did so much to bring about the "human capital crisis" will now be pursued with an unchecked vengeance. As mentioned earlier, the panel's big contractor faction knows of DoD's policy, but refused to use the report to draw attention to this outrage or call for its repudiation. Moreover, OMB did not even wait until the ink was dry before defying this principle. Although the OMB panelist said in her additional remarks that the agency was "revising (its) criteria for success," agencies are still being directed to convert and compete the jobs of at least 425,000 federal employees by the end of 2004. Moreover, she reaffirms that agencies are encouraged by OMB to continue to use direct conversions, i.e., giving work to contractors without public-private competition, to fulfill these quotas. Finally, she insists that the agencies will be encouraged to consider opportunities to allow federal employees to compete for new work and contractor work. The Administration's competitive (sic) sourcing initiative is well over a year old. Agencies are frantically competing and converting federal employee jobs, but only now has OMB gotten around to "considering" subjecting contractors to the same competitive scrutiny experienced by federal employees. Forgive me if I seem underwhelmed. 7. "Establish a process that, for activities that may be performed by either the public or the private sector, would permit public and private sources to participate in competitions for work currently performed in-house, work currently contracted to the private sector, and new work, consistent with these guiding principles." This is another principle that the big contractor faction didn't incorporate into the report's recommendation. For example, that DoD civilian employees should be allowed to compete for new work and contractor work is not an option; it's the law. 10 U.S.C. 129a requires DoD to shift work between its civilian, military, and contractor workforces, depending on what's best for the taxpayers. Nevertheless, DoD almost never reviews work performed by contractors to see if it public sector performance is appropriate and continues to systematically starve the civilian workforce of opportunities to take on new work. This anti-taxpayer, anti-federal employee history is not exactly shrouded in mystery. The verdict of history is clear. Absent competition requirements, taxpayers will never benefit from the savings that would be generated by allowing reliable and experienced federal employees to compete for new work and contractor work. While the principle talks of the benefits of public- private competition, the panel's big contractor faction ensured that only work performed by federal employees would actually be subject to public-private competition. And as has been conclusively established, contractors not only acquire their work without competing against federal employees, they also infrequently compete against one another. According to a 2000 report of the DoD Inspector General, "(I)nadequate competition occurred for 63 of the 105 contract actions" surveyed. Later that year, the General Accounting Office reported that most information technology orders were sole-sourced. In fact, "only one proposal was received in 16 of the 22 cases" (or about $444 million of the total $553 million). The Associated Press recently reported that the federal government "bought more than half its products and services last year without bidding or through practices that auditors say do not fully take advantage of the marketplace. . .Concerns about the government's new (i.e., post-acquisition reform) style of shopping are simply put: Buying without competition often means the public treasury gets overcharged." It was said at a March 6 hearing of the Senate Governmental Affairs Committee by a contractor representative that "Contractors, for instance, are subject to a range of checks and balances, including continual competitive pressures. In fact, some 75 percent of all services contracting actions, and more than 90 percent of all information technology services contracting actions, are competitively awarded. . ." This is a very misleading use of statistics from the Federal Procurement Data System. Although the contract vehicle (a.k.a., "hunting license") in a multiple award scenario may be considered to be competitively awarded, funding is provided through task orders. Such task orders through September 30, 2001, were automatically classified as competitively awarded, regardless of the circumstances. Although it is not possible to recreate the records to determine whether task orders to multiple award service contracts were competitively awarded, a DoD IG review indicated that an astounding 72% of 423 multiple-award task orders awarded in fiscal years 2000 and 2001 were awarded on a sole-source or directed-source basis. Finally, this principle is also an example of the big contractor faction's bait-and-switch tactics. In the commentary for Principle #7, it was written that "Criteria would need to be developed, consistent with these principles, to determine when sources in either sector will participate in competitions." (Emphasis added) However, the only reference in the recommendation to the development of participation "criteria" related to instances in which federal employees would be competing for work. Why should such criteria only apply "where there is no in-house workforce currently performing the work"? (Emphasis added) It is well-known that contractors, usually the smaller ones but often the larger ones as well, regularly bid on work for which they have no "excess capacity." Why shouldn't agencies be allowed to undertake the same "make- or-buy" decisions that are made every day by firms, including contractors, in the private sector, without having to jump through arbitrary hoops established by the panel's big contractor faction? Sometimes the agency will have excess capacity, sometimes the agency will be performing similar work, sometimes the agency will be able to make arrangements for performance by employees in another agency, and sometimes the agency will start from scratch as the Transportation Security Agency is doing right now with airport security screening. Agencies should vigorously consider all such options because that's what would best serve taxpayers and the people who depend on agencies for important services. However, while the big contractor faction talks the talk of competition, it could never walk the walk, and the report's recommendation preserves new work and contractor work as no competition zones. In contrast, the Allen-Andrews Amendment would ensure vigorous public-private competition under a cost-based process for all three categories of work. 8. "Ensure that, when competitions are held, they are conducted as fairly, effectively, and efficiently as possible." This principle raises essentially the same issues as Principle #6; and my concerns over the failure of the big contractor faction to actually incorporate this principle in the recommendation are essentially the same. I would like to address one point. The commentary for this point insists that "Fairness requires that competing parties, both public and private, or their representatives, receive comparable treatment throughout the competition regarding, for example, access to relevant information and legal standing to challenge the way a competition has been conducted at all appropriate forums, including the General Accounting Office and the United States Court of Federal Claims." (Emphasis added) Because of the nature of discussions surrounding what should have been an open-and-shut issue, we had asked that the word "union" be inserted before the word "representative." Even this ambiguous language was not incorporated into the big contractor faction's recommendation, which gave standing only to offerors. 9. "Ensure that competitions involve a process that considers both quality and cost factors." That's obvious. And, of course, the federal government already has such a process that considers both quality and cost factors. It is called OMB Circular A-76. There are essentially three different types of A-76 competitions: 1) sealed bids, 2) negotiated, and 3) best value. The first method has become, over the last three years, the least used. As its name implies, there are no discussions with competitors after the bids are submitted. In this case, qualitative issues are dealt with under the terms of the performance work statement. The use of the second method allows the contracting officer to hold discussions with competitors to resolve any deficiencies in their technical and / or cost proposals. Thus, under negotiated A-76 competitions, qualitative issues can be dealt with both before and after submission of proposals. The third method is best value, which, as established earlier, allows for an explicit review of qualitative issues. Thus, A-76 allows agencies to secure the highest quality services at the lowest possible prices, i.e., the best of both worlds for taxpayers and agencies. That is, the circular or any other well-managed cost-based process allows agencies "to take into account the government's need for high-quality, reliable, and sustained performance, as well as cost efficiencies." No panelist, whether part of the big contractor faction or the pro-taxpayer faction, ever recommended that the government "buy whatever services are least expensive, regardless of quality." That is clearly not the way federal sourcing should work and it is clearly not the way federal sourcing under the circular works. However, as Mr. Doke reminds us, "It is a popular misconception that a low price means low quality." Agencies should decide what services they want with the features they want, determine that the offerors can provide the services they want with the features they want, and then decide in favor of the offeror who can do that work for the least cost to the taxpayers. And that's how it works under OMB Circular A-76 or any other well-managed cost-based competition process. Unfortunately, that common sense isn't part of the big contractor faction's recommendation. Although unwilling or unable to make the case that agencies have been deprived of opportunities to improve the quality of their services because of OMB Circular A-76, except for a tiny handful of cases that were rectified on appeal, the big contractor faction recommends that A-76 be junked in favor of an explicitly subjective process that historically has cost taxpayers more for the same services than if they had been acquired under a cost-based process. A FAR- based best value process is not needed to take into account quality, undermines the integrity of the sourcing process by introducin

LOAD-DATE: June 26, 2002