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March 6, 2002 Wednesday
CAPITOL HILL HEARING TESTIMONY
11760 words COMMITTEE:
GOVERNMENTAL AFFAIRS HEADLINE:
MONITORING, ACCOUNTABILITY AND COMPETITION IN THE FEDERAL AND SERVICE CONTRACT
Bill Tracking Report
Full Text of Bill TESTIMONY-BY:
HARNAGE, SR., NATIONAL PRESIDENT AFFILIATION:
FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO BODY:
BOBBY L. HARNAGE, SR. NATIONAL PRESIDENT AMERICAN
FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO
BEFORE THE SENATE
GOVERNMENTAL AFFAIRS COMMITTEE ON FEDERAL SERVICE CONTRACTING
Chairman Lieberman, Ranking Member Thompson,
Chairman Durbin, Ranking Member Voinovich, and other distinguished members of
the Senate Governmental Affairs Committee, on behalf of the 600,000 federal
employees across the nation and around the world represented by the American
Federation of Government Employees, AFL-CIO, I appreciate this opportunity to
discuss the serious and longstanding problems in federal service contracting
policy. Let me also take this opportunity to thank you, Senator Durbin, for
leading the effort to correct those problems through the introduction of the
Truthfulness, Responsibility, and Accountability in Contracting (TRAC)
(S. 1152). I also want to thank the 17 Senators who have
cosponsored this important legislation, including Senators Lieberman,
Torricelli, and Dayton who sit on this committee. We speak and act in the long
and looming shadow of the Bush Administration's scheme to throw up for grabs the
jobs of at least 425,000 federal employees over the next three years, either
through direct conversions to contractor performance (i.e., giving work to
contractors without public-private competitions) privatizations (again without
competition) or public-private competitions. Not since the "spoils system" at
its very worst have the American people seen an incoming Administration attempt
on such a massive scale to gut the civil service, replacing the working and
middle class Americans in the federal workforce with their political supporters
in the business community.
As AFL-CIO President John Sweeney pointed out
last year to the General Accounting Office's (GAO) Commercial Activities Panel:
"After abuses too infamous to ignore, the nation as a matter of law and
policy rejected a 'spoils system' that allowed new presidents to replace their
predecessors' workforces with cronies and political supporters. We adopted,
instead, a civil service system to ensure that the American people would always
be served by women and men who chose to devote their lives to public good rather
than private gain.
"Rank-and-file federal employees provide the
continuity, attention to details, and institutional memory necessary to ensure
that the American people continue to be the best governed in the world. Because
they are not political appointees, these civil servants can do their job of
serving the public without fear or favor. And because civil servants are part of
the enduring fabric of government, the American people can always count upon
them for service, regardless of a President's political affiliation or
"The idea that as much as one-fourth of the federal
government's executive branch workforce could be outsourced over the next four
years raises grave concerns that, under the banner of 'efficiency,' the nation
could well return to a latter day 'spoils system."'
OFFICE'S COMMERCIAL ACTIVITIES PANEL
Over the last several months, we
have heard a lot of talk about the GAO's Commercial Activities Panel.
Specifically, contractors have insisted that AFGE members stop lobbying in
support of the TRAC Act
until the panel has submitted its
recommendations to the Congress in May.
AFGE did not believe it was
necessary to establish a panel to correct the serious and longstanding problems
in federal service contracting policy. The two worst problems-the absence of
mechanisms to track the cost of service contracting and the refusal to permit
federal employees to compete in defense of their own jobs, for new work, and for
contractor work-are obvious, and their solutions don't require the intervention
of a panel.
Rather, the time to establish a panel to look at
outsourcing was when the controversial "acquisition reform" effort was first
undertaken, not after the damage had been done: the creation of the "human
capital crisis," audits of service contracts so bad they left the Department of
Defense Inspector General "startled," almost no public-private competition and
levels of private-private competition so low that even Bush Administration
officials are alarmed, the finding that more than one-tenth of the federal
contractor workforce made poverty-level wages and that less than one-third of
the federal contractor workforce was covered by prevailing wage laws, etc.
Moreover, the panel was clearly stacked to favor contractor interests.
Seven of the twelve panelists are either contractors or officials in the Bush
Administration. In fact, I would not have even joined the panel had Senate Armed
Services Committee Chairman Carl Levin not assured me that his committee would
not take up proposals from the panel that did not represent a consensus of
views. At the same time, I must also emphasize that I have the utmost respect
for all of my colleagues on the panel. I can't say that I agree with all of them
as far as federal service contracting issues are concerned. However, I will
readily agree that all panelists have conscientiously and capably advocated for
their particular points of view.
It is expected that federal employees
and their unions wait patiently for the panel's report. Have contractors and
their friends in the Bush Administration waited on the panel's report? No,
clearly not. Here are some examples of how the other side has failed to wait for
1. OMB officials have committed the Bush Administration to
privatizing, converting to contractor performance without public- private
competition or subjecting to public-private competition at least 425,000 federal
employee jobs by the end of 2004.
2. As part of that scheme, agencies
were required to convert or compete at least 5% of the jobs (42,500) listed on
their Federal Activities Inventory Reform (FAIR) Act inventories during Fiscal
3. During Fiscal Year 2003, the quota is at least 10% of the
jobs (85,000) on the FAIR Act inventories.
4. In FY03, agencies will be
encouraged to use privatizations to hit their arbitrary quotas.
has pressured agencies to contract out jobs that senior agency managers have
always insisted be performed by reliable and experienced federal employees by
requiring that agencies publish lists of their inherently governmental jobs.
This would, of course, constitute a unilateral expansion of the FAIR Act beyond
its carefully delineated boundaries-and one that would clearly require the
enactment of additional legislation.
6. OMB sent out guidance on July
11, 2001, that instructed the Department of Defense (DoD) to consider
contracting out work that have historically been performed by reliable and
experienced civilian employees, including "Installation Services; Other
Nonmanufacturing Operations, Real Property Management, Operations and
Maintenance; Intermediate, direct or General Repair Work; and Education and
7. OMB has proposed a dramatic change in OMB Circular A-76
with respect to interservice support agreements (ISSAs), contracts for services
between agencies that may ultimately be performed by civilian employees or
contractors. In a Federal Register notice, the Administration proposed that all
ISSAs, old and new, be competed, usually at least every three to five years.
8. In its own package of recommendations for last year's defense
authorization bill, DoD asked for authority to directly convert to contractor
performance without public-private competition work performed by civilian
employees, contract out depot maintenance work, and privatize the commissaries.
9. In last year's defense authorization bill, the Congress moved forward
on a range of service contracting issues, ranging from a Base Realignment and
Closure process last year that institutionalizes the controversial
privatization-in-place mechanism to a recovery audit mandate with an inadequate
public- private competition requirement to an extension of streamlined
procedures for commercial items with values less than $5 million.
Administration has not waited for the panel's report, the Pentagon hasn't waited
for the panel's report, the contractors haven't waited for the panel's report,
and the Congress hasn't waited for the panel's report. Only federal employees
and their unions are supposed to wait for the panel's report-and wait not just
for any panel's report: rather, we are told to wait for a report from a panel
stacked in favor of contractor interests. While contractors and the
Administration continue to attack federal employees, we are told to lay down our
arms until they get some reinforcements. Even by inside-the-beltway standards,
the bald assertion that federal employees and their unions must wait for the
panel's report racks up a level of disingenuousness that takes one's breath
AFGE was urging the Congress to require agencies to carefully
track the costs of contractors, uphold the use of costs as the ultimate
criterion in any public-private competition process, ensure that federal
employees have opportunities to compete for work they are doing as well as for
new work, abolish the use of arbitrary in-house personnel ceilings that prevent
federal employees from competing for work, ensure that agencies emphasize
contracting in to the same extent as contracting out, and provide federal
employees with the same appellate rights as contractors before the GAO Panel was
established because those principles promote the interests of taxpayers and
everyone who depends on the federal government for service. Regardless of the
recommendations offered by the panel, AFGE will still be fighting for those
THE PROBLEMS IN FEDERAL SERVICE CONTRACTING POLICY AND THE
SOLUTION: THE TRAC ACT
Federal service contracting
policy is in desperate need of reform. As a result of wholesale downsizing of
the in-house workforce and indiscriminate service contracting, the federal
government, DoD in particular, is experiencing an entirely self- inflicted
"human capital crisis." Despite the relative absence of competition between
contractors for government work, contractors still acquire and retain almost all
of their work without public-private competition. Agencies, even those with
experience with service contracting, still lack reliable and comprehensive
systems for tracking costs. Evidence mounts that to the extent savings are
achieved through service contracting they come at the expense of workers. The
entire competition process remains unaccountable because only contractors, not
federal employees, have the appellate rights necessary to contest agencies'
service contracting decisions.
And the situation is not getting any
better. OMB has imposed arbitrary, one-size-fits-all conversion / competition /
privatization quotas on all agencies, deliberately encouraging agencies to give
federal employee jobs to contractors without any public-private competition.
(OMB insists that direct conversions that occur without a cost
comparison must be justified by the contracting officer and must result in
reasonable contract prices or a significant quality improvement or both. That's
a pretty loose arrangement, however. It's one thing to allow agencies the
discretion to undertake a direct conversion involving a few employees. It's
another thing entirely to require agencies to hit large, arbitrary targets in
very short time periods, using at least in part direct conversions. A federal
employee would be very justified in believing that, in such an environment,
direct conversions are vulnerable to abuse, either by contracting officers who
want to contract out because of management prejudice and their power to do so is
unchecked since there is no public-private competition process or by contracting
officers who are trying desperately to hit their large and arbitrary targets in
very short time periods.)
Moreover, DoD's high-level Business
Initiatives Council is reportedly considering a wide variety of mechanisms to
convert work to contractor performance without public-private competition that
would take jobs away from tens of thousands of employees.
today's hearing is so important. We will have an opportunity to review those
problems and consider pending legislation-the TRAC Act
would go a long way towards resolving those problems. No piece of legislation is
perfect, especially one that attempts to solve the serious and longstanding
problems in federal service contracting. Indeed, AFGE, at a 2001 hearing of the
House Government Reform Subcommittee on Technology and Procurement Policy, has
already indicated its willingness to work with all lawmakers, conservative and
progressive, Republican and Democratic, to further refine the TRAC
And we translated those good intentions into real action
when we worked last year with Republican and Democratic lawmakers who care about
readiness and efficiency on the House Armed Services Committee to attach a
modified, DoD-specific version of the TRAC Act
to the defense
authorization bill. Contractors were only able to remove the service contracting
reform provisions from the legislation after the House leadership threatened to
prevent the defense authorization bill from ever going to the floor and
committing to deal with the concerns raised by the pro-taxpayer provisions in
conference. It came as no surprise to AFGE that those commitments were never
1. Problem: Indiscriminate Downsizing and Service Contracting Have
Created a "Human Capital Crisis"
No solution to the "human capital
crisis"-the current and looming shortages of federal employees in critical
occupational categories in agency after agency-is possible without a serious
reform of federal service contracting policy. The "human capital crisis" did not
happen by accident. It is the natural result, in large part, of arbitrary
in-house personnel ceilings that force agencies to reduce their workforces and
then prevent them from growing their workforces, irrespective of their
workloads, in favor of an excessive reliance on service contractors. The
would allow agencies to carefully recover from this
self- inflicted crisis by preventing work from being contracted out without
public-private competition and ending the use of arbitrary personnel ceilings.
a. Solution: The TRAC Act
Would Ensure Public-Private
Competition In Most Cases Before Work Could Be Given Contractors
would neither prevent agencies from downsizing,
whether the staff cuts were the result of BRAC or regular reductions-in-force,
nor prevent agencies from contracting out work performed by federal employees.
However, the TRAC Act
would prevent agencies from replacing
federal employees with contractors without first demonstrating the value of
service contracting to taxpayers.
As I mentioned earlier, the federal
workforce has not just been cut. In order to stay under arbitrary personnel
ceilings, many agencies have essentially stopped hiring federal employees and
let attrition take its inexorable toll. Instead, agencies have contracted out
the work, starving the workforce of new blood, new skills, and new ideas. The
would ensure that agencies consider the
appropriateness through a public-private competition process of performing some
new work in-house. In other words, federal agencies would undertake the same
"make-or-buy" decisions that are made by private sector firms, including
contractors, on a daily basis.
The TRAC Act
the federal government a more attractive employer. Although nobody is going to
get rich from a career in the civil service, the work has traditionally been
relatively immune from politics. Such is no longer the case. Why would a person
join the civil service today when his or her job could be contracted out
tomorrow, perhaps even without public-private competition?
earlier, the TRAC Act
would not end service contracting.
However, it would ensure that federal employees have opportunities to compete in
defense of their jobs before they were contracted out. That is, with respect to
the competitive process, whether their jobs were kept in-house would depend on
an objective cost comparison process, and not whether their work was coveted by
politically well-connected contractors. Indeed, if their installations or
offices were productive, federal employees would be allowed, under the
to compete with the private sector for additional
federal government work. This more enlightened approach for the determination of
work assignments obviously creates many recruitment and retention incentives for
productive careers in the federal government.
also provides the framework for appropriately growing the federal
workforce. It is commonly acknowledged that agencies will have to hire
additional staff if the federal government is to begin recovering from the
"human capital crisis." The TRAC Act
does not require that
certain amounts or categories of work be brought back in-house. Rather, the
legislation gives agencies the discretion to determine how many and which
contractor jobs will be reviewed to determine the appropriateness of in-house
performance through public-private competition; the measure also ensures that
agencies will review new categories of work to determine whether it makes more
sense to have the work performed by contractors or federal employees. The
would allow agencies to recover from the "human
capital crisis" by carefully considering, on a case-by-case basis, which
categories of work are appropriate for in-house performance.
would also give managers incentives to improve.
Currently, when managers run into trouble, they all too frequently contract out
the work. They outsource their problems, instead of working to solve them.
Because it is so easy to contract out, and because they can often count on
working for the contractor, managers sometime have little incentive to improve
in- house service.
There will be no shortage of candidates to perform
additional work in-house. Many federal employees will lose their jobs through
direct conversions, public-private competitions, privatizations, downsizing, and
BRAC over the next several years. The cost comparison requirements for new work
and contractor work will give federal agencies an opportunity to retain that
valuable human capital. Additional staff may well come from the private sector,
particularly with respect to work acquired from contractors. Just as contractors
sometimes "staff up" to perform work by hiring some of the federal employees who
used to do the work, so would federal agencies "staff up" by hiring former
b. Solution: The TRAC Act
Eliminate Arbitrary In-House Personnel Ceilings
would eliminate the arbitrary in-house personnel ceilings that have
been instrumental in bringing about the "human capital crisis." Arbitrary
personnel ceilings keep agencies from hiring new staff or force the firing of
existing staff, irrespective of budgets and workloads. When workload exceeds the
in-house workforce, agencies simply contract out the work-often at higher costs.
The TRAC Act
would ensure that agencies manage their workforces
by workloads and budgets, not by arbitrary numbers, empowering agencies to use
federal employees or contractors, depending on which workforce is more
According to OMB, during the Clinton Administration, several
agencies-including the Departments of Agriculture, Health & Human Services,
Housing & Urban Development, State, Education, and Treasury, as well as the
Environmental Protection Agency-said that they each could have saved millions of
dollars by performing work with federal employees instead of contractors but did
not do so because they were forced to work under arbitrary personnel ceilings.
GAO has also reported that agencies sometimes manage their in-house workforces
by personnel ceilings set by OMB that "frequently have the effect of encouraging
agencies to contract out regardless of the results of cost, policy, or high-risk
The problem is particularly bad at DoD. In 1995, the personnel
directors of the four branches of the Armed Forces told the Congress that
arbitrary personnel ceilings-not workload, cost, or readiness concerns-were
forcing them to send work to contractors that could be performed more cheaply
in-house. GAO reported in 1997 that a "senior command official in the Army
stated that the need to reduce civilian positions is greater than the need to
save money". An earlier report by the DoD Inspector General noted that the goal
of downsizing the public workforce is widely perceived as placing the DoD in a
position of having to contract for services regardless of what is more desirable
or cost- effective.
And it's gotten worse. The Bush Administration's
direct conversion and privatization quotas are nothing more than arbitrary
reductions in the number of federal employees so that they can be replaced by
contractors without any public-private competition.
would move us away from sterile debates about downsizing and
upsizing so that we can finally talk about rightsizing. If agencies prove they
can do work more efficiently through a public-private competition, they can hire
the additional employees necessary to perform the work, notwithstanding any
arbitrary personnel ceilings. If they can't perform the work more efficiently,
then the agency couldn't hire any additional employees. The legislation would
ensure that agencies always use the most efficient, most effective, and most
reliable service provider, instead of having to always choose contractors.
For DoD, management by arbitrary personnel ceilings has been statutorily
prohibited, both in Title 10 as well as in a perennial general provision in the
defense appropriations bill. Nevertheless, DoD's high-level Business Initiatives
Council recently repudiated the use of "civilian full-time equivalent targets. .
.in order to make the most efficient use of civilian personnel," implicitly
acknowledging that DoD continues to manage its workforce by personnel ceilings.
The TRAC Act's
requirement for public-private
competition would eliminate any incentive for the Pentagon to continue to defy
the prohibitions against artificially constraining the civilian workforce: since
the work has to be competed in most cases, there's no reason to unfairly
discriminate against federal employees.
c. Solution: The TRAC
would allow lawmakers to develop a better understanding of the
human toll from service contracting as well as the impact of inferior private
sector pay and benefits on contractor performance.
The Office of
Personnel Management and the Department of Labor would be charged under the
with comparing the pay and benefits of federal
employees to their contractor counterparts and then reporting back to the
Congress in order to determine the human toll from contracting out.
is well-established that contracting out has been used in the private sector and
in the non-federal public sector to shortchange workers on their pay and
benefits and to avoid unions. It is likely that this pernicious practice exists
at the federal level as well. In 1998, at the request of AFGE, Representatives
Steve Horn (R-CA) and Dennis Kucinich (D-OH) asked the GAO to examine the pay
and benefits of the federal service contractor workforce. Congressional
auditors, however, came back empty-handed: agencies couldn't be helpful because
they did not keep the relevant information and contractors did not respond to
surveys. A survey conducted by GAO in 1985 of federal employees who were
involuntarily separated after their jobs were contracted out revealed that over
half "said that they had received lower wages, and most reported that contractor
benefits were not as good as their government benefits."
Policy Institute (EPI), in a ground-breaking 2000 study, has determined that
more than one in ten federal contractor employees earn less than the "living
wage" of $17,000 per annum, i.e., the amount of money necessary to keep a family
of four out of poverty.
"The federal government saves money by
contracting work to employers who pay less than a living wage ($8.20 per hour).
Even the federal government jobs at the low end of the pay scale have
historically paid better and have had more generous benefits than comparable
private sector jobs. As a result, workers who work indirectly for the federal
government through contracts with private industry are not likely to receive
wages and benefits comparable to federal workers. . .
Institute; "The Forgotten Workforce: More Than One in 10 Federal Contract
Workers Earn Less Than a Living Wage"; November 27, 2000; page 2.
Contractors ritualistically invoke the Service Contract Act whenever the
human toll from service contracting is raised. However, EPI's research reveals
the very limited reach of prevailing wage laws.
"In 1999, only 32% of
federal contract workers were covered by some sort of law requiring that they be
paid at least a prevailing wage. . .But even this minority of covered workers is
not guaranteed a living wage under current laws. For example, the Department of
Labor has set its minimum pay rate at a level below $8.20 an hour for the
workers covered by the Service Contract Act in 201 job classifications."
Economic Policy Institute; "The Forgotten Workforce: More Than One in 10
Federal Contract Workers Earn Less Than a Living Wage"; November 27, 2000; page
GAO has been unable to determine the extent to which contracting out
undercuts workers on their wages and benefits. And despite its pioneering work
in this area, EPI acknowledges that
"Further research, such as a survey
of contracting firms, is needed in order to know more about these workers and
their economic circumstances."
The issue of contractor pay and benefits
received considerable attention during the recent debate on aviation security.
Virtually all participants in that debate, regardless of their political
affiliation or position on the ideological spectrum, agreed that the failure of
contractors to provide workers with decent pay and benefits contributed
significantly to the crisis in aviation security that ultimately led to broad
and bipartisan support for the function's federalization.
While there is
much talk about the "human capital crisis" in the federal workforce, the debate
over aviation security focused much-needed attention on the "human capital
crisis" in the contractor workforce, one that has been shrouded in secrecy
because of poor contract administration and contractors' stubborn opposition to
even the most basic efforts to determine what work contractors are performing
and how much they cost.
(The TRAC Act,
elsewhere in this testimony, would require agencies to track the cost and
quality of all service contracting efforts, allowing managers to finally begin
to understand the impact of inferior contractor pay and benefits on the delivery
In fact, the Aviation and Transportation Security Act (S.
1447) established a valuable precedent with respect to the pay and benefits of
federal employees. Concerned about the impact of substandard compensation on the
quality of work of airport screeners, the legislation requires future contractor
screeners to provide their employees with no less compensation than that earned
by federal employee screeners. This precedent should eventually pave the way for
excluding pay and benefits from consideration during the competition process, so
that awards can be based on systems and staffing levels, rather than what's
worse for workers.
2. Problem: Federal employees are unfairly prevented
from competing in defense of their own jobs, for new work, and for contractor
work. Taxpayers are prevented from learning which sector is able to deliver
government services in the most cost- effective manner.
a. Solution: The
would ensure federal employees have opportunities to
compete for their own work as well as for some new work.
Contrary to the
interests of taxpayers and federal employees, almost all work is given to and
retained by contractors without any public-private competition, even though
federal employees win 60% of the competitions actually conducted.
the agency considered to be the champion of public-private competition,
nevertheless, almost never uses public-private competition before giving work to
"(C)ontracts resulting from a cost comparison performed in
accordance with OMB Circular A-76 represent an extremely small portion of the
total number of service contracts awarded by the Department during fiscal year
1999 (less than 1 percent). Further, these contracts represent a very small
portion of the total dollars awarded by DoD to private sector contractors during
fiscal year 1999."
Jacques Gansler, Under Secretary for Acquisition
& Technology, Department of Defense; Senate Report 106-53; December 26,
At the same time that DoD's civilian workforce has been
significantly downsized, service contracting in DoD has increased dramatically.
"From FY 1992 through FY 1999, DoD procurement of services increased
from $39.9 billion to $51.8 billion annually. The largest subcategory of
contracts for services was for professional, administrative, and management
support services, valued at $10 billion. Spending in this subcategory increased
by 54 percent between 1992 and 1999."
Robert J. Lieberman, Assistant
Inspector General, Department of Defense; "Federal Acquisition: Why Are Billions
of Dollars Being Wasted?" (testimony before the House Subcommittee on Government
Management, Information, and Technology); March 16, 2000.
That is, DoD
has dramatically increased service contracting and, as discussed earlier,
reduced its civilian employee workforce- while almost never using public-private
There is actually even less public-private competition
outside of DoD. According to GAO, in the handbook for the Commercial Activities
Panel's organizing meeting, "OMB reports that one- tenth of one percent of
civilian agency commercial activities has been competed using OMB Circular
A-76." It is important to keep in mind that non-DoD agencies contract out for
more than $40 billion worth of services annually.
At the Department of
Housing and Urban Development (HUD), for example, despite hundreds of millions
of dollars worth of service contracting over the last several years involving
work that has historically been performed by federal employees, the A-76 public-
private competition process has never been used. HUD managers systematically
invoke exceptions that allow contractors to acquire work without any
public-private competition. And according to a Department of the Interior (DoI)
internal memorandum, "it is DoI's policy to use exemptions to formal A-76 cost
comparisons to the maximum extent possible."
Moreover, there is often
little competition among contractors for work. The DoD Inspector General
reported to the House Government Reform Subcommittee on Government Management
that in excess of three-fifths of the contracts he and his staff surveyed
suffered from "inadequate competition." Regardless of the level of
private-private competition, 77% of the surveyed contracts had "inadequate cost
estimates" that "clearly left the government vulnerable-and sometimes at the
mercy of the contractor to define the cost."
The relative absence of
private-private competition holds true even with regard to markets considered
"Most of the 22 large (information technology goods and
services) orders we reviewed were awarded without competing proposals having
been received. Agencies made frequent use of statutory exceptions to the fair
opportunity requirement. Further, contractors frequently did not submit
proposals when provided an opportunity to do so. Only one proposal was received
in 16 of the 22 cases-the 16 cases all involved incumbent contractors and
represented about $444 million of the total $553 million awarded."
General Accounting Office, "Contract Management: Few Competing Proposals
for Large DoD Information Technology Orders" (GAO/NSIAD-00-56), p. 4.
Bush Administration officials have noticed with alarm the inadequacy of
competition between contractors.
"Because we are spending the public's
money, there are some goals that cannot be compromised in the name of
efficiency. Since the beginning of the (acquisition) reform movement, over a
decade ago, I have not seen a serious examination of the effects of reform on
competition, fairness, integrity, or transparency. As a result, I think we are
seeing some serious competitive problems surface with the proliferation of
government-wide contracting vehicles and service contracting."
Styles, then the Nominee to be Administrator of the Office of Federal
Procurement Policy, Hearing of the Senate Governmental Affairs Committee; May
17, 2001; p. 2.
Federal agencies need not be at the mercy of sole-source
contractors, however. If GAO reports that savings are possible from individual
A-76 competitions, and if OMB insists that savings are generated through A-76
competitions generally, whether the work stays in-house or is contracted out,
and if federal employees win 60% of the public-private competitions actually
conducted, then federal employees should be competing for more work, both for
their own as well as for new work and currently outsourced work.
agencies were being run in the interests of taxpayers and the people who depend
on the federal government for services, managers would be actively considering
in-house performance of work. Would a firm in the private sector-a big defense
contractor, let's say-automatically contract out almost all new work, as DoD
does now? Of course not.
It is a homely metaphor, but today, in the
federal services marketplace, there are two shops, a civilian employee shop and
a contractor shop. However, agencies never use the civilian employee shop-no
matter how much less costly, no matter how much more efficient we are, and no
matter how much more reliable we are.
The TRAC Act
would require that agencies subject work performed by federal employees as well
as new work to public-private competition before it is given to contractors. The
public-private competition requirement was carefully written to ensure that it
would not apply to work performed by the private sector prior to the enactment
of the legislation. The public-private competition requirement also does not
apply to contracts with values less than $1 million for work not performed at
the time by federal employees. The legislation also completely exempts contracts
for design, construction, and engineering, as well as specialized scientific and
technical contracts for work not performed at the time by federal employees that
are undertaken for research and development.
The establishment of
regular public-private competitions will reduce the time necessary to complete
the competitions. Currently, agencies have no incentive to become quicker and
more adept at performing public-private competition because managers are
accustomed to simply giving work to contractors. The more competitions they
conduct, the more expert managers will become. Once agencies understand that
public-private competition is not optional, managers will have no choice but to
develop the capacity to conduct the competitions expeditiously, equitably, and
efficiently. With respect to new work that is subject to the public-private
competition requirement, agencies can perform that work in the interim with
federal employees-either existing or newly-hired temporary or permanent
employees in that agency or in another agency-or even temporary contractors.
b. Solution: The TRAC Act
would ensure that federal
employees have fair opportunities to compete for some work that is currently
Despite acquiring their work with virtually no
public-private competition and little private-private competition, contractors
are never subjected to much-needed public-private competition to see if their
work could be performed more efficiently by reliable and experienced federal
The prospect of contracting in would keep contractors from
forcing taxpayers to swallow costly post-award mark-ups. Usually, there is very
little competition among contractors for work, especially when the initial
contract comes up for renewal. Columbia University Professor Elliot Sclar, who
testified before the House Government Reform Subcommittee on Government
Management in 1998 on contracting out, has described service contracting as a
"...dynamic political process that typically moves from a competitive
market structure towards a monopolistic one. Even if the first round of bidding
is genuinely competitive, the very act of bestowing a contract transforms the
relative market power between the one buyer and the few sellers into a bilateral
negotiation between the government and the winning bidder.
textbook models of competition so prized by privatization advocates provide no
guidance to what actually occurs when public services are contracted. Over time,
the winning contractor moves to secure permanent control of the 'turf' by
addressing threats of potential returns to (contracting in) or from other
outside competitors. To counteract the former threat, they move to neutralize
competition, most typically through mergers and market consolidation among
contractors. This trend helps to explain why two-thirds of all public service
contracts at any time are sole-source affairs...."
AFGE has long
believed that if savings were possible from competing the jobs of federal
employees, then they were possible from competing the jobs of contractors as
well. As you know, OMB Circular A-76 provides for insourcing as well as
outsourcing. The same rules and the same rationales apply.
Administration agreed with us-or so we believed. A senior OMB official even
committed to ensure that agencies undertook more contracting in. In a February
2, 1999, letter to me, Acting Deputy Director for Management G. Edward DeSeve
"I also agree with you that we should ask federal managers to
'take pause' and consider the potential benefits of converting work from
contract to in-house performance. As I indicated at our October meeting, OMB
will encourage agencies to identify opportunities for the conversion of work
from contract to in- house performance. . ."
No such guidance was ever
offered. We were not deterred, however. Working with lawmakers on the House and
Senate defense appropriations subcommittees, principally Senator Durbin, we
secured the enactment of this report requirement:
"The Secretary of
Defense shall submit a report to. . .identify those instances in which work
performed by a contractor has been converted to performance by civilian or
military employees of the Department of Defense. . .In addition, the report
shall include recommendations for maximizing the possibility of effective
public-private competition for work that has been contracted out."
Congress, FY 2000 Defense Appropriations Act, Section 8109.
resulting report on DoD's contracting in activities-or, more precisely, the lack
of contracting in activities-was hardly a surprise. DoD's compliance-or, more
precisely, DoD's complete failure to comply-with the second requirement to
develop a contracting in policy did cause some surprise.
"Eight of the
286 (OMB Circular A-76 public-private competition) studies (completed during the
previous five years) involved work which was being performed by the private
sector." (Note: Federal employees were victorious in five out of the eight
cases.) "In responding to the Section 8109 requirement to present
recommendations for maximizing the possibility of effective public-private
competition for work that has been contracted out, the Department reiterated
existing policy guidance on the subject."
General Accounting Office, DoD
Competitive Sourcing (01-20), December 2000.
At a time when the Pentagon
is supposedly championing public- private competition, less than 3% of all A-76
studies performed by DoD were directed at work performed by contractors. In
other words, public-private competition is being used to replace federal
employees with contractors, instead of to make DoD as a whole more efficient.
Moreover, after being directed to come up with a plan for increasing its
contracting in, the Pentagon thumbed its collective nose at the Congress. As
usual, the situation is worse in non-DoD agencies where contractors' work is
never subjected to the scrutiny of public-private competition.
respect to contracting in, it's illustrative to look at local government, using
survey data collected by the International City / County Management Association.
"Our data show significant incidence of reverse privatization or
contracting back in previously privatized services. . .From 1992- 1997, 88
percent of governments had contracted back in at least one service and 65
percent had contracted back in more than three services. On average across all
places, 5 services were contracted back in from 1992 to 1997."
Warner and Amir Hefetz, Privatization and the Market Structuring Role of Local
Government, Cornell University Department of City and Regional Planning Working
Paper #197, December 2000."
Why so much contracting in? The authors
"Contracting back in reflects problems with the contracting
process itself, concerns over limited efficiency gains and maintenance of
service quality. . .Analysis of cases of contracting back in shows that it is
motivated by desire to maintain service quality and local control and to ensure
cost savings in the face of changing markets."
What is the explanation
as to why there is so much contracting in at the local level and so little at
the federal level, especially given the strong likelihood that there is much
less private- private competition for the federal government's work because of
the much greater complexity of the work required and contract administration
problems are so much more severe?
Here's the most likely explanation,
according to the authors:
"Ideology does not dominate local service
delivery decisions; rather, pragmatic local government demonstrate the continued
importance of public investment, innovation and direct involvement in service
In other words, local officials want to do what's right for
their communities. Can the same good intentions be attributed to those who have
run federal service contracting in recent years?
would neither prohibit contracting out nor require contracting in.
Rather, the legislation would simply require agencies to subject approximately
the same numbers of federal employee and contractor jobs to public-private
competition. That is, agencies would choose how many and which contractor jobs
would be subject to public-private competition.
c. Solution: The
would ensure that award decisions for public-private
competitions would continue to be based on the objective criterion of costs and
thus uphold the interests of taxpayers.
Contractors are not happy about
losing almost three-fifths of the public-private competitions conducted under
OMB Circular A-76. Rather than cut their costs and provide taxpayers with a
better deal, contractors want to junk the circular and replace it with a
pro-contractor system that emphasizes "best value."
Instead of making
the best decision for taxpayers, i.e., what costs less, acquisition officers
would be encouraged to use all manner of subjective criteria to determine the
winner of a public- private competition process, including such whimsical
notions as a contractor's ability to respond "flexibly" to changing
circumstances or the contractor's use of "innovative" approaches. "Best value"
would allow a contractor to exceed the requirements of the solicitation with the
understanding that although she may charge more, her bid is more "responsive,"
and thus more closely follows the intent of the solicitation. In other words,
what the contractors can't win on costs, maybe they can win with "fudge"
Contractors try to justify the use of "best value" by falsely
asserting that A-76 doesn't allow for consideration of qualitative factors.
Wrong. Agencies can already use a real "best value" system-one that is being
used today to improve the quality of service while still ensuring that the
ultimate decision on who should provide the service is based on costs-a
bottom-line criterion that, even in the morally murky world of federal service
contracting, is objective.
Even the strongly pro-contractor Clinton
Administration strongly disagreed with contractors on "best value." In a July
21, 1998, letter, a senior OMB official, wrote that "The Administration fully
supports the use of 'best value' procurement techniques and is currently using
them in private-private competitions and public-private competition, conducted
in accordance with the requirements of OMB Circular A-76. It must be clear,
however, that the Federal Acquisition Regulations at Part 15 were not developed
with public-private competitions in mind. . .We are opposed to any language that
could be interpreted to permit DoD or any other agency to rely simply on Part 15
in a public-private competition."
By retaining important elements of the
OMB Circular A-76 process- the formal cost comparison, the 10% minimum cost
differential, and the most efficient organization-the TRAC Act
ensures that the interests of taxpayers will be paramount.
Agencies don't track the costs, size, and quality of their contractor
workforces, allowing waste, fraud, and abuse to run rampant through federal
I shall speak a lot about the Department of Defense
(DoD) in my testimony. That is because DoD has the most experience with service
contracting, spending the majority of service contracting dollars. It is also
one of the few agencies that has over the last several years been subjected to
more than cursory Congressional oversight of its service contracting because of
the bipartisan concern generated over how service contracting has undermined
readiness and failed to come close to achieving the savings goals established by
a. The TRAC Act
would allow agencies to
track their contractors' costs.
No one knows exactly how much DoD is
spending on service contracting, let alone if those billions of taxpayer dollars
are being spent wisely. We do know that the cost to taxpayers for service
contracting has increased dramatically. Over the last six years, Pentagon
officials have systematically replaced federal employees with contractors, often
regardless of whether or not it makes any sense. According to the Office of
Personnel Management, the DoD civilian workforce fell from 966,000 to 640,075 in
2001. Service contracting, on the other hand, increased from $39.9 billion in
1992 to $55.9 billion in 1999, according to the Federal Procurement Data System.
(As discussed below, GAO estimates that the annual bill for taxpayers for DoD
service contracts is almost $100 billion.)
It is clear that the emphasis
in DoD's service contracting crusade has been giving the jobs of federal
employees to contractors, not in making sure that work has been well done.
". . .DoD managers and contracting personnel were not putting sufficient
priority during the 1990's on (service contracting), which likewise was
virtually ignored for the first few years of recent acquisition reform efforts.
Consequently, we think the risk of waste in this area is higher than commonly
realized. . .We reviewed 105 Army, Navy, and Air Force contracting actions,
valued at $6.7 billion, for a wide range of professional, administrative, and
management support services amounting to about 104 million labor hours, or
50,230 staff years. We were startled by the audit results, because we found
problems with every one of the 105 actions. In nearly 10 years of managing the
audit office of the IG, DoD, I do not ever recall finding problems on every
item. . ."
Robert J. Lieberman, Assistant Inspector General for Audits,
Department of Defense; "Federal Acquisition: Why Are Billions of Dollars Being
Wasted?" (testimony before the House Subcommittee on Government Management,
Information, and Technology); March 16, 2000.
One of the principal
architects of DoD's massive transfer of work from federal employees to the
private sector, Dr. Jacques Gansler, was sheepish when asked during a Senate
Readiness Subcommittee hearing later that year about the IG's damning report:
". . .I agree with (the IG about) needing significant improvements in
service contracting. . .(T)his has become a major challenge for us. . .(W)e have
to really significantly improve our service buying. . .(I)t's probably going to
take us a few years. . .to shift towards really professional service buying." 1
Jacques Gansler, Under Secretary for Acquisition & Technology,
Department of Defense; "A Hearing on Acquisition Reform" (testimony before the
Senate Subcommittee on Readiness); April 26, 2000.
GAO has weighed in as
well, both with respect to service contracting undertaken pursuant to OMB
Circular A-76 and service contracting generally.
"Efforts to improve the
accuracy of data on savings from A-76 (public-private competition) studies at
the time the studies are completed are warranted, as are efforts to assess
savings over time. Both are key to establishing more reliable savings estimates
and improving the credibility of the A-76 program amidst continuing questions in
Congress and elsewhere."
General Accounting Office, DoD Competitive
Sourcing (NSIAD 01- 20), December 2000.
In an earlier report on A-76,
GAO had noted that entries in the Commercial Activities Management Information
System (CAMIS), the system that is supposed to be used to monitor contracts
undertaken pursuant to the circular,
"are not modified and are being
used continuously without updating the data to reflect changes in or even
termination of contracts. DoD officials have noted that they could not determine
from the CAMIS data if savings were actually being realized from A-76
competitions. Our work continues to show important limitations in CAMIS data. .
.During our review, we found that CAMIS did not always record completed
competitions and sometimes incorrectly indicated that competitions were
completed where they had not yet begun or were still underway. We also
identified where savings data recorded for completed competitions were incorrect
based on other data provided by the applicable service."
Accounting Office, DoD Competitive Sourcing: Results of Recent Competitions
(NSIAD-99-44), March 2000.
According to GAO, DoD has chosen not to keep
its commitment to the Congress to improve its system for reporting the costs of
"The Department of Defense (DoD) spends tens of
billions annually on contract services-ranging from services for repairing and
maintaining equipment; to services for medical care; to advisory and assistance
services such as providing management and technical support, performing studies,
and providing technical assistance. In fiscal year 1999, DoD reportedly spent
$96.5 billion for contract services-more than it spent on supplies and
equipment. Nevertheless there have been longstanding concerns regarding the
accuracy and reliability of DoD's reporting on the costs related to contract
services-particularly that expenditures were being improperly justified and
classified and accounting systems used to track expenditures were inadequate. .
". . .DoD has not developed a proposal to revise and improve the
accuracy of the reporting of contract service costs. DoD officials told us that
various internal options were under consideration; however, these officials did
not provide any details on these options. DoD officials stated that the momentum
to develop a proposal to improve the reporting of contract services costs had
subsided. Without improving this situation, DoD's report on the costs of
contract services will still be inaccurate and likely understate what DoD is
paying for certain types of services."
General Accounting Office,
CONTRACT MANAGEMENT: No DoD Proposal to Improve Contract Service Costs Reporting
(01-295), February 2001.
As bad as the Pentagon is at tracking the costs
of service contracting, DoD at least has some experience in this regard
(although most of it could hardly be called instructive or worthy of emulation).
Nevertheless, the Administration is directing non- DoD agencies to undertake
massive increases in their service contracting without first establishing
systems to reliably and accurately track their outsourcing costs.
credit, the new OFPP Administrator has acknowledged that "agencies do not have a
recurring system to adequately track A- 76 savings over the long term." That is
a stunning admission, given that the Bush Administration intends to use A-76 to
convert / compete / privatize at least 425,000 jobs over the next three years.
Surely it is not too much to expect that agencies be required to track the
billions and billions of dollars spent on service contracting. Clearly,
effective contract administration is one of the many additional costs of service
contracting. Otherwise, service contracting becomes all about replacing federal
employees with contractors, regardless of the expense.
would require agencies to keep track of the costs and savings of
its service contracting. For each service contract, the following cost
information would be tracked and made public: the cost of federal employee
performance at the time the work was contracted out, the cost of federal
employee performance under a most efficient organization plan, the anticipated
cost of contractor performance, the current cost of contractor performance, and
the actual savings achieved by the contract.
If imitation is the
sincerest form of flattery, then TRAC Act
feel very flattered, indeed. The FY01 defense authorization bill included a
provision (Section 354) that required DoD to establish a TRAC-like inventory of
all work involving 50 or more employees that has been subject to performance
review (OMB Circular A-76, strategic sourcing, privatization, or any other
analysis to determine whether the performance of work should be changed). For
each such activity reviewed, the inventory is 1) tracking the cost of conducting
the review; 2) comparing the cost of performance before and after the review;
and 3) comparing the anticipated savings with actual savings, if any. Reviewed
activities will be tracked for this information for at least five years. Reports
from this inventory will be submitted to the Congress annually. The TRAC
would establish a similar system for all contracts in all agencies,
offering real hope that federal service contractors will finally be held
accountable to the taxpayers.
Of course, the cost-tracking requirement
of the TRAC Act
has already won outright flattery from the
leader of a major service contracting group. According to the April 2, 2001,
Federal Times, "(Contract Services Association Gary) Engebretson said he agrees
with part of the TRAC Act
that calls for more reliable
accounting systems to track the cost and savings from outsourcing."
Moreover, the establishment of a public-private competition requirement
will give agencies real choices in the delivery of services and ensure that
careful consideration is given before the taxpayers are billed for additional
service contracting. By ensuring that they are allowed to compete, federal
employees will be able to keep contractors honest-and vice-versa, of course.
b. The TRAC Act
would allow agencies to track their
The TRAC Act
does not focus
only on efficiency. The legislation would also ensure that agencies track
contractors' effectiveness. The TRAC Act
would require agencies
to describe for each contract the quality control process used by the agency in
connection with monitoring the contracting effort; identify the applicable
quality control standards and the frequency of the preparation of quality
control reports; and then determine whether the contractor met, exceeded, or
failed to achieve quality control standards.
c. The TRAC
would allow agencies to track their contractors' workforces.
A former senior OMB official once said when asked about the size of the
contractor workforce, "You can use any number you want. . . But whatever it
is...it is a lot of people." Indeed, it is. Research by Paul Light of the
Brookings Institution who is the author the ground-breaking book, The True Size
of Government, indicates that the service contractor workforce is approximately
4 million employees. In contrast, there are just over 1.8 million executive
branch federal employees. This means the service contractor workforce may well
have grown to at least twice the size of the federal government's in-house
The shadow workforce of contractors has been built up over many
years. As Light observed, the shadow workforce reflects in large part
"decades of personnel ceilings, hiring limits and unrelenting pressure
to do more with less. Under pressure to create a government that looks smaller
and delivers at least as much of everything the public wants, federal
departments and agencies did what comes naturally. They pushed jobs outward and
downward into a vast shadow that is mostly outside the public's consciousness."
OMB officials and contractors have long dismissed the need to document
the size of the contractor workforce, both at the micro (i.e., number of workers
employed under specific contracts) and macro (i.e., number of contractor workers
employed agency-wide and government-wide) levels. "Numbers are not important,"
they blithely insist. "What really matters is how well the job is done." (Of
course, because of the problems discussed above, we can't say how well
contractors are actually performing.)
In documents ranging from the
federal budget to the Federal Activities Inventory Reform Act, detailed
information is kept on the number of federal employees, at both the micro and
macro levels. Clearly, Bush Administration officials, like those who came before
them, believe it is very important to maintain meticulous records about the size
of the federal government's in- house workforce. However, they have historically
professed no interest whatsoever in keeping the same statistics about the
Light reminds us that we cannot talk intelligently
about what government does and what it needs to do without an accurate head
count of the contractor workforce:
"It is impossible to have an honest
debate about the role of government in society if the measurements only include
part of the government. The government also is increasingly reliant on
non-federal workers to produce goods and services that used to be delivered
in-house. Not only does the shadow workforce create an illusion about the true
size of government, it may create an illusion of merit as jobs inside the
government are held to strict merit standards while jobs under contract are not.
It may also create illusions of capacity and accountability as agencies pretend
they know enough to oversee their shadow workforce when, in fact, they no longer
have the ability to distinguish good product from bad.
headcount (to include, among others, contractor employees) would force Congress
and the President to confront a series of difficult questions. Instead of
engaging in an endless effort to keep the civil service looking small, they
would have to ask just how many (employees working directly and indirectly for
the government) should be kept in-house and at what cost. One can easily argue
that the answers would lead to a larger, not smaller, civil service, or at least
a civil service very differently configured."
The Department of the Army
is to be commended for its development of a reliable, comprehensive and
unobtrusive methodology for tracking the costs and size of its contractor
workforce. It is unfortunate that some contractors and some of their allies in
the "acquisition reform" establishment have worked so hard to kill this
important initiative. In addition to tracking costs and size, the information
collected would be used by the Army to determine the extent to which inherently
governmental work had been given to contractors and whether readiness is
undermined if commercial activities are contracted out to an excessive extent.
It is this methodology-endorsed by organizations ranging from the AFL-CIO to the
Reserve Officers Association to the National Association of Public
Administration-which agencies could use in fulfilling the TRAC
requirement for tracking the contractor workforce.
includes an enforcement mechanism to ensure agencies' prompt
compliance with the TRAC Act's
requirements to track contractor
costs, ensure public-private competition for our work and new work before it is
given to contractors, abolish the use of arbitrary in-house personnel ceilings
that prevent federal employees from competing for work, and emphasize
contracting in to the same extent as contracting out.
seriously and constructively with the Clinton Administration to deal with the
concerns of federal employees about the service contracting process. Despite
commitments-to develop a contractor inventory, start contracting in work, stop
managing federal employees by arbitrary in-house personnel ceilings, and
establish a system to track contractor costs-and laws-to end the practice of
managing the DoD civilian workforce by personnel ceilings, develop a plan for
contracting in work, regularly consider contracting in DoD work, stop replacing
downsized employees with contractors without public-private competition-the
situation has not improved. And the Bush Administration, with its aggressively
pro-contractor agenda, is making this situation far, far worse.
requires agencies to have made "substantial progress"
during the 180 days after enactment towards meeting the legislation's
requirements. OMB is responsible for certifying "substantial progress" towards
compliance on an agency-by- agency basis. If OMB, which is commonly acknowledged
to be run and staffed by those who are predisposed towards downsizing and
service contracting, is unable to certify that a particular agency is in
compliance, that agency may not undertake any new service contracts. That
agency, however, may ask OMB at any time- the next week, the next day, or later
that afternoon-for another chance to be certified, presumably as a result of
making "substantial progress" towards reforming its service contracting
During any agency's temporary suspension of service
contracting, OMB may waive it, on an agency-by-agency basis, for service
contracts necessary for national security, patient care, and extraordinary
economic harm. There are no administrative, legislative, or judicial reviews or
appeals to the use of the exceptions. AFGE can't tie up agencies in courts or
Congress over the use of those three very broadly-worded exceptions.
This enforcement mechanism was based on a bipartisan, non- controversial
provision in the Senate FY01 defense authorization bill that imposed a
moratorium on further downsizing of the DoD acquisition workforce unless the
Secretary could certify that certain criteria had been met.
to OMB Criticism of the TRAC Act
A representative of
the Bush Administration harshly criticized the House TRAC Act
(H.R. 721) at a June 28, 2001, hearing of the House Government Reform
Subcommittee on Technology and Procurement Policy. While we do not concede the
accuracy of the OMB criticism, I am sure, Senator Durbin, you are pleased to
know that your legislation satisfactorily addresses that criticism.
1."...TRAC would freeze all currently contracted activities to see if
they could be performed more cost effectively by the public sector..."
This is false. Under no circumstances would any temporary suspension in
the House or Senate TRAC Acts
affect "currently contracted
activities." Besides, as discussed above, there is no immediate temporary
suspension in the Senate bill. Under the Senate TRAC Act,
agencies have 180 days to start making progress towards complying with the
requirements of the legislation to track contractor costs, giving federal
employees opportunities to compete in defense of their jobs and for new work,
abolishing arbitrary in-house personnel ceilings, and emphasizing contracting in
to the same extent as contracting out.
If the Office of Management and
Budget (OMB) certifies six months after enactment that an agency is making
"substantial progress", then there are no consequences. If not, then there would
be a temporary suspension on new service contracting-with broad exceptions for
national security, patient care, and extraordinary economic harm-until such time
as that agency was certified as being in compliance-the next week, the next day,
or later that afternoon.
2."...and would require an entirely new set of
financial and other reporting systems that would not contribute to the
government's ability to administer contracts, improve performance, or enhance
This is half-right. Yes, the TRAC Act
would require new contractor tracking systems. However, these tracking systems
would actually be helpful in ensuring better contract administration, as the
witness from GAO pointed out during the question and answer session at the June
28th hearing on the House side and as the leader of a major contractor group
(the Contract Services Association of America) has already admitted.
3."By suspending all facilities and operations contracts including, for
example, all federal scientific and criminal lab contracts, many of the primary
functions of government would be seriously affected-constituting a serious
threat to our national defense.
As noted above, the Senate TRAC
does not have an immediate temporary suspension. Rather, agencies
have six months to make "substantial progress" towards implementing the reforms
required by the TRAC Act
until OMB is charged with determining
whether they are in compliance. Unlike the House bill, the Senate TRAC
exempts from the legislation "specialized scientific and technical
contracts for work not performed at the time by federal employees that are
undertaken for research and development..." Moreover, the TRAC
enforcement mechanism poses no threat to "national defense"
because there is an exemption for all future contracts necessary for "national
4."Even Medicare would not be able to issue payments since
this is performed by contract."
This is really grasping at straws. If it
is not already clear that the legislation is not intended to address Medicare
contracts, an exemption can easily be written in the bill at its mark up.
5."TRAC also would require public-private competitions for all future
contracts, including the exercise of all options, extensions, and renewals by
any contracting officer. We estimate that TRAC would affect over 230,000
contract actions involving contracts over $25,000 totaling $100.3 billion in
2000-an untenable outcome."
That the TRAC Act
serious about ensuring that federal employees have opportunities to compete is
true. However, the Senate TRAC Act
does not require
public-private competitions for "all options, extensions, and renewals."
Moreover, the legislation also includes a threshold exempting contracts for new
work below $1,000,000 in value from the public-private competition requirement.
Giving work performed by federal employees to
contractors without public-private competition is pork-barrel politics at its
worst. AFGE's opposition to direct conversions, whether through share-in-
savings contracts, Native American direct conversions, or the myriad of
exceptions loopholes, and waivers in the A-76 process is non-negotiable, whether
five jobs or five hundred jobs are at stake.
At the same time,
public-private competition must be used to make the federal government more
efficient, not as a "spoils system" by the new Administration to replace federal
employees with the businesses of politically well-connected contractors.
Contractors and their allies can no longer have it both ways, the federal sector
always under scrutiny, the contractor sector immune from review; competitions
and conversions mandatory for the jobs of federal employees but strictly
off-limits for contractors; showering new work on contractors while putting
federal employees on a starvation diet.
The establishment of a process
that subjects work to public- private competition before it is given to
contractors and holds contractors to the same scrutiny as that experienced by
federal employees, like that in the TRAC Act,
taxpayers and all Americans who depend on agencies for important services.
First, taxpayers will save money because contractors will finally have
real competition. Second, the quality of work will be improved because managers
will finally have real choices in the delivery of services. Third, a real
public-private competition process will bolster contract administration and thus
reduce waste, fraud, and abuse. Fourth, ensuring that agencies at least consider
the appropriateness of in-house performance will help to end the "human capital
It's time for the Congress to face a fundamental and
inescapable truth: if public-private competition works, then it works for new
work and contractor work-not just federal employee work. If public-private
competition isn't right for contractor work or new work, then it's not right for
federal employee work either-and the entire outsourcing process must be shut
That concludes my testimony. I would be happy to entertain any
March 12, 2002