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FDCH Political Transcripts

September 27, 2002 Friday


LENGTH: 17638 words









SEPTEMBER 27, 2002


T. DAVIS: Good afternoon and I want to welcome everyone to the subcommittee's oversight hearing on outsourcing.

Today, we're going to examine the results and recommendation of the commercial activities panel that were published in its final report "Improving the Sourcing Decisions of the Government."

We have rescheduled this hearing numerous times to accommodate the schedules of our very important members and witnesses. So I'd like to extend my thanks to all of the participants for being here today and for your patience.

For almost 50 years, the executive branch has promoted the purchase of commercially available goods and services from the private sector. This policy was formalized by the Office of Management and Budget Circular A-76, which provides agencies guidance for conducting public-private cost comparisons. In fact, in 1983, revised A-76 Handbook states that it has been, and continues to be, the general policy of the government to rely on commercial sources to supply the products and services the government needs. But in recent years, A-76 has come under fire from all sides. Federal employees are inadequately trained to write performance work statements or to perform the necessary cost comparisons. Moreover, the A-76 process is lengthy and often it is demoralizing to the employees whose jobs are being competed. In addition, contractors are concerned that the cost comparisons are unfair, since the public and private sectors' accounting systems are not comparable.

Congress recognizes that the A-76 process is flawed. Therefore, we passed the Floyd D. Spence National Defense Authorization Act for 2001, Public Law 106-398, which mandated that the General Accounting Office convene a panel of experts to study the policies and procedures governing the transfer of the federal government's commercial activities from government to contractor performance.

The legislation required that members of the panel represent the interests of the federal government, federal labor organizations and private industry. The Commercial Activities Panel that often over a 12-month period. And conducted three public field hearings. The panel unanimously adopted 10 sourcing principles intended to guide the federal government in its sourcing policy.

Additionally, the panel made three recommendations that were adopted by a super majority but two federal labor unions representatives and two representatives from the academia cast dissenting votes.

The panel's recommendation includes the implementation of an integrated competition process in which public-private competitions would be conducted under the Federal Acquisition Regulations, with some appropriate cost comparisons provided from A-76, limited changes use Circular A-76 and the creation of high performing organizations -- HPOs -- by management and employees.

The HPO would be exempt for a specified period from competition for a particular function. It would then enter into a binding performance agreement for at least five years.

I have repeatedly stated that the federal government's ultimate objective in the outsourcing arena would be to pursue the best value for taxpayers. This principle is the touchstone of the FAR-based process, therefore, I'm encouraged that the panel's recommendation include the application of a FAR-based process.

The subcommittee requested that witnesses discuss their perspectives on the 10 sourcing principles that were unanimously approved by the panel and their perspective on the panel's recommendation, including reservations they may have regarding the panel's recommendations and their views on the feasibility of implementing the recommendations.

The subcommittee will hear testimony from David M. Walker, comptroller general of the U.S. General Accounting Office, and soon to be a constituent of mine; Angela Styles, the director of the Office of Federal Procurement Policy, Office of Management and Budget; Joe Sikes, the director for competing, sourcing and privatization, Department of Defense; Stan Soloway, the president of Professional Services Council; Colleen Kelley, president, National Treasury Employees Union; and Jacqueline Simon, the director of public policy, American Federation of Government Employees.

Mark Filteau, president of Johnson Controls World Services, had family emergency and sent Mark Waggoner (ph), who will ably represent him.

I appreciate everybody being here. And let me now yield to Mr. Turner for any opening comments he may wish to make.

TURNER: Thank you, Mr. Chairman.

It is always interesting to note that we usually gather a pretty good crowd when we talk about A-76, even on a Friday afternoon.

And I welcome all of our witnesses and participants today.

As we all know, A-76 is a phrase that not many people even pay much attention to outside of Washington. I certainly would hate to poll my constituents and asked them how many have ever heard of A-76. But it is quite a hot topic for those of us who work in this particular area. And it would seem to me that we need to work very hard to try to resolve the difficulties that we have had with A-76. And I look forward today to hearing from the witnesses to talk about the report issued by the GAO, which will, I think, provided another basis for another round of discussions, which I hope will be productive in trying to deal with this very contentious area of federal procurement policy.

Thank you, Mr. Chairman.

T. DAVIS: Thank you very much.

Mr. Walker, you are our first panel. Would you -- you know the policy here.

Do you solemnly swear the testimony you are about to give will be the truth, the whole truth and nothing but the truth?

Thank you.

Thank you, sir, again, for being with us. And we appreciate your flexibility in meeting our different schedule needs.

WALKER: I'm happy to do it, Mr. Chairman -- Mr. Turner. It's a pleasure to be here.

I think this is a very important topic and I know that you have tried on -- and all of us have tried on several occasions to make this happen. And I am pleased that it is happening.

I am pleased to be here today to participate in this subcommittee's hearing on the report of the congressionally mandated Commercial Activities Panel. And, again, it is the panel's report. It is not a GAO report. And I think that is very important.

I am acting in my capacity as chairman of the Commercial Activities Panel. But, obviously, I am also the comptroller general of United States.

In just the few months since the panel issued its report in April, we have begun to the real progress in implementing the panel's recommendations, at least as it relates from an administrative standpoint. And I know that Angela Styles will then be talking about that.

As you know, the panel's work was the result of a provision contained in the fiscal year 2001 Defense Authorization Act, which call for me, in my capacity as comptroller general of United States, convene a panel experts to study and make recommendations for improving the policies and procedures governing the transfer of commercial activities for the federal government -- fund (ph) government to contractor personnel.

The impetus of the legislation was the growing controversy surrounding competitions conducted under OMB Circular A-76 to determine whether the government should obtain commercially available goods and services in the public or private sector.

Importantly here, Mr. Chairman and Mr. Turner, I used the term "sourcing," not "outsourcing" because under our principles, it could do either way. While there is likely to be more activity going outside the federal government, there are possibilities that they could come back. And, obviously, I'll be happy to answer questions on that.

Controversy surrounding the use of A-76 also occurred at the time, with increasing questions over the role of government and who is in the best position to provide the needed services.

As I have testified on a number of occasions, given recent trends in our long-range fiscal challenges, the federal government needs to engage in a fundamental review, reassessment and reprioritization of what the federal government should do, how the federal government should do business and who should do the federal government's business.

Because of the importance of the issues to be addressed, I chose to chair the panel rather than to delegate it, which I was allowed to do under the statute. My view was unless you had top-level people from the different groups involved, that the hope of being able to achieve a consensus on anything with next to zero, given the nature and the controversy and the complexity associated with this topic.

In establishing the panel, a number of steps were taken to ensure representation from all major stakeholders, as well as to ensure a fair and balanced process. To ensure a broad array of views on the panel, we used a Federal Register notice to seek suggestions on the panel composition.

Let me note, for the record, contrary to assertions by some, I received no complaints from any panel member during the process about the composition of the panel -- no complaints from any panel member about the composition the panel until after our report was issued. My view is if you can't attack the result, you attack the process. And that is what's happening. It's the oldest game in town.

Once convened, the panel, as a group, took a number of steps at the outset to guide its deliberations and ensure a full and balanced consideration of the issues. The first step was the adoption of a mission statement. The panel also agreed that all of its findings and recommendations would require agreement of at least two-thirds supermajority of the panel in order to be adopted. This meant that everything was in play and you could not end up having factions form that would automatically result in a stalemate of the process.

And the panel further decided that each member of the panel would have an option of having a brief statement included in the report explaining that member's position on the matters considered by the panel. Every member did so.

And we also had a Federal Register notice soliciting input on the issues and the panel held 11 meetings over a period of May 2001 to March 2002, including several field hearings during that period of time.

As the panel began its work, it recognized the need to set a set of principles that would provide a framework for sourcing decisions. Those principles, as they were debated and flushed out, provided an important vehicle for assessing what does or does not work under the current A-76 process and provided a framework for identifying needed changes in the process.

The principles, which are outlined on page seven of my testimony, 10 in total, were unanimously adopted by the panel and included as an integral part of the panel's recommendations. While each principle is important, no single principle stands alone and several are interrelated. Therefore, the panel adopted the principles and their accompanying narrative comments as the package and then use these principles to assess the government's existing sourcing system and to develop additional panel recommendations.

In addition to the principles, the panel adopted a package of additional recommendations that it believed would improve, significantly, the government's the policies and procedures for making sourcing decisions. As you noted, Mr. Chairman, this was adopted by a supermajority of the panel by an eight to four vote. It is important to emphasize that the panel decided to consider and adopt these latter recommendations as a package, just as we did with the principles, recognizing the diverse needs represented on the panel and the give and take required to reach agreement among a supermajority of the panelists.

As a result, the supermajority of the panel members recommended the adoption of three basic items -- conduct public-private competitions under the framework of an integrated FAR-based process; make limited changes to the existing A-76 process; and encourage the development of high performing organizations.

Many of the panel's recommendations can be accomplished administratively under current law. And OMB is taking steps to try to accomplish that.

The panel recommended that our recommendations be adopted as soon as practicable, some of which, however, may require legislation. And, obviously, that is one of the reasons why we're having this hearing.

Like the guiding principles, the other recommendations that we made were a result of much discussion and debate and, frankly, compromise. I was getting input from every panel member, including individuals who I knew would vote no, in a good-faith attempt to try to come up with a fair, balanced, reasoned and reasonable proposal, even if it wasn't going to make a difference on what the ultimate vote would be. All we had to have was one of the eight members vote no and we would not have these additional recommendations.

In conclusion, I supported the adoption of the set of principles, as well as the package of additional recommendations contained in the panel's report. Overall, I believe the findings and recommendations contained in the panel's report represent the reasoned, reasonable, fair and balanced approach to addressing the important, complex and controversial area of sourcing policy.

WALKER: I hope that the Congress and the administration will continue to consider and act on this report and its recommendations. I particularly want to encourage the Congress and the administration to consider the importance of the high performing organizations concept. Agencies should not wait until faced with the challenge of public-private competitions to seek efficiencies to retain work in- house. It is the taxpayers' interest that we try to maximize the performance that assure the accountability of all enterprises within government, whether or not they will ever be subject to sourcing.

The fact of the matter is that most government jobs will never be subject to competitions. And as a result, I believe that the panel's recommendation pertaining to high performing organizations could be an important vehicle for fostering much-needed attention to how we can enhance the economy, efficiency and effectiveness of government and improve government's accountability in ways that they complement to, not a substitute for always, competition.

Finally, and most importantly, in considering the panel's package of recommendations or any other changes that may be considered by Congress and the administration, in my view, the guiding principles which were developed and unanimously agreed to by the panel should be the foundation for any further action.

Let me also add that I appreciate the hard work of my fellow panelists and their staff, who worked in a good-faith effort over a considerable amount of time in order to deliver this report.

Mr. Chairman and Mr. Turner, that concludes my opening statement. I would be happy to answer any questions that you may have.

T. DAVIS: Thank you, Mr. Walker. I understand you are willing to sit here while others testify and we can do the questions all at once?

WALKER: I would be happy to do that, Mr. Chairman.

T. DAVIS: That would be great.

If I could have the other witnesses come up. And, before you sit down, just raise your right hand, everybody.

Ms. Kelley is not here yet. We will get her when she gets here.

You solemnly swear the testimony you are about to give will be the truth, the whole truth and nothing but the truth?

Thank you very much.

We'll start with Ms. Styles and move straight on down.

Angela, thanks for being with us.

STYLES: (OFF-MIKE) to discuss the administration's competitive sourcing initiative, the final report of the Commercial Activities Panel and the administration's pending changes to OMB Circular A-76.

In particular, Mr. Chairman, I want to thank you for your continued interest in the difficult, but very important, issues.

First, I think I have to start off by thanking General Walker and his staff at the GAO. They devoted a tremendous amount of personal time and effort to this panel and to creating a fair report.

We had a healthy and, I think, productive exchange of ideas. And I think, ultimately, through Mr. Walker's efforts, we were able to achieve consensus on the 10 principles. I think that is a truly astounding feat, given the diversity of the panel.

And while we were not able to achieve consensus on the ultimate recommendations, I think Mr. Walker went above and beyond what would normally be expected in these circumstances to ensure that the views of all panel members were represented to the maximum extent possible.

I must also commend Mr. Walker for providing an avenue for the administration to work and develop lasting relationships with key players in both industry and the Federal Employee Union. The panel gave us and the administration a firm foundation to ensure that there was an open up, full and fair dialogue and continue to have one as we move forward with addressing these many difficult issues.

The issues related to this report -- public-private competition, and to the administration competitive sourcing initiative -- are complex, challenging, intellectual and, in many respects, highly politicized. Competitive sourcing asks people to make very hard management choices -- choices that affect very real jobs held by real, dedicated and loyal career civil servants.

In many respects, it comes down, I think, to one simple reality -- very few people, whether you are working in the private sector or the public sector, like to work under the pressure of knowing that their job is on the line if they don't figure out how to do it more efficiently and more effectively.

But the fact that public-private competition and our initiative require hard choices and a lot of hard work makes it one that can effect fundamental, real and lasting changes in the way we manage the federal government. And the clincher here, from our perspective, is that it's the taxpayer. This initiative strives to focus the federal government on its mission -- delivering high-quality services to our citizens at the lowest possible cost.

We have civilian agencies, for what I submit is the first time, taking a very hard look at how they fulfill their mission. What are their employees doing that is inherently governmental? What are they doing that is commercial? Is this the right mix for mission success?

They are also asking what private contractors are doing and whether the agency is managing its private contractors well -- whether public employees could do it better and cheaper or whether a different private sector company could do it better.

These are fundamental question, but ones that must be asked if we are going to have any chance of doing a better job of managing the federal government.

Competitive sourcing is about a commitment to better management. It is a commitment to ensuring that our citizens are receiving the highest quality service from their government without regard to whether that job is being done by dedicated civil employees or the private sector. What we care about is competition and the provision of government service by those best able to do so, be that the private sector or the government, itself. We care about cost, quality and the availability of service, not who provides it.

The panel's report is a significant step forward and, in many regards an important guide as this administration moves forward with overhauling the current process for public-private competition.

I look forward to continuing to work with this committee in assessing and making changes to the process.

This concludes my prepared statement, but I look forward to answering any questions.

SIKES: Chairman Davis, Mr. Turner, I am pleased to be here today to discuss the results of the Commercial Activities Panel with this subcommittee.

I attended all of the panel meetings as the second chair to Undersecretary Pete Aldrich and also representative of the department in the field hearing in San Antonio. I found the panel discussions to be open and constructive with all sides of the difficult issues being heard.

Frankly, at the beginning of it, I was skeptical that we would reach meaningful consensus. I believe it is a testament to Comptroller General Walker that the panel reached the conclusions and recommendations that you have before you today.

The Department of Defense fully supports the objectives of the panel's recommendations, especially the set of fundamental principles that were adopted as a framework. And let me emphasize that these principles were adopted as a framework and not intended to be applied independently. I have been at a number of conferences since the panel's report was issued and find that the individual principles are often focused on to support a specific point of view. As the report clearly states, the principles are inextricably linked with one another, and no individual principle is meant to stand alone.

The current A-76 process is lengthy, complex and frustrating for everyone. That frustration is an outgrowth of attempts, over time, to address legitimate concerns of all participants while establishing a level playing field.

The panel's integrated competition process is a promising method to improve fairness and reduce the lengthy time it required and it is clearly consistent with a framework provided by the principles adopted by the panel.

The department is working closely with OMB to help develop this new process.

I think it is important to keep in mind that the new process will still be a public-private competition and many of the difficulties inherent in such a competition will remain -- correct (ph) the inaccurate work statement, costing the government proposal will still be challenging. And the department is working hard to continue to improve our ability to do these tasks.

As the panel report notes, the Department of Defense has, by far, the most federal experience in public-private competitions and, as recommended, we are working already with other federal agencies to share the methodologies that we have developed over a number of years.

As we work toward this new integrated process, we are also continuing to review our ongoing competitions and apply lessons learned from those to improve the ongoing processes. While the current A-76 competition process is far from perfect, it does provide a standardized process to determine whether commercial functions are better performed by DOD employees or by the private sector.

And as difficult as the process can be, the history of the competitive sourcing program shows that it consistently generates savings and efficiencies. That is the power competition.

My own personal hope for the new process, in addition to the improvements we expect to see, is that it will at least get us out of the negative attitude everybody has toward the old process. And that, as much as anything, should help speed up figuring out what the right way to sourcing things in the Department of Defense are.

I support and look forward to improve public-private competitive process as a result of the panel's findings. And I stand ready to answer any questions you may have.

Thank you, sir.

T. DAVIS: Thank you very much.

Mr. Soloway?

SOLOWAY: Thank you, Mr. Chairman and Mr. Turner. I appreciate the opportunity to testify today.

Let me start by joining the chorus of gratitude for the comptroller general. It is true that without his efforts, the panel would not have made as much progress as it did. And he is to be both congratulated and thanked for his work and his fair and balanced leadership.

Much has been written and said about the CAP report. And in too many cases people have drawn the conclusion that the panel was hopelessly divided in its views, but such as not the case.

As the comptroller general has correctly stated, the panel reached unanimous agreement on 10 overarching principles that are balanced and that actually addressed the major concerns of each of the stakeholder communities involved.

The logic, common sense and fundamental fairness of these principles is, I believe, clear to any objective observer. The principles recognize that competition is the principal driver of improved efficiency and performance. They recognize the critical importance of both cost and non-cost factors in a smart source selection. They recognize that all offerors must be subject to the same evaluation criteria; the same post-award performance measurement; and the same appeal and protest rights. They recognize that sourcing is a strategic process that must take into account a variety of factors, including mission requirements, human capital, budget realities and more.

The principles explicitly state that a public-private competition must not be mandated merely because both public and private sectors are able to perform the work, but rather than such decisions must be based on a broader set of criteria.

These principles also represent a stinging rebuke to the so- called TRAC Act. And taken as a whole, the message of the principles is, to paraphrase a slogan of the federal employee unions, "let them compete in a fair, transparent and strategic process."

Today the A-76 process fails to align in almost any way with these principles, but the federal acquisition regulation, which are built on the tenet of equal rights and equal responsibility, backed up quite well. Thus, the recommendation of the panel to eliminate the federally flawed A-76 and replace it with an integrated FAR-based process was a logical extension of the principles to which all panelists agreed.

Unfortunately, since the issuance of the report, too much of the discussion has been dominated by hyperbole and uninformed rhetoric. We hear repeatedly that "best value contracting," for instance, is akin to some kind of unconstrained bizarre. In truth, it is nothing of the sort, but is, rather, that a process that affords great flexibility within the construct a clearly defined and accountable boundaries. It may not be perfect, after all, nothing is. But I would suggest it is a far the sight preferable to the bad old days of low-balling and cost shoot outs. And it is a process available to virtually all federal procurements, except those conducted under A-76.

We also hear repeatedly that the FAR-based process is so new it must be rolled out at a snail's pace. But, as the report states, the FAR already is the common language of federal procurements and already is better understood and more effectively implemented than A-76. Thus, we start the implementation of the new process several steps ahead of where we are today.

We eagerly await OMB's proposed changes of the current process and hope they will align with the 10 principles agreed to buy the panel. Time and quality are of the essence and I know OMB has been working hard on those changes.

It has been five months since the panel's report was delivered. And during those months, we have seen a clear trend in which some government activity, particularly at DOD, have canceled or significantly slowed their competition activities. This is partially due to understandable antipathy toward A-76 and a concurrent hope that OMB's proposed revisions will create a far more effective means of conducting the competitions.

There are six basic questions, I think, regarding the administration's implementation that need to be considered. One, does the policy clearly define the government entity that is submitting a bid? This is a critical and often overlooked element, but it is essential since it is the bidder that must submit a proposal and, if successful, enter into a binding performance agreement or contract. It is that bidder who is responsible for performance. And it is that bidder, and only that bidder, that can be afforded appeal and protest rights.

Second, are all bidders, public and private, responding to the same solicitation and being evaluated on the same criteria?

Third, since GAO and others have made clear that the government does not know the cost of its own internal activities, what steps are being taken to ensure that the government is being held to cost realism standards equal to those required of the private sector, which today is subject to a much wider array of cost accounting principles, audits and more?

Does the policy establish clear and appropriate conflict of interest rules? The GAO has recommended in its most recent rulings on A-76 cases that the same rules that apply to general procurement be applied to public-private competitions, and we would agree.

Five, the does the policy create a construct for public entities to enter into binding performance agreements back, to the maximum extent possible, mirror our contract?

And finally, does the policy create a clear and equitable protest process? Does it define a process of checks and balances, for instance, for public entities, similar to those based by companies, so as to avoid a universe bogged down by frivolous protests on every aspect of every procurement?

Only by being able to answer in the affirmative these basic questions will any implementation achieve the outcomes envisioned by the panel's unanimously agreed to principles.

The bottom line is that the government is the stakeholder that matters the most. And we have to cut through all of the parochial rhetoric on all sides and focus only on the government's best interests. The Commercial Activities Panel and, indeed, most objective observers agree that we are at a moment in time when real change is both possible and essential. The degree to which the recommendations of the panel are implemented will have an enormous impact on the government's interests, which are best served by a competition process that is strategically sound, fair and transparent.

SOLOWAY: In so doing, the government will be taking a major step toward optimizing performance and efficiency on behalf of the American people.

The time to act is now.

Thank you, Mr. Chairman. I would be happy to answer any questions.

T. DAVIS: Thank you very much.

Ms. Kelley, thank you for being here. I'm going to need to swear you in. I have sworn everybody else in. I need you to just rise with me.

Do you solemnly swear that the testimony you are about to give will be the truth, the whole truth and nothing but the truth?

KELLEY: Yes, I do.

T. DAVIS: Thank you.

Thanks for being with us today.

KELLEY: Thank you.

T. DAVIS: You are here on time.


T. DAVIS: No problem -- just glad to have you here.

KELLEY: Chairman Davis, Ranking Member Turner, I really appreciate the opportunity to testify before you today.

Unfortunately, I'm here to urge you to reject the package of changes by the Commercial Activities Panel as they fail to improve sourcing policy for federal employees or for the taxpayers.

The panel's recommendations should not even begin to be evaluated until the administration puts the break on their quota-driven outsourcing initiative.

And on that subject, I want to thank both you, Chairman Davis, and you, Congressman Turner, for voting for the Moran-Wolf-Morella Amendment that rejected the administration's approach to contracting out.

A consistent theme echoed at the panel hearings was the need for reliable systems to track the work of government contractors. The importance of better contractor oversight was reinforced last summer when the panel learned that Mellon Bank, a contractor hired by the IRS, had lost, shredded and removed 70,000 taxpayer checks worth $1.2 billion. Unfortunately, none of the CAP recommendations would prevent a Mellon Bank-like contracting fiasco from happening again.

Despite the lack of oversight of contractors, OMB continues to force agencies to comply with their arbitrary outsourcing quotas to open up 425,000 federal jobs to contractors. OMB continues to enforce these reckless quotas, even though the panel voted unanimously that sourcing policy should, and I quote, "avoid arbitrary FTE or other arbitrary numerical goals."

To date, the administration still has not articulated is justification for either the 5 percent, the 10 percent or the 50 percent quotas that they have imposed on agencies. Where is the data shows that any quota -- that any number for contracting out federal employee jobs, with or without competition, are the right numbers and will lead to savings and to improved agency performance?

Agencies should have the discretion to determine how best to balance their workloads with their budgets.

I opposed the final CAP report because of my concerns about what was missing from the report and because of my concerns about the risks and the dangers posed by actually implementing the report's package of recommendations. For example, in addition to failing to recommend the implementation of contractor oversight systems, the report does not ensure federal employees will be given an opportunity to prove they can do their jobs more efficiently and at a lower cost than contractors. Nor does the OMB outsourcing directive.

And the report, again consistent with the OMB outsourcing quotas directive, ignores the benefits that would be gained by the taxpayers if federal employees and their union representatives had a legal standing to protest faulty contract decisions.

The recommendations to combine a modified FAR part 15 cost (ph) technical trade-off process, which sounds very complicated, up with a modified A-76 public-private competition process into a new integrated process while simultaneously forcing agencies to meet their outsourcing quotas is very, very risky. It is more complicated than A-76 and it will likely lead taxpayers picking up the tab to pay contractors for costly services that they do not need.

Any new government sourcing program or process ought to be tested on a limited basis, independently reviewed and modified, based on lessons learned. Then, if Congress sees the alternative as superior to A-76, Congress should determine whether or not it should be authorized government-wide.

The risks involved in this untested A-76 plus FAR recommendations are particularly high, in light of the administration's contracting out quotas. The quotas are driving many agencies to contract out the work to contractors without first conducting public-private competitions. And some agencies have hired outside contractors to administer the A-76 competitions since they have no experience.

The only thing OMB has made clear to agencies about competitive sourcing is that they have to get to 15 percent by the end of fiscal year '03, and ultimately get to 50 percent.

Now that OMB is moving ahead to implement one of the CAP's recommendations, agencies are even more confused on how to meet the outsourcing quotas. On the one hand, the administration has told agencies to meet their quotas either through privatization, without competition, or through A-76 competitions. On the other hand, OMB is saying that A-76 does not work. It should be put through a shredder and agencies should now use the new untested process. Which one is it?

With or without competitive sourcing, I believe that the most important action that Congress can take to put some teeth in the unanimously adopted principles of the Commercial Activities Panel would be to approve H.R. 721 -- the TRAC Act. This would give the taxpayers the accountability that they need and they expect.

And most importantly, before contracting out any more work, Congress and the administration should make the necessary investments in increased agency staffing, resources and better training. Because with supported with the tools and the resources that they need to do their jobs, there is no one -- absolutely no one -- who can do the work of the federal government better than federal employees.

Thank you.

T. DAVIS: Thank you very much.

Ms. Simon, thanks for being with us.

SIMON: Thank you.

My name is Jackie Simon.

T. DAVIS: Jackie, you push the button there.


T. DAVIS: There we go.

SIMON: My name is Jackie Simon and I am the public policy director of the American Federation of Government Employees.

On behalf of the 600,000 federal employees represented by AFGE, I thank you, Chairman Davis, for the opportunity to discuss our concerns about the serious and long-standing problems in federal service contracting.

Before I get started, I want to thank both you, and Representative Turner for supporting the Moran-Wolf-Morella Amendment that frees agencies from OMB's privatization quotas. AFGE National President Harnage asked me to thank you in particular, Chairman Davis, for your outspoken leadership in its support.

Given that our written statement provides a detailed critique of the Commercial Activities Panel's report, please allow me to briefly summarize our views.

The panel allowed contractors disproportionate representation, so naturally it served up recommendations to further contractors interests. The pro-contractor faction was unable to make a case for doing away with OMB Circular A-76. And it failed to make any case at all for replacing it with the controversial, unproven and subjective FAR-based best value public-private competition process, which even its advocates acknowledge may be slower than A-76 and which, by all estimates, will result in contracts that are more costly for taxpayers, but, of course, more profitable for contractors.

The panel's pro-contractor faction has overplayed the fact that one part of the CAP report received unanimous support from the panel -- the principles. But there is much less to this unanimity than meets the eye.

On the one hand, many of the principles are so bland that they are almost meaningless. On the other hand, the panel felt free to either ignore or contradict the principles and its recommendations.

But the panel is over and, in the real world, the facts are that the Bush Administration has already shown that it will continue to defy the principles that its representatives on the panel endorsed. For example, the Pentagon officials have told the Congress, in no uncertain terms, that their objective is to, quote, "divest," unquote, all work they classify as non-core, involving hundreds of thousands of jobs. Divestiture was defined earlier this year by a DOD official to mean the, quote, "transfer of assets to the private sector and the employees, as well."

At the readiness hearing on the CAP report, the DOD witness explicitly repudiated the unanimously agreed principle that ensures federal employees should have the opportunity to compete for new work and work that has already been contracted out.

Another example is high performing organizations -- investing in workforce training and encouraging labor management cooperation in order to improve and 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 anytime soon.

OMB's privatization quotas are another stark example. Rather than repudiate them, heard the panel's principles, OMB officials are attempting to rationalize them, claiming they are revising their criteria for success. And, of course, contractors assailed Representative Moran for leading the fight to free agencies from the OMB privatization quotas.

Whatever it might have been, whatever we might want to be, the CAP report has become irrelevant. While some clearly have stake in burnishing its legacy, it cannot be denied that the CAP report has not aged very well. OMB is doing what it wants to do, irrespective of the panel's principles and recommendations. DOD is doing what it wants to, irrespective of the panel's principles and recommendations. And contractors are doing what they want to do, irrespective of the panel's principles and recommendations.

And AFGE is going to do what we think is best -- continue to work to ensure that agencies start to track contractor costs, require public-private competition before work is contracted out and ensure that federal employees have chances to compete for new work and contracted work.

We are pleased, actually, that the focus of our grass-roots efforts on the Senate side have paid off so well. Since the release of the CAP report, we have significantly increased TRAC cosponsorships and come within one vote of adding a TRAC-like amendment to the Defense Authorization Bill.

What is relevant, of course, is the OMB rewrite of the public- private competition process. Although they disagree on those issues, President Harnage appreciates the willingness of Administrator Styles to maintain a frank and open dialogue. And we look forward to offering a detailed and well-reasoned critique whenever OMB's rewrite is made available.

What is also relevant and even more timely are the now infamous OMB privatization quotas. OMB officials sometimes insist that the quotas are merely goals, with the implication that they are not enforced, that they just reflect the administration's wishes. Recently, however, it was brought to our attention that the OMB privatization quotas are, in fact, mandatory quotas, not goals.

According to the Coast Guard memo, and I quote, "During a government-wide conference on competitive sourcing held recently in Washington D.C., OMB representatives noted that two agencies received forced reductions in FTE during the latest round of budget submissions. These reductions were directly linked to agency non- compliance with the president's competitive sourcing goals," end quote.

If the congressional effort to free agencies from privatization quotas is successful, OMB officials have threatened to retaliate by forcing agencies to review for privatization their entire fair (ph) act (ph) commercial inventories.

As President Harnage responded, quote, "Those comments are nothing more than blackmail -- a desperate attempt to stave off a bipartisan effort in Congress to abolish the quotas by threatening to privatize almost a million federal employees jobs."

I would add that the OMB threat shows exactly why the Moran Amendment and the TRAC Act need to be enacted and into law as soon as possible.

Thank you for the opportunity to represent AFGE before your subcommittee, Chairman Davis. I look forward to attempting to answer any questions you have.

T. DAVIS: Jackie, thank you very much.

Mr. Waggoner (ph), thanks for being with us.

WAGGONER (ph): Thank you, Mr. Chairman -- Mr. Turner. Mr. Filteau sends his regrets and I appreciate the opportunity to represent him.

The Commercial Activities Panel started with the premise that whatever was ultimately recommended, it must support federal agency mission objectives, while being fair to all stakeholders, including government employees, contractors and the taxpayers.

With this foundation, the panel unanimously adopted its 10 principles, which embodied the concept of fairness by calling for a clear, transparent process that is consistently applied to all parties. Fairness is crucial to public-private competitions. If the process isn't deemed fair, then the private sector will participate. Fairness is also vital when it comes to the treatment of the government workforce, no matter who wins the competition.

If my company, or any other responsible company, wins a public- private competition for base operations support contract, we want to hire as many of the existing workforce as possible. They're good workers with a lot to contribute. But if the public sector employees are dragged through a long process filled with misinformation and uncertainty, many workers will find jobs elsewhere before the competition is even decided. It is not in anyone's interest to abuse loyal government workers.

Similarly, we need a process that encourages the private sector to compete. Currently, many good government contractors do want to spend their scarce bid and proposal resources on A-76, because, as you mentioned, the process is long, unfair, uncertain and costly. At my own company, we pass up on many more A-76 opportunities than we bid. And it is unlikely that we will bid more in the future unless the process is changed.

To appreciate how unfair the current A-76 process is, imagine a non-A-76 procurement in which one special bidder, the incumbent, get as many chances as it needs to submit a technically acceptable proposal. Next, that special bidder always gets to compete against the best proposal chosen from among the other bidders. And if the performance level of the special bidder doesn't match that of the best chosen, then he gets that proposal changed to be brought up to the hire performance level before any costs are even considered.

Finally, during the cost comparison, the special bidder gets a 10 percent price advantage.

WAGGONER (ph): While this may sound unreasonable, these are the advantages provided to the in-house team the under A-76. It is no wonder that meos (ph) win half of the competitions -- over half of the competitions.

But back to the guiding principles that were adopted by the panel -- they led to a logical recommendation, which was to shift it rapidly to a FAR-type process, under which all parties compete under the same set of rules. The FAR embodies a fair process, with clear rules. It has the confidence of government and industry. And this high level of confidence, combined with a fair, time-tested process, is the key to encouraging quality competitive proposals from the private sector.

Shifting to a FAR-based process also addresses several other key issues. It provides flexibility. You can award based on best value or on low cost, as the need dictates.

The FAR embodies a high degree of accountability for all parties, public and private, alike, with provisions for third-party audits by agencies like a defense contract audit agency, to track costs and performance.

The FAR process would allow the public sector to participate in competitions for work currently performed by contractors, as well as the work performed in-house. And since the public sector would be competing under the same process and would be treated as a true bidder, they would have the right to protest, just like a contractor.

Moving to a FAR-based process is neither a radical idea nor one in which the government lacks experience. The FAR is used successfully every day by the government to make thousands of purchase decisions between competitors. We can and should make it work fairly for competitions involving public sector bids.

In conclusion, the contractor community is not afraid of competition or accountability. We are subject to intense competition on FAR-type procurements every day. And we are subject to routine audits on performance and costs.

The panel's recommendation to shift to a FAR-based process embodies the concept of fairness, accountability, competition -- an approach under which all parties compete under the same set of time- tested rules.

Thank you, Mr. Chairman and Mr. Turner.

T. DAVIS: Thank you very much.

Let me start with Ms. Kelly and Simon -- just ask a few questions here. Because I want to get -- clearly, a great frustration among federal workers that some of these competitions are just going outside almost automatically, without giving them an appropriate opportunity. Those are legitimate concerns that we try to address.

My concern is that we are just not, at the federal level -- and part of this could be addressed to the civil service system -- making sure that we are recruiting and retaining people adequately to stay in the federal work force to keep a workforce that can compete with the private sector, particularly in the IT area.

This was not the case in government 30 years -- I was a page up here 30 years ago, you know, when they -- President Kennedy said, "Ask not what your country can do for you, ask what you can do for your country." There was a real spirit of coming into government and working for the government -- being part of something. I don't detect that same spirit today when I walk through the halls of some of our agencies -- when I talk to kids that are getting out of college, asking what they are going to do -- that government can effectuate change in the same way, and particularly in the IT section. You still get that in some of the government regulatory agencies and in some of the legal departments at Justice, where it is still pretty tough to get jobs.

But in some of these IT areas, it seems to me, there are some difficulties in retaining people and even recruiting people.

Number one is the pay differential between the private sector is very pronounced. And changing that would, in my opinion, mean revisiting some of the civil service regulations in terms of how we pay people -- what we pay them and not just raising everybody's pay, but maybe making it a little more select.

Secondly is training -- who wants to go to a job where you are not getting trained and being up-to-date on things that are going forward?

Now, sometimes you will stay with government -- you will give it a shot -- you will try to be a part of something important. But when you are trained for yesterday's up jobs and yesterday's technology and you're not being kept up -- and, yet, that's one of the first things that gets cut in government.

We have, honestly -- I mean, this is something we need to work on together. We have tried, honestly, through our SARA legislation -- through our Tech Corps -- through some of these -- to try to get at this. And maybe we are just getting around it and not working with you close enough so that we can have an honest discussion over the best ways we can bring more people into the government. Because ultimately, you can revamp A-76. If you don't have the in-house capability and the in-house training, which isn't the fault of the workers, it's just not going to be competitive. And for the taxpayers, there is no choice but to send it out.

Frankly, to give taxpayers their best value, it seems to me, you need to keep a good in-house cadre there because that keeps the contractors competitive.

So I think we need to get to that to make this whole equation work. Otherwise, we can make it FAR-based -- we can do anything we want and, it seems to me, you are going to lose, inevitably.

That's, kind of, my thoughts going into this, but this is a more complicated process than just working through A-76 -- that we need to look internally at civil service rules, pay rules, training rules and the like. We've tried to get at it. There is not a bottomless pit of money that we can put into these, but there is some additional expenditure of funds that I think can ultimately save the taxpayers money.

So, with that in mind, I would like to get your reaction to what I said -- from both of you.

Jackie, if you don't feel you want to comment today...


T. DAVIS: ... we would be happy to have you come in and submit something later. But we're pleased to have you here. You are, as Mr. Walker said, an important part of this equation. We cannot simply do this outsourcing -- everything -- and stay competitive and get the government what it wants. And we want to give you and your workers the tools they need to be able to compete. And I think it works for everybody.

Ultimately, remember this -- our job -- my job is not to help contractors or union, it is to get the best value for the taxpayer dollar in the services we are buying. And we can only do that if we can have a robust public sector that is trained, up-to-date -- recruiting the best and brightest. And that's where we seem to be losing.

And I've talked enough. Let me try to get a reaction from each of you on that.

KELLEY: Actually, I very much appreciate, Chairman -- that is, you're recognizing that this is about so much more than just a process. And all the things you have said, I had written down because I was going to respond back to you. But you have covered so many of them because this whole issue of recruiting and retaining the federal work force is one -- and I know Dave is sitting next to me and nodding his head because we have had these conversations many times.

For me, the issues run a very wide range, many of which you touched on -- the issues the pay -- and I would say that this competitive sourcing issue and the quotas imposed by OMB are also a factor that is now out there for those were looking to come to the federal sector and those who are deciding whether or not to stay. Because they are asking themselves the question if theirs will be one of the 425,000 jobs that the administration is interested in competitively sourcing outside of the federal government.

On the technology issue, which is, I think, an area we can probably all agree on that we see exactly the problems that you identified -- and it is about resources. First of all, the resources so that the government has cutting edge technology to do its work on, which would then provide the workforce with the cutting edge technology to maintain those skills and to be able to stay in competition with the private sector -- and the need, I believe, for the government to maintain those skills. I think it is very risky for the government, in any arena -- in any occupation -- in any skill -- to rely solely on outside services, rather than maintaining it within the government to some degree.

And, I guess, the last thing that I would say is NTU's interest is in working with you -- with Congress on anything that we could do to help to address this problem. At the moment, the way it always seems to come down is on the issue of the ability to pay, whether they are recruiting or retention bonuses or annual salaries that keep the workers able to stay with the federal sector. And that usually comes down to a discussion around flexibilities that agencies need or have in order to be able to provide additional compensation to employees.

And over and over again what I see happening is Congress authorizes flexibilities, whether it's special pay rates or the ability to pay recruiting, retention, relocation bonuses, student loan repayments -- a lot of really good things are authorized. What never comes along with that is the appropriation to give the agencies the resources to do it. And then, the question for them is if they want to implement it, even though they agree this is a top priority, they have to take the resources from somewhere else. And that becomes the reason why very few of these are ever implemented.

So MTU would welcome the opportunity to figure out how to not only provide the authorization, but the funding to help make that happen in a way that begins to address the problem that you so accurately defined.

T. DAVIS: Well, before we get to Ms. Simon, let me just respond to that a minute.

First of all, I have opposed the quotas and the goals. I think I not only supported the amendment you -- I spoke for it. I just think that's the wrong way to go currently.

Now, it may be that that's -- I understand where the administration comes from. I understand the need to do that and that's the way to get things moving, and the like. But I think, at this point, it is so weighted when you go outside with these -- you go to A-76 or whatever -- that you lose almost every time, given what we've talked about. Not every time, but it's just very weighted until we make some of these other changes.

Secondly, I used to work for government contractor and I will tell you this -- our most important -- I was general counsel -- I was a senior vice president and we were a billion dollar a year company. And our most important asset in that company was our employees who walked out the door every night. And we did everything we could to make sure our employees came back the next day because that was our asset -- it wasn't our building, it wasn't our computers, it was our people. And if our people left the company, went (ph) underneath it.

That is the way of the information economy. Everybody in the private sector understands that, but government doesn't seem to appreciate it. And until we can change the culture where we recognize that our employees are the way that we can become efficient on behalf of our taxpayers -- and an investment in their training and their recruitment and their retention is really dollars saved -- something the private sector -- we always talk about copying what the private sector is doing -- we are the same boat.

So a lot of your concerns -- I just want to say, I understand it and I emphasize with them. Unfortunately, for the short-term in terms, for example, on this homeland security and other areas -- trying to get things quickly done, we are not to snuff with where we need to be. We need to work on doing that. And I think as we do that, some of these other areas that you expressed concern in, I think, are going to be easier to resolve.

But I understand it's kind of weighted against you as you look at it. At least, that's my opinion. And I appreciate your comments.

Jackie, I didn't mean to interrupt you. And go ahead and please comment.

SIMON: No, that's quite all right.

I just wanted to take this opportunity to join in the congratulations to Mr. Walker because AFGE has certainly appreciated the attention -- what he calls the human capital crisis has gotten ever since GAO began talking about this problem.

AFGE considers the human capital crisis, however, to be self- inflicted in the federal government. It is not something that we didn't all understand while it was happening. It is the result of downsizing and contracting out.

And, as Colleen Kelley just mentioned, the single most important thing we believe that the federal government could do would be to get rid of the privatization quotas. At best, it sends a mixed message to the employees that the federal government would like to recruit or retain, by telling them that they have a 50-50 chance of losing their job and then even less than 50-50 chance of having the opportunity to compete to defend that job.

A couple of things have recently occurred, and I won't even talk about the homeland security debate that has certainly been rather demoralized for many federal employees to have their loyalty and fitness questioned. And it has really been very unfortunate.

But one step that the Office of Personnel Management has recently taken to try to make the federal government and more attractive employer is to establish flexible spending accounts to help federal employees pay for their health insurance costs. And, while this is a positive development and a good thing and will probably save some federal employees some money, we have recently read in the press that OPM has already decided that it will contract out all of that work -- the work in administering, setting up and keeping track of those flexible spending accounts.

Now, the employees at OPM have the skills and the ability, and OPM is certainly set up to do that kind of work. They do that kind of work in other areas of federal employee compensation. And the decision has been made, apparently unilaterally, not to give the employees there the opportunity to compete for new work.

And we hear that all the time. Whenever new work, and particularly as you mentioned, in the area of IT -- interesting, exciting, challenging new work that would keep them on the cutting edge of new technology -- when new work is taken on by an agency, it is automatically contracted out. And the existing workforce is virtually never given an opportunity to compete to do it or to do it automatically, like the contractors are.

SIMON: And I think that that and the quotas are the two biggest problems facing the federal workforce when it comes to motivating and making them feel as though they are valued assets.

T. DAVIS: Yes.

I mean, again, a beefed-up federal workforce -- a better trained, prepared recruited federal workforce may or may not win the competition, but it just sharpens the level of competition, as these go.

SIMON: But just -- I think that what is most demoralizing, to be honest, is the knowledge and repeated experience of being precluded from the opportunity either to compete in defense of their jobs or to compete ever for new work.

T. DAVIS: So you're talking about the jobs that go out that don't even go through the A-76, in some cases?

SIMON: Well, certainly, you know, that's the other thing I was going to hand you, here. You know, just -- we hear a lot of denials that the president's competitive sourcing agenda is really about something other than competition.

I have, just as an example, the U.S. Department of Agriculture's plan that it submitted to OMB for how it expects to comply with those quotas. And it is, you know, page after page after page of work unit after work unit after work unit -- five and 10 and 15 and 20 and seven and six and four -- perfectly innocent federal employees during their jobs -- no one is alleging that they are not doing their jobs well or efficiently -- that they aren't the low-cost, high-quality provider. But, merely to comply with these quotas, they are going to lose their jobs.

And here it is, page after page -- a virtual firing squad.

T. DAVIS: Yes. I mean, just for the record, Mr. Turner and I have some concerns about the quotas.

On the other hand, I mean, well I think we have to find the right balance.

Mr. Walker?

WALKER: If I can...

T. DAVIS: Sure.

WALKER: ... to comment on several comments...

T. DAVIS: I'm off script here.

WALKER: ... that have been made.

T. DAVIS: They gave me some...

WALKER: No, that's all right.

T. DAVIS: ... (inaudible) I still haven't gotten to one of them.


T. DAVIS: Better we free-flowing anyway.

WALKER: First, I believe the administration's current quotas -- targets -- call it whatever you want -- violate the principles because they are arbitrary. I understand that the administration came up with them during the campaign. And I am sure that the president and his team feel some obligation to try to deliver on campaign promises. But it is fairly clear that there was not a considered thoughtful process that resulted in the determination of those percentages. And I think the keyword is "arbitrary."

At the same point in time, it is possible -- and I would argue appropriate for this administration, and any administration, to undertake a considered review and analysis of functions and activities that, based upon, you know, past practice in the government or based upon prevailing practice for large enterprises -- whether the public sector, private sector, not-for-profit sector -- or based upon past experience, it makes sense to consider competitive sourcing.

And the one example -- and that, I say is if I can give it -- I have got a lot of experience in the benefits area, both in the government, as well as the private sector. And the simple fact of the matter is this FSA, I think, is a plus and I think it will help employees. It will help them save some money by being able to pay for some things with pretax dollars, rather than after-tax dollars. That is a plus.

But I think you'll find if you did analysis that most major employers outsource this work. And it's not something that is currently being done within the public sector. And it's not just a matter of whether or not the people have the skills and abilities to do it. I don't think there's any doubt about that. We've got a lot of great people in the government. But it's also the systems.

You know, there are many employers out there -- many entities out there that are already have systems. There are already running. You know, they've got many, many different people that they are providing these services to. And part of the question is do you want to stand up those kinds of systems and do you have the excess capacity there that would be available to do that type of work?

So, I mean, I do think there are clearly circumstances on which federal employees have the ability and should have the opportunity to compete for new work and potentially bring work back in. But I think it is facts and circumstances -- it's not across the board.

T. DAVIS: OK. Thank you.

Yes, Stan -- and then Angela.

SOLOWAY: Since we're having a free flow of discussion, just a couple of thoughts and I think Mr. Walker just hit on a very critical point that I think is worthy of expanding a little bit and that is maybe separating out some of the differences between a private sector company whether there is a government contract or not and the way the government views these issues when we talk about human capital roles and missions, if you will, and a company.

In the private sector in a high performing company -- and I think this is what Mr. Walker was really referring to -- there is a big separation -- and understanding of the separation between a core competency and a core requirement. A core requirement is to provide benefits to my employees. It may not be the competency of my company.

And that is one of the reasons that the government does not compete as well for people is when people, for instance, information technology workers, go to work for an IT, they are part of the core competency of that company. They are the fundamental mission of that company. Therefore, they are likelier to get greater support and professional development -- greater benefits and so forth -- the kinds of things that make work quality so important. Whereas, in the government, by and large information technology positions are support functions, and they never compete well in a resource-constrained environment, be it in the public or private sector, for the kind of investment dollars you're talking about.

T. DAVIS: Let me just say...


T. DAVIS: ... but you would admit that the government can do a better job, particularly in the procurement side, of getting a little bit more competency within it? I mean, I think...

SOLOWAY: Absolutely. And I agree...

T. DAVIS: I don't disagree with what you're saying, but we can do a better job with what we've got there.

SOLOWAY: Absolutely. And I would agree that the government needs to always retain the residual capability to understand the supply base, manage and apply the solutions and so forth.

But my point would be that pay and all those kinds of benefits- levels issues are critical. And certainly the federal work force deserves that support. But that, in and of itself, will not solve the recruiting and retention problem.

The last two points I will make very quickly. I think we have to be very careful not to assign the human capital crisis to outsourcing and contracting out, because, frankly, the data doesn't support that all, relative to employment reductions of the civilian agencies as compared to contracting out. And I think the human capital crisis is a crisis faced not only in government, but in many industry sectors where we simply have an aging workforce.

And the final thing is on the quotas -- I would like to be very clear about this -- or the so-called quotas -- this is one of the few areas where I actually disagree with Mr. Walker. And it is an area that many members of the panel are in disagreement on. It was never specifically discussed or debated in the panel. And there are those of us who believe that the principle that speaks to arbitrary quotas and numerical goals actually does not speak to the administration's plan. Because I think there is a big difference between an arbitrary plan that presumes the outcome -- in other words, it presumes you're going to outsource -- and it presumes you're going to in source -- vise (ph) a goal for performance. And we set performance goals all the time.

So I think it's just, for the record, important to note that the panel was not unanimous at all in its view that that particular principal was intended as or was, in fact, a direct criticism of the administration's goal. That is a matter that has been of some discussion.

WALKER: If I can, Mr. Chairman?

It is fair and accurate to say that the panel did not explicitly address the administration's goals -- quotas -- target -- whatever. But I believe in substance over form, and I think substance speaks for itself.

T. DAVIS: OK. I understand.

Angela? Thank you.

STYLES: Yes. I would like to take an opportunity just to clarify what is a tremendous amount of confusion and misrepresentation about our goals.

First, it's an aggregate 15 percent government-wide goal. It's not 15 percent at each agency. There is not a single one of the 26 departments and agencies that have come into me with a plan -- a reasoned and rational plan -- that is something other than 15 percent -- that represents good management and a good thing for the agency that I have said, "No, sorry, you're going to have to compete 15 percent."

We have applied our goals for competitive sourcing in a manner to build infrastructure at the departments and the agencies for public- private competition. I have agencies that, over the next couple of years, have said, "I am going to look at public-private competitions for 7.5 percent of what I have in-house and 7.5 percent of what I've had contracted out."

I have departments and agencies that are at 10 percent over three years. Each and every plan is tailored specifically for the needs of each and every agency and their specific circumstances.

On the direct conversion piece, there have been representations here that there are agencies out there that are going to directly convert everything to meet these goals. Not a single one -- not a single one that I know of -- the Department of Agriculture plan that was represented here -- they came in with that plan and we said, "Absolutely not. That's not what we are about. We are about competition and we are not about meeting these goals through direct conversions."

T. DAVIS: OK. And thank you very much.

Let me just make one other comment and just address this to Ms. Kelley and Ms. Simon. I mean, I think we have had a conversation here where we agree on some things. But let me just tell you what I have tried to do to help -- just marginally -- along the issues we have talked about.

We have our Services Acquisition Bill -- our digital Tech Core -- our Acquisition Workforce Exchange Program -- our recruiting and retention efforts of our SARA bill, in particular, I think, will be very, very helpful to employees. And we haven't been able to get support from you on that.

Now, I know there is a lot of suspicion. I know there are other issues on that. But I think we need to try to work together and where you don't agree, figure how we can make this go.

This is complicated and there is a lot of mistrust on all sides of the table. I recognize that. I'm a big boy. I've been here a while -- probably be here a little longer. But these are issues we have to have a serious, dispassionate discussion about.

And I think Mr. Walker, you made a good start with this panel that you put together where you got everybody around the table and so on. If we could sit here and quit gaming it and just sit down -- we have a number of areas we do agree on -- that's a great starting point. We need to focus on some of the areas that you didn't discuss here that, if we could add pieces to that -- on workforce training and recruiting and retention -- the issues we have talked about -- they might feel a little bit better about some of the other issues that you and Ms. Styles have addressed.

And also, the staff reminds me that -- what -- 60 percent of the A-76 stay in government -- 60 percent of the competition. So it's not completely weighted. But I still think we need work on the items we have discussed.

And I appreciate the union representatives articulating that eloquently.

I am way over my time. I'm going to yield to Mr. Turner, but I'll get back to my script on the next round.

TURNER: Thank you, Mr. Chairman.

Mr. Walker, I wanted to inquire of you, and perhaps other panel members would comment, on one of the recommendations which, as I understand, was not universally accepted by the panel, but was a part of the panel's recommendations and that is to encourage the development of high performing organizations.

Tell me a little bit about what that concept was.

And perhaps those who had concerns about it could share with me their concerns.

WALKER: It is a concept that, quite frankly, I and, you know, Bobby Harnage, really, talked about early on in the process and that is that while the administration is very committed to the concept of competitive sourcing as a means to try to achieve, you know, best taxpayer value, as they would say, my view is that in the end, what we are looking for -- as both of you have said -- we're looking for the best answer for the taxpayers.

And, in doing that, we have to recognize that a vast majority of government will never be subject to public-private competition. And, therefore, what are we going to do with that vast majority of government that never will be subject to public-private competition? How are we going to try to make them high performing organizations? What can be done to do that?

But, as a supplement to that, to the extent that there are certain functions or activities that might, at some point in time, be subject to public-private competition, might we provide them to have an opportunity to take advantage of this high performing opportunity concept to see if they can deliver under that and not get a permanent pass from competitive processes, but to get some type of temporary stay from competitive processes if they end up, you know, committing to and delivering on certain key objectives and events, whether they be performance objectives, cost objectives or whatever else?

And the last thing, let me just say, is I couldn't agree more that we have to keep this in context. Our biggest problem is what are we going to do to attract and retain a qualified and motivated workforce? And this is a subset of a much bigger issue. And we've got to make sure that we are also taking steps not only to deal with this controversial area, but to deal with the more fundamental problem, which is what are we going to do to accomplish that broader objective? Because, over time, if we don't, the deck's really going to be unfairly stacked just because of erosion in government's capacity and capabilities over the years to be able to effectively compete.

TURNER: So, clearly, to have a high performing organization you are saying you have to have a trained and competent workforce. And you have to figure out how to recruit it and train it and retain it.

What else is in the concept of a high performing organization?

WALKER: Well, it's the concept that you would end up providing not only some financial resources to try to be able to help, you know, the function or activity or agency or entity be able to become a high performing entity. But secondly, you would also provide access to technical expertise -- that there would be individuals who would have, you know, requisite expertise with regard to people, process, technology issues -- change management issues, et cetera -- to try to help determine what needs to be done and, most importantly, to get it done. Because in most things in the public-private not-for-profit sector, the difference between success and failure is not the plan, it's the implementation of the plan. Ninety percent of success or failure is based on implementation.

And so people need -- they need support as it relates to resources, as it relates to expertise, you know, training -- other types of activities.

TURNER: The high performing organization -- is the concept, then, to select certain agencies or subsets of agencies and apply management principles and techniques to evaluation of the performance of that particular organization that is selected and then to implement those? Is that the concept?

WALKER: Basically. And, obviously, there is a capacity problem. I mean, you can't have every department and agency doing this at once. You can't, you know, it's got to be something that you end up doing, you know, in some considerate fashion. And, you know, possibly on some type of an installment basis, looking for the best targets of opportunity -- matching resources to where you think you're going to get the best results.

TURNER: Do you envision a special team of managers with expertise being available to the various agencies when they are selected and they come in, they begin to evaluate it and determine what changes need to be made within that agency?

WALKER: Without getting into too much of the detail, I envisioned that there could be individuals that are federal employees who have skills, knowledge and abilities in this area, as well as contractors who have skills, knowledge and abilities and experience in this area, who could end up being made available to provide assistance to the targeted, you know, entities, functions or activities.

TURNER: And I gather that the concept that you're referring to was not universally accepted by the panel members. And I would like to hear from someone who saw some difficulties with the suggestion.

WALKER: Well, let me mention one thing and then let Jackie speak. We voted on the additional recommendations as a package. And while the vote on that was eight to four, my personal opinion is the reason the vote was eight to four was not as much concern over this HPO concept, it is because we voted on it as a package.

And, of course, Jackie can speak for AFGE and Colleen for NTU, et cetera. But my sense was that the concerns that caused them to vote no was not this, it was the issue of the FAR-based process and how many times Congress should be required to act.

I mean, that's my understanding, but they can speak for themselves.

SIMON: Yes. I think that there were, sort of, two aspects of the HPO issue. First, President Harnage liked to say that MEOs (ph) shouldn't be something that federal agencies aspire to only when they have a gun to their head -- the gun being the threat of losing the work to the private sector.

But if you situate the issue of MEOs (ph) or high performing organizations in the larger context of contracting out, which is where we were discussing this idea, it is part of the shift. Once upon a time, the privatization and contracting out were advocated as a way of saving the government money. The idea was that the government was too expensive and the private sector could do the job less expensively. And for a while, you know, that was sort of the reigning argument and the reigning ideology in favor of contracting out.

But the problem with that was, first, as Chairman Davis indicated, using a cost-based process for public-private competition, the contractors lost most of the time when costs the criteria that decided whether something would go in-house or stay in-house or go to contract.

And then when the work did go out the door and go to contractors, when cost was the criteria for deciding, the resulting contracts were not as profitable as the contractors wanted to be.

Consequently, when we were discussing a new way of deciding whether work should be contracting out and on what the criteria would be for selecting which source, and the criteria for selecting which contractor was going to be something other than cost, the new rhetoric was that the private sector was "better" -- was more technologically adept and more modern and more competent.

And then that raised the question of, well, you know, why is that the case?

And, you know, the discussion -- there is a few factors we could cite, but certainly one of them was what Mr. Walker was just describing -- it's the fact that agencies are certainly constrained by federal government budgeting practices when it comes to hiring necessary personnel because of FTE ceilings, even though they are illegal, certainly, in the Department of Defense, they are still certainly practiced -- and the fact that the government is prohibited from making large capital expenditures even when that is the necessary -- to get the new technology that is needed to perform at a very high level.

And consequently, this concept of HPOs was developed. And the part of the HPO concept that was controversial on the panel -- not from our perspective, we supported this -- was the idea that while an agency or an office had been designated as an HPO, it would have a break from being subjected to the privatization quotas. And it would allow the workers in that office or that agency to focus on the agency's mission and the work at hand rather than spending so much time and energy figuring out how to comply with quotas or engage in competitions.

TURNER: Yes, sir?

SIKES (?): Mr. Turner, as who supported the recommendations and certainly agree with everything Mr. Walker just said in terms of the lay down of how the debate went and sort of the issues that were in play, there were a couple of areas some of us were concerned about with regard to HPO's, but not enough to have us, certainly, oppose the concept because it is a very logical common sense approach.

There were really two core issues, one of which Jackie just touched on in her history lesson, which is the question of are we going to have a process where we have commercial activities that are going through an HPO process of some kind and using it as an excuse not to optimize it, opposed to improve, which is -- there is a general agreement and the report is fairly clear that competition is the principal driver of top optimal efficiency. So there is that issue.

And the other point, I think, even perhaps more important to that was -- and Mr. Walker touched on this in his statement and in his answer -- and that is that with all of the work being done in government and the amount of government activity that would never be considered for competition -- appropriately not considered for government competition -- some of us think that the HPO concept is that is best focused there because you are never going to have the competitive tool -- the management tool of competition there. And, therefore, where you have other alternatives for competition, for instance, can exist, you don't necessarily need to focus what will be limited resources, as Mr. Walker said, in an HPO. You need to focus those limited resources where you are never going to have competition.

It is not a religious or philosophical difference, it is just more of an implementation question on where the emphasis ought to go.

KELLEY: Mr. Turner, if I could add -- from NTU's perspective, it is pretty hard not to support the concept of high performing organizations and, in fact, we do. I wish there was more emphasis on it outside of the discussions around the Commercial Activities Panel because if every agency, in fact, were given the resources and the support to strive for that, then there would be -- and, if part of that was that agencies were able to retain some or all of the savings that they recognize by, in fact, becoming a high performing organization, then that would be the incentive -- the competition -- whatever you want to call it -- that I think would help to lead agencies to be able to actually reach that level without determining whether or not it is going to be competitively sourced or outsourced or contracted out or whatever the words are.

And so, NTU supports that. That was not an issue on our vote to not support the panel. It had to do -- the panel's report -- it was about quotas -- it was about standing -- it was about a government- wide rollout of a new system, rather than something that would be tested first. Those were our issues on the panel.

TURNER: Well, I think that the concept certainly deserves our attention. It certainly seems to go to the heart of creating a more efficient federal government. And I hope we will have the opportunity to pursue that further.

Thank you, Mr. Chairman.

T. DAVIS: Thank you very much.

Let me get back on my script, here.

This is really for anybody who wants to comment.

The panel endorsed the consideration of both cost and non-cost factors in making source selections in public-private competition. Are there any instances in which such an approach would not be appropriate? Why would the government not want to consider technical past performance, innovation management approach and other such non- cost factors?

Anybody want to take that?

STYLES: I think it is important to clarify here that cost, from our perspective, cost is never, never the only consideration. Whether it is our procurement process or an A-76 competition -- whether it is the old one or the new process we are developing, it is never exclusively a cost determination.

If somebody cannot meet the technical qualifications to do the work, they shouldn't -- and I hope they aren't during the work.

My best example is, you know, custodial and lawn maintenance services, in our mind, whether it is now or going forward, should not be subject to cost technical trade-offs. We should be buying those based on lowest cost. But they do have to make a determination that those kinds of things are technically acceptable -- that you, you know, you have the ability to mow the lawn -- you have the equipment -- that type of thing.



SIKES: I would add to that, since DOD is the one that is limited to cost, by statute, that I would agree totally with what Angela said. We have found that we have gone to cost technical trade-off when it gets really complex because we find we are not getting the best value to the government if the true innovation of whoever is coming to bid is not able to be taken into account.

And, in fact, sometimes the competitions get skewed away from that because we don't look at it. So, it is not a quite -- cost is always going to be there. And we have ways we can do that in the simpler custodial kinds of things -- that's fine. It gets difficult when we start talking about some of the complex functions we are looking at now.

KELLEY: From NTU's perspective, there are two issues that concern us. And it has to do with one, a level playing field for the federal employees who currently do the work. If the innovation, which we are not opposed to, nor are federal employees opposed to -- if they don't have the resources or the technology to be able to be in that level playing field as the bar gets raised, that is a concern. And, also, there is a concern as to whether or not, in fact, the services being provided would have what some might call bells and whistles that the taxpayers don't need and could end up paying for services that are actually over and above what, in fact, the taxpayers do be.

I do not have a specific example -- I wish I did -- that I could give you in our experience with working with the A-76 process. But I know that my concerns were not put to rest in our year-long discussions that we had on the Commercial Activities Panel. So seeing it actually play out -- and until I can see it play out where those issues are eliminated, they will continue to be concerns for NTU.

SOLOWAY: Mr. Chairman, we have a long experience with what Angela referred to as cost technical trade-off or best value judgments in federal procurement. I think there are two critical issues here. One is that under the A-76 process, there can be a best value determination made, but only in the evaluation of the private sector bidders. It does not apply to the government bidder. So there is a fundamental inequity there when you have a whole set of factors that you apply to one side there are not going to apply to the other. That is one of the inequities that a FAR-based process, where everybody is subject to the same evaluation criteria and so forth, would be addressed.

The second thing I think that is important to note is that we sometimes presume that you either have a best value competition or you have a cost competition. But in the federal acquisition regulation, best value really encompasses virtually all categories of procurement, with the exception of things like a sealed bid, where there is -- we would not get into that. But it is either -- it can be a low-cost technically acceptable decision and go all the way up the spectrum to a very high-end, high-technology R&D kinds of environments where cost becomes very secondary because you are really looking for unique technical skills or what have you.

But the best value construct -- underneath it exists all of these varying alternatives that we are talking about. And the whole concept is that you would design your acquisition strategy to meet your requirement, rather than being locked in, as you are in A-76, to effectively a cost only decision.

WAGGONER (ph): Stan was right. Currently, the A-76 process forces the MEO (ph) to produce a low-cost technically acceptable bid. And come actually, I think puts a wet towel on their ability to innovate.

The beauty of the FAR is that it allows you the flexibility. If the particular service that you are procuring is the type that you want to buy on a low-cost technically acceptable process, then the buyer may want to take that approach. They have the flexibility to go to best value or anything in between, in terms of trade-offs and percentages and -- including past performance and other criteria, whether they be management or technical things to consider in there.

The beauty of the FAR-based process is that it will allow the MEO (ph) actually to propose best value solutions, if that's the way the procurement is designed, because that's the best solution for whatever the complexity if the particular service that they are buying is rather complex. And sometimes they can be. Sometimes you can have grass mowing along with some IT services bundled into it. You could have a whole lot of different services put together to make a relatively complex procurement.

SIKES: Following on my two former DOD colleagues, here, I can guarantee you this is central to the discussion of the integrated process. Because we have worked for a long time with a separate process to figure out how to deal with that. And no matter what we did, everybody thought we were skewing it the other way. So it's sort of what they used to call the second bite at the apple. We were trying to level it, but whoever thought they were going to lose figured we were just skewing it one way or the other.

SIKES: The integrated process should hopefully allow us a way to do that at once so it's obvious that we are treating everybody fairly.

SIMON: Chairman Davis, in our written testimony, we offer a very long and detailed critique of the FAR-based best value process and its subjectivity. And I am really happy about this discussion here today because it is very different from the last hearing on the CAP panel, where the implication seemed to be that A-76 lacked a mechanism for considering quality and was only a cost-based process.

But one of the things that I think it's really important to point out with a FAR-based process is it takes away from the government -- or it certainly allows the government to divest itself of the responsibility for determining what quality standards the government wants in its purchase.

Although the government needs to reveal in its request for proposals whether cost or technical factors will predominate, they don't have to reveal by how much and they don't have to reveal which cost or technical factors will have what weights assigned to them prior to the offeror submitting their proposals.

And I also would like, if I may, to quote Marshall Doke, a very well-known conservative legal scholar, actually, from Texas. He is actually very prominent in the Texas Republican Party. He has written at length on the shortcomings of the FAR-based best value process. And I will just quote him here briefly. He says, "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."

The problem with the FAR is that all of those standards aren't required to be revealed until after proposals have been submitted. And it is really ultimately a very anti-competitive process.

And one other point about the FAR-based best value -- a lot of times contractors say that they are very comfortable with it because it is widely used in private-private competition -- competition between contractors. And although it has some problems in that area that I really can't speak to here, one thing that can be said is that when it's private-private competition, you can't have any kind of systematic bias in favor of one group, at the expense of another. Contractors will be competing between one another. And one contractor will win, but the loser will also be a contractor.

But in the context we are living in, where there is such tremendous political pressure to privatize, agency officials are under tremendous pressure to use the discretion that the FAR process gives them to exercise a bias against federal employees and in favor of contractors. And that's one of the most important problems with the FAR approach to best value.

T. DAVIS: Thank you.

Yes, Mr. Walker?

WALKER: First, it's not that A-76 doesn't provide for considering something other than cost, it's just not dynamic enough.

Secondly, A-76 does not provide for a level playing field. A-76 is not consistent with the principles adopted by the panel -- the existing A-76.

At the same point in time, the panel recommended some modifications to A-76. And it did not expressly recommend repeal of A-76, I might note. It said that we needed to move to a new integrated FAR-based process that was consistent with the principles and had a level playing field and to modify A-76, in part, to be able to handle the transition period and, in part, you know, possibly there are some circumstances where it makes sense where, you know, it's not highly sophisticated, it's not highly technical and where cost is a primary driver and where you don't need the dynamic interchange on technology and certain other things.

I think when you get right down to it, there is three kinds of business we are talking about here -- just cutting through -- we are thinking about the panelists. You've got core that the government should do that should not be outsourced, without getting into the debate of what that is, all right? That's one reason you need HPOs. There's a lot of that -- tremendous amount of that, OK?

Secondly, you have non-core that is new. It is new -- the government is not doing it. The government may or may not have people who could do it. They may or may not have the technology available. They may or may not have the excess capacity. And in that kind of situation, you know, more likely than not, it's probably going to be done externally.

And you have non-core, or gray areas, where we do have government workers working. And one of the real fairness issues that I think is -- people are touching on, but not raising directly -- is that sometimes you need investments in technology. And sometimes you need the investment in training and development in order for the work force to be able to effectively compete.

And, you know, candidly, the way that our budget system works, it does not facilitate that, always. You know, the fact that we don't have a capital budgeting concept and the fact that things are done based on cash flow and not based upon economic value-added or discount of present value concepts. And so, as a result, that ends up leading, in certain circumstances, to perverse decisions.

But the last thing is I think words matter. I think A-76 has got a lot of baggage -- rightly or wrongly, I think that's value -- it's got a lot of baggage, too. I think what we are really talking about here is what is the best choice? What is the best choice for the taxpayer, which is a lot more dynamic term? It considers whether or not we ought to even ever think about it going outside the government or not, as well as all of these other factors that we are talking about.

Thank you.

T. DAVIS: Ms. Simon, let me ask you a question.

In your statement, you made it clear that you object to the use of any FAR-based best value-type process for public-private competitions. But I was puzzled to find no mention of the FAR-based process that DOD has used over the past decade-and-a-half or so for its depot-level workloads.

As I understand it, that process has evolved over the years from one that used a standard FAR-based value selection process in the late '80s and early '90s to a more limited best value process based on the assignment of dollar values to technical aspects of the proposals.

Also, as I understand it, in the most recent competitions using this process, the public sector either won outright or its proposal, submitted in conjunction with a private sector partner, was selected. These awards were quite substantial in the realm of hundreds of millions of dollars up to over $10 billion dollars.

I guess my question is -- and if you don't want to answer it today, you can get back to us, but I'm just trying to understand this as we move and trying to iron out where the administration is coming with their FAR-based proposals. Have you studied DOD FAR-based depot competition process? What specific objection, if any, do you have to the DOD depot competition process? And do you think the experience gained with this process would be valuable in implementing the panel's recommendation for a FAR-based process?

SIMON: Well, I would like to answer you later, in writing, if that is OK.

T. DAVIS: That would be fine.

SIMON: But I will...

T. DAVIS: And it's not a trick question. I think...


T. DAVIS: ... we all went to understand what works for you.

SIMON: Sure. Just responding now, you know, the FAR allows both best value and cost-based decisions. And it sounds like you are referring to a procedure for assigning cost to quality differences that's sometimes called dollarization.

In one of the principles that AFGE certainly thought in the panel and has continued to advocate is that decisions in public-private competitions should also be cost-based.

We are no more wedded to A-76 than anybody else, although were very different reasons. I think there was one reason that all of the panelists agreed -- one area of A-76 that everyone agreed A-76 needed improvement and that was the area of how time-consuming it was and how slow a process it was.

And, although the FAR-based best value, as is acknowledged in the report, will certainly be no faster than A-76, we have always been open to changes in A-76 that would make it faster. And we have been open to wholly new approaches that were, in the end, cost-based.


If I might set this up -- and I think we really want to get to it -- let me finally -- I mean, I think if anything, this panel showed that everybody is prepared and under -- you know, there's a lot at stake, obviously, for the individual constituencies here.

Ms. Styles, let me ask this -- the panel recommended that OMB make limited changes to the existing A-76 process. It outlined a number of potential changes.

Can you share with us which changes you anticipate making? And will you be making more changes, do you think, in addition to the ones included in the panel's report? And what is the time period you think before any changes could be implemented?

STYLES: Well, we have really, over the past several months, taken kind of a top to bottom review of A-76. And we have completely overhauled it.

We are ready, very soon, to cancel the existing circular and come out with an entirely new circular -- really reissue it as a new document.

We're going to be folding in a couple of things. We're folding in another circular -- A-97 -- which deals with sales to and from state and local governments. We are also folding in a policy letter -- 92-1 -- on what is inherently governmental and what is commercial.

So you are going to be seeing it very shortly. It is the final clearance right now. I would expect by the end of October a draft proposal with some very significant substantive changes to the circular, itself. They're coming out in draft. We're going to have a 45-day notice and comment period. Then we will take some time after that to assess the comments we receive.

But I think what you are going to see is some real needed changes to this circular. It has been a document that has been around for 50 years. People just kept tacking things onto it and changing them without consistency. So you are going to see a readable document -- one that makes sense -- one that reads well. And my best example was when I was reading the old circular, I came upon the word "privatization." And I thought and I thought and I thought -- and I'm like, "I've never seen 'privatization' in the circular. Why is it defined here in the definitions?" Well, it turns out -- I did a search and privatization was never used in the circular.

So there is a lot of strange inconsistencies that we have cleaned up.

Specifically, some of the things that were recommended -- I think all of our changes are consistent with the recommendations of the panel. There's going to be some issues that people are probably going to argue about whether they are consistent or not. There are a few things that were the recommended as changes to the A-76 process, itself, that we have definitively adopted -- strengthening the good business practices by eliminating any -- even appearances of conflict of interest between the MEO (ph) and the PWS (ph). Implementing some tools for an aggressive enforcement of the process, including better pre and post-reward reviews, audits and inspections.

You will see an adoption of the integrated process. You will also see an overlay of many of our FAR processes that we have for consideration of the solicitation -- of the award -- of how bids are treated.

I think you will see this as a document that people in the acquisition field will understand and can use to a much better extent than the current circular.

T. DAVIS: Thank you very much.

SIKES (?): Could I just say one last thing?

T. DAVIS: Yes, please.

SIKES (?): I think Mr. Walker said it best when he said, "What's really important is the best choice." You get to the best choice through competition -- through good, rigorous competition where the best come to play and compete.

At the end of the day, what ever process OFPP will come up with, and I hope it will be a good one, it has got to be one that the private sector is willing to compete in vigorously and good companies coming in and giving good quality proposals. Because on a public- private competition, the public sector will be there every time. If you don't have a process that is not attracting the best in the private sector, the government and the taxpayer are going to be cheated out of getting the best choice, ultimately.

T. DAVIS: You know, let me just say I think that is -- the nub of this is we need to do two things. One is bring in the best from the private sector to compete and try to beef up our public sector and make sure that we can continue giving them the tools so that they can be even sharper than they are now. We do that, the taxpayers don't lose. That's, at the end of the day, what we are about.

I just want to take a moment to thank everybody for attending the hearing today -- a lot of thoughtful testimony -- not all of it in agreement, of course. But that's what we are here -- to try to solicit the comments.

I want to thank Congressman Turner for participating.

And I want to thank the staff for organizing this.

I think it has been very productive. I'm going to enter into the record the briefing memo distributed subcommittee members.

We will hold the record open for two weeks from this date for those who want to forward submissions for possible inclusion on some of the questions or afterthoughts that you may have.

Thank you very much and the proceedings are close.


[????] - Indicates Speaker Unknown
   [--] - Indicates could not make out what was being said.[off mike] - Indicates could not make out what was being said.


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