SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 3032 words

COMMITTEE: HOUSE GOVERNMENT REFORM

HEADLINE: REVIEW TH FINDINGS OF THE COMMERCIAL ACTIVITIES PANEL

BILL-NO:  
H.R. 721             Retrieve Bill Tracking Report
                      Retrieve Full Text of Bill

TESTIMONY-BY: COLLEEN M. KELLEY, NATIONAL PRESIDENT

AFFILIATION: NATIONAL TREASURY EMPLOYEES UNION

BODY:
Statement of Colleen M. Kelley National President National Treasury Employees Union

Committee on House Government Reform

September 27, 2002

Chairman Davis, Ranking Member Turner, and other distinguished Members of this subcommittee, my name is Colleen Kelley and I am the National President of the National Treasury Employees Union. I was one of the twelve members of the Commercial Activities Panel (CAP). As you know, NTEU represents 150,000 federal employees in 25 federal agencies and departments. Any change in government sourcing policies and procedures will have a major impact on the federal workforce, and therefore I appreciate you giving me the opportunity to testify today.

When the Panel held its first meeting over a year ago, I was optimistic that the Panel could reach unanimous agreement on a set of recommendations for improving the federal government's sourcing processes. While I knew that a majority of the Panel members came in with strongly held views in support of moving more government work to the private sector, what I heard from the Panel on that first day was a willingness to be flexible in the interests of finding common ground. Unfortunately, in the end, the CAP recommendations fail to improve current sourcing policies for federal employees or the taxpayers and as a result I am here today to urge you to reject them. It is hard to imagine that the CAP recommendations or any proposed changes to the government's sourcing policies can be fairly implemented and utilized by any agency in the chaotic environment created by the Administration's aggressive quota- driven contracting out initiative. The Panel's recommendations should not even begin to be evaluated until the Administration puts the brakes on this reckless initiative to open up 425,000 federal employee jobs to the private sector.

Chairman Davis, Ranking Member Turner, Congresswoman JoAnn Davis, Congressman Ose, Congressman Kanjorski, and Congresswoman Mink, thank you for voting with an overwhelming majority of your House colleagues on July 24 to reject the Administration's contracting out initiative. This bipartisan vote on the Moran/Wolf/Morella amendment, coupled with an identical provision pending in the Senate to block the Administration's plans, is a clear repudiation by Congress of the flawed approach to contracting out undertaken by this Administration. The amendment would not stop contracting out; rather it would allow agencies to base contracting decisions on what is needed to deliver reliable, high quality, and low-cost services to the taxpayers.

The Administration's position on outsourcing is very clear: it does not matter whether agencies use a flawed outsourcing process or one that works, as long as agencies aggressively move government jobs to the private sector. Even while senior Administration officials were deliberating on the CAP and telling federal employees and the press that A-76 is a flawed process, the Administration has never let up in enforcing the contracting out quotas they imposed on every federal agency. But never before has their position on contracting out been so transparent before last week. Despite their claims that A-76 is broken, and despite the House and Senate's repudiation of the Administration's quota approach to contracting out some 425,000 federal employee jobs, the Administration now intends to double their quotas and contract out all of the jobs listed on the FAIR Act inventories - 850,000 federal employee jobs - instead of their original 50% quota. With policy pronouncements like that, it is hard for federal employees or any other American taxpayer not to believe that this Administration cares more about contracting out as many jobs as possible than delivering high quality government services to the taxpayers.

A consistent theme echoed at the Panel hearings and among many of the panelists was the need for the government to implement reliable accountability and reporting systems to track the work of government contractors. Even though agencies continue to contract out more and more government work to private sector contractors, agencies still are unable to determine whether contracting out is saving the taxpayers money or improving the delivery of government services. Agencies simply do not have the staffing or systems in place to monitor the work of contractors.

As a result, it seems that once a contractor gets a contract, that work is out the door and rarely - if ever - scrutinized again. For example, last summer, the Panel learned that Mellon Bank, a contractor hired by the Internal Revenue Service, lost, shredded, and removed 70,000 taxpayer checks worth $1.2 billion in revenues for the U.S. Treasury. The Panel shared my outrage when learning of this contractor abuse and as a result I was hopeful this case would lead the Panel to recommend better contractor oversight to ensure that a Mellon Bank-like case would never happen again. Why did it take so long for the government to detect a problem with this contractor's failure to deliver the promised services? If agencies had better tracking systems and more contract oversight staff, the fraud - and the losses to the taxpayers - resulting from the Mellon contracting fiasco could have been halted much sooner.

Unfortunately, none of the recommendations in the CAP report would prevent such a waste of taxpayer dollars from happening again. It is a disservice to the taxpayers for agencies to continue to head down the path of contracting out more and more government work before we even have systems in place to know if contracting out is saving money or improving the delivery of services. The CAP's failure to recommend a meaningful contractor oversight system is what I feel was the ripest opportunity missed by the Panel.

NTEU is very troubled that despite the lack of oversight of contractors, OMB continues to force agencies to comply with their arbitrary outsourcing quotas. Even though the Panel was divided on most of its recommendations, the one area where there was unanimous agreement was on the ten principles that should guide sourcing policy. One of the principles was that federal sourcing policies and practices should "Avoid arbitrary full time equivalent (FTE) or other arbitrary numerical goals." The supporting commentary stated that there is "an overall concern about arbitrary numbers driving sourcing policy or specific sourcing decisions.... Any FTE or other numerical goals should be based on considered research and analysis. The use of arbitrary percentage or numerical targets can be counterproductive."

OMB surprisingly supported this principle, and in fact they now claim they are flexible in how they enforce their quotas. Recently, OMB has made statements indicating the quotas are no longer being applied "in a rigid or arbitrary manner." This subcommittee should not be misled by OMB's empty words.

Based on what I am hearing from the 150,000 employees in the 25 different federal agencies NTEU represents, agencies are being vigorously policed by OMB to meet the outsourcing quotas. For example, OMB is not allowing for any flexibility for an agency like the IRS, which is in the middle of a sweeping reorganization aimed at better serving the American taxpayers, or agencies working under heightened security as a result of the tragedy of September 11. If OMB no longer intends to force agencies to comply with the 15% or 50% quotas for outsourcing, then it would seem logical that the Administration would be willing to put an end to their outsourcing quotas.

While the Administration claims the outsourcing quotas are not arbitrary, to date the Administration still has not articulated its justification for how they came up with the specific quotas of 5%, 15%, and 50% they have imposed on agencies. Where is the data that shows that a 5% quota, a 15% quota, or a 50% quota for contracting out federal employee jobs with or without competition are the right numbers and will lead to savings and improved agency performance? Where is the data that shows that these arbitrarily chosen numbers for outsourcing will improve operations at homeland security agencies?

OMB will respond that "competition improves efficiency" yet their directive allows for contracting out without competition. OMB will respond that they are now approving agency contracting out plans that come under the 15% and 50% quotas, yet those numbers continue to be the benchmarks, and behind the scenes OMB continues to bully the agencies to meet those unjustified numbers. Nowhere has OMB ever given a good justification on why 15% and 50% are the right size quotas for agencies as diverse as the IRS, the Department of Health and Human Services, or the Department of Energy. Agencies should have the discretion to determine how best to balance their workloads with their budgets.

Instead of using quotas to contract out federal jobs, Congress and the Administration should act on the recommendations contained in the CORE Proposal. The CORE Proposal is a set of recommendations I advocated before the Panel that would track the true costs of contracting activities, ensure full and fair public- private competition, improve the integrity of the sourcing system, and most importantly put the interests of the taxpayers ahead of anything else. The CORE Proposal can be found on NTEU's website at http://www.nteu.or/ .

The CORE Proposal fixes many of the problems contained in the final CAP package of recommendations, and addresses many of the critical issues missing from the report. What issues does the CAP report fail to address? In addition to failing to recommend the implementation of contractor oversight systems, the CAP 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 consistent with the OMB outsourcing directive, the report fails to give federal employees real opportunities to compete for new government work or for some of the government jobs being performed by contractors.

The CAP 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 legal standing to protest faulty contract decisions outside of their agency.

While the report gives some lip service to giving the "public sector" rights to protest flawed sourcing decisions, it fails to recommend that those rights be granted specifically to federal employees and their unions, their duly elected legal representatives. The fact that federal employees and their union representatives do not have standing to challenge sourcing decisions outside of their agencies is an injustice to federal employees, the taxpayers, and our very democracy.

In addition to my concerns about what is missing from the CAP Report, I believe the final package of recommendations actually in the report, if implemented, would be a step backward for the government's sourcing policies and procedures. As you know, I did support the principles and I think they laid a good foundation for what could have been meaningful changes to the government's sourcing decision-making process. I also feel very strongly that when federal employees are provided with the tools and resources they need, they can do the government's work better than anyone else, and thus the report's High Performing Organization concept is one that needs to be looked at more closely. And I believe that many of the limited changes to OMB Circular A-76 recommended by the Panel are worthy of implementation.

However, my opposition to the final recommendations was driven primarily by the recommendation to combine a modified FAR Part 15 cost/technical tradeoff process with a modified A-76 public/private competition process into a new "Integrated Competition Process." I believe that implementing this broad recommendation while simultaneously forcing agencies to meet their outsourcing quotas is very risky, more complicated than A- 76, and will likely leave the taxpayers picking up the tab to pay contractors for costly services they do not need.

There is simply no evidence that indicates this new source selection process will be any more efficient, cost effective or expeditious. Any new revolutionary government service delivery system that will determine the expenditure of hundreds of billions of taxpayer dollars 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. Unfortunately, the CAP Report sets this untested program in autopilot mode, with a very limited role for Congress.

Since the CAP report was released, my staff and I have had an opportunity to hear the reactions to the CAP recommendations of contract officers and other experts. Over and over, we hear the words "confusing," "time-consuming," "expensive." The risks involved in implementing this untested recommendation are particularly high in light of the contracting out quotas.

The quotas are driving many civilian agencies to simply convert the work to private sector performance without first conducting public-private competitions, because agencies have been so overwhelmed with other management initiatives and meeting their mission requirements. Other agencies have opted to hire outside contractors to administer the A-76 public-private competitions since they have no experience in administering fair public- private competitions.

Unfortunately, there are still many agencies trying to meet OMB's quotas that just cannot seem to get their act together. For example, recently the Administrator of the Food and Nutrition Service at the Department of Agriculture, sent out a memorandum to all employees, which provided employees with misleading information about competition success rates, gave conflicting information about what source selection process would be utilized, and proposed opening up to private sector contractors not just "commercial jobs," but "inherently governmental" jobs as well.

The FNS case is another example of how agencies are struggling to comply with the Administration's arbitrary outsourcing quotas and why this OMB initiative is so counterproductive. 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 FY 03, and ultimately get to 50 percent. How to get there has been a wide- open and constantly changing message from OMB.

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 one hand, the Administration has told agencies to meet the quotas to open up 425,000 federal employee jobs to the private sector either through privatization without competition or through A-76 competitions. On the other hand, OMB is saying publicly that A-76 does not work, it should be put through a shredder, and agencies should now use a new untested process.

With all these mixed signals coming from OMB, at the end of the day, the only agencies that will meet their quotas and get a passing grade from OMB will be those doing direct conversions. And for those conducting A-76 public-private competitions, or considering conducting A-76 competitions, they will likely stop what they are doing, do direct conversions to meet the 2003 quotas, and wait for the OMB regulations implementing this new system merging a modified FAR Part 15 cost/technical tradeoff process with a modified A-76 public-private competition process. You talk about a human capital crisis: who would want to be a government procurement official in this environment?

With or without competitive sourcing, I believe the most important action Congress can take to put some teeth in the unanimously adopted principles of the CAP report would be to approve H.R. 721, the TRAC Act. Among other things, the TRAC Act would require agencies to implement reliable systems to track whether contracting efforts are saving money, whether contractors are delivering services on-time and as promised, and that when contractors are not living up to their end of the deal, the government work is being brought back in-house.

After spending a year on the Panel listening to the concerns about contracting out from people who deal with this day in and day out, and seeing the negative impact the Administration's outsourcing initiative is having on agencies, I am even more convinced of the need to enact the taxpayer-friendly TRAC Act. The Panel heard over and over about the need for more contractor oversight, more accountability from contractors, and fair competition. The TRAC Act would give the taxpayers the accountability they need and expect. Now, I am well aware that there are those who are opposed to the bill's contracting suspension provisions. On this point, I would just say that the goal of the TRAC Act is not to stop all government contracting; the goal is to start having some accountability for contracting. NTEU is willing to accept passage of the TRAC Act without H.R. 721's suspension provisions, as long as there is another reliable mechanism to ensure agencies comply with the requirements laid out in the bill.

Instead of rushing to contract out more government work, Congress and the Administration should make the necessary investments today in increased agency staffing, resources, and better training, so that the taxpayers can get government services delivered by federal employees at even lower costs and increased efficiency tomorrow. When supported with the tools and resources they need to do their jobs, there is no one who is more reliable and who can do the work of the federal government better than federal employees. testify.

Thank you for holding this important hearing today and for giving me the opportunity to testify.

LOAD-DATE: September 30, 2002