THE TRUTHFULNESS, RESPONSIBILITY, AND
1. TRACK COSTS:The TRAC Act would require agencies to track costs and savings from contracting out. Right now, agencies are assuming that promised savings from contractors are actually realized. However, as the General Accounting Office (GAO) has reported, costs have a way of increasing over the course of contracts. GAO has also reported that agencies donĦt have systems in place to track costs. This information could be used to encourage contractors to do better work or bring work back in-house when it could be performed more efficiently by federal employees. Either way, the taxpayers benefit.
2. REQUIRE PUBLIC-PRIVATE COMPETITION: The TRAC Act would prevent agencies from contracting out new work and work performed by federal employees without public-private competition. The Department of Defense (DoD) recently admitted that less than one percent of its contracts are first subjected to public-private competition, despite the fact that, according to GAO, federal employees win 60% of the competitions actually conducted. Non-DoD agencies conduct virtually no public-private competitions. That is, almost all work is contracted out without public-private competition. And thatĦs either work federal employees are doing or work federal employees could do. Federal employees deserve to compete in defense of their own jobs and compete for work that they can do. Agencies can do more efficiently in-house much of the work that is currently contracted out without public-private competitions, and save money for the taxpayers.
3. ABOLISH ARBITRARY PERSONNEL CEILINGS: The TRAC Act would allow agencies to hire additional federal employees if they could do the work more efficiently in-house. Agencies continue to manage their federal employees by arbitrary personnel ceilings. Even when they have work, and money to pay for that work, they still contract out that work, often at higher costs, because they canĦt hire the necessary staff. There are already laws prohibiting the management of DoDĦs workforce by arbitrary personnel ceilings that are routinely ignored. Also, the Federal Workforce Restructuring Act of 1994 that reduced the federal workforce by 275,000˘reductions now exceed 400,000˘said that displaced federal employees could not be replaced by contractors, but that safeguard was also regularly violated, as senior Clinton Administration officials openly admitted.
4. CONTRACTING IN: The TRAC Act would require agencies to subject work performed by contractors to the same level of public-private competition as work performed by in-house staff. If public-private competition is good for federal employees, then it should be good for contractors, especially since the contractor workforce is estimated to be twice the size of the federal workforce, and contractors acquired most of their work without public-private competition in the first place. However, agencies compete and convert (give to contractors without public-private competitions) federal employee jobs almost exclusively. From 1995 through 1999, according to GAO, DoD conducted 286 public-private competition reviews. Only 8 of those reviews were for work performed by contractors. Federal employees won 5 out of 8 of those reviews˘and each time federal employees won, they saved money for the taxpayers, as even DoD admitted. Taxpayers could save much more if contractors were forced to defend their work to the same extent as federal employees. The one time during the Clinton Administration contractors were told that their contracts might not be automatically renewed, they magically came up with 15-20% savings. Imagine the savings to taxpayers if contractors were actually required to compete!
5. WAGES AND BENEFITS: Contracting out in the private sector and elsewhere in the public sector is used to undercut workers on their wages and benefits. The same thing is likely happening in the federal sector. The TRAC Act would require the Office of Personnel Management and the Department of Labor to conduct a comparison of federal employee and contractor compensation packages to be sure. GAO says they canĦt get this information without cooperation from the contractors˘who wonĦt cough up the necessary data. The Economic Policy Institute recently reported that more than 1 in 10 contractor employees earn less than a living wage ($17,000 annually), the amount necessary to keep a family of four above the poverty line, but said that more research into the human toll from federal service contracting is necessary.
THE BUSH ADMINISTRATIONĦS AGGRESSIVE PRO-CONTRACTOR AGENDA:
Officials at the Office of Management and Budget (OMB) have committed the Bush Administration to converting to contractor performance without public-private competition or subjecting to public-private competition at least 425,000 federal employee jobs over the next four years. As part of that effort, agencies must convert or compete at least 5% of the jobs listed on their Federal Activities Inventory Reform (FAIR) Act inventories during Fiscal Year 2002 and 10% of the jobs in Fiscal Year 2002. ThatĦs almost 128,000 federal employee jobs over the next two years alone. OMB is also attempting to pressure 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.
Please note the thoroughly one-sided nature of this pro-contractor agenda: Not a single contractor job is to be competed or converted. Agencies can fulfill their targets exclusively by direct conversions, i.e., simply giving federal employee jobs away to contractors. Moreover, no effort will be made to learn more about the efficiency and effectiveness of the burgeoning contractor workforce.
Mr. Chairman and members of the subcommittee, 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 impress upon the House Government Reform Subcommittee on Technology and Procurement Policy the importance of quick passage of the Truthfulness, Responsibility, and Accountability in Contracting (TRAC) Act (H.R. 721), legislation which has been cosponsored by 182 House lawmakers, including 20 on the Government Reform Committee.
Despite the legislationĦs widespread support, both last year and this year, both in the House as well as on the Government Reform Committee, this is the first hearing at which this important legislation will be discussed. Needless to say, this opportunity is long overdue.
Mr. Chairman, we were told last year that this hearing would be devoted to the TRAC Act. As it turned out, the TRAC Act was not even mentioned in the two-page letter sent to witnesses scheduled to speak at this hearing.
At the same time, Mr. Chairman, let me express my appreciation for your consistently strong leadership on many issues of concern to federal employees and their families: pay, health care, retirement, and child care in particular. I understand the conflict you feel on the controversial issue of federal service contracting. However, I think the more you study the TRAC Act the more you will find it addresses the many serious problems and inequities in the federal service contracting process.
Mr. Chairman, we speak and act in the long and looming shadow of the Bush AdministrationĦs scheme to throw up for grabs the jobs of at least 425,000 federal employees over the next four years, either through direct conversions to contractor performance (i.e., giving work to contractors without public-private competitions) 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 recently to the General Accounting OfficeĦs (GAO) Commercial Activities Panel:
Ironically, the much more limited use of OMB Circular A-76, the public-private conversion / competition process, by the Clinton Administration was a loss for taxpayers. In fact, A-76, after all of these years, is still a money-loser. According to GAOĦs DoD Competitive Sourcing: Some Progress, but Continuing Challenges Remain in Meeting Program Goals (NSIAD-00-106) report from last year:
exceeding savings. The PresidentĦs fiscal year 2001 budget submission reports that during fiscal year 1998 and 1999, the overall costs of the A-76 program have exceeded the expected savings."
Bush Administration officials appear to have learned little from their predecessorsĦ mistakes. Not only are they dramatically expanding the scope of the process, they are extending its reach into every single agency.
FEDERAL LIVING WAGE RESPONSIBILITY ACT (H.R. 917)
Although I will devote the bulk of my statement to H.R. 721, I do want to express AFGEĦs support for the Federal Living Wage Responsibility Act (H.R. 917), legislation introduced by Representative Luis Gutierrez (D-IL) that has racked up almost 80 cosponsors, including several on the House Government Reform Committee.
This legislation would, as AFL-CIO President John Sweeney described at the hearing held earlier this month by the GAO Panel, "enable hardworking contractor employees to lift themselves and their families out of poverty." Of course, H.R. 917 would ensure that federal agencies also pay their direct employees at least a "living wage," i.e., the amount of money necessary to keep a family of four above the poverty line. Finally, this legislation would boost the benefits of low-income contractor and federal employees.
As the legislation progresses, AFGE will work with the sponsor to perfect the provision that boosts benefits for low-income federal employees to make it compatible with H.R. 1307, Representative Steny HoyerĦs bill to increase to 80%, on average, the federal governmentĦs contribution towards health insurance premiums for federal employees.
ThereĦs a lot of talk about treating more humanely those federal employees victimized by the service contracting process, although such rhetoric is often used to advance proposals intended to make more palatable the direct conversion of jobs to the private sector without any public-private competition. However, if any lawmaker really wants to deal with the human toll of federal service contracting, they should support the prompt passage of the Federal Living Wage Responsibility Act.
LEGAL STANDING FOR FEDERAL EMPLOYEES
As a former contractor lawyer, Mr. Chairman, I am sure you appreciate this obvious inequity: contractors˘and only contractors˘can take agencies to Federal Claims Court and GAO in the event of arbitrary service contracting decisions. This isnĦt just another instance of the service contracting process being stacked against federal employees. The failure to afford federal employees legal standing makes the process even more unaccountable. Decision-makers know that they can be held responsible only by contractors. This canĦt help but bias the process against federal employees, who are left with no recourse.
Over the past year, AFGE has taken five cases to court˘providing documented irregularities with the service contracting process totaling tens of millions of dollars˘only to be left with rulings that neither AFGE nor federal employees has legal standing.
Fortunately, Representative Charlie Gonzalez (D-TX) has begun the process of righting this historic wrong with the introduction of H.R. 2227, legislation that would give federal employees the same rights as contractors. H.R. 2227 would amend Title 10 U.S.C., to give appeal rights to DoD employees with respect to actions or determinations made under OMB Circular A-76.
Of course, Representative GonzalezĦs legislation is just the beginning. Non-DoD employees should have the same rights as DoD employees. Moreover, much service contracting takes place outside of OMB Circular A-76. Federal employees should have legal standing in all service contracting situations in order to defend their rights. Finally, it may well be necessary to provide DoD employees with standing to enforce longstanding prohibitions against the management of DoDĦs civilian workforce by personnel ceilings. DoD is instead charged with managing its civilian workforce by workloads and budgets, not arbitrary numbers. However, these prohibitions have been broken, again and again. Given the failure of the Congress to prevent the practice of management by personnel ceilings from being perpetrated, that burden may have to be assumed by DoDĦs civilian employees.
The Government Reform Committee was one of three House committees to which H.R. 2227 was referred. It is imperative, Mr. Chairman, that you use your influence to waive this committeeĦs jurisdiction and ensure that Representative GonzalezĦs important legislation is included in this yearĦs defense authorization bill. Moreover, Mr. Chairman, you should ensure that comprehensive, government-wide standing legislation is sent to the House floor for approval on an emergency-basis, alongside the TRAC Act. It is unconscionable that the Bush Administration would throw up for grabs the jobs of at least 425,000 federal employees, knowing that, as a result of an historical inequity, they have no appeal rights.
GENERAL ACCOUNTING OFFICEĦS COMMERCIAL ACTIVITIES PANEL
Over the last several months, we have heard a lot of talk about the GAOĦs Commercial Activities Panel. Specifically, contractors have told me that I should direct AFGE members to stop lobbying in support of the TRAC Act until the panel has submitted its recommendations to the Congress by May of next year.
I think that message is disingenuous. The Bush Administration is not waiting for the panelĦs recommendations. Officials at the Office of Management and Budget (OMB) have committed the Bush Administration to converting to contractor performance without public-private competition or subjecting to public-private competition at least 425,000 federal employee jobs over the next four years. As part of that scheme, agencies must convert or compete at least 5% of the jobs (42,500) listed on their Federal Activities Inventory Reform (FAIR) Act inventories during Fiscal Year 2002. During the next year, the quota will be 10% of the jobs (85,000). OMB is also attempting to pressure 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.
Please note the thoroughly one-sided nature of this pro-contractor agenda: Not a single contractor job is to be competed. Agencies can fulfill their targets exclusively by direct conversions, i.e., simply giving federal employee jobs to contractors. Moreover, no effort will be made to learn more about the efficiency and effectiveness of the burgeoning contractor workforce.
OMB is also preparing legislation behind-the-scenes to "require agencies to account for the full costs of their programs" in order to promote more contracting out, according to a May 15 article on the GovExec.com website. Interestingly, the contractors have waged an aggressive campaign over the last several years to weaken and even eliminate the cost accounting standards that agencies use to prevent contractors from passing on unallocable costs to taxpayers through the ever-popular cost-reimbursement and other flexibly priced contracts. Although contractors insist on transparency and disclosure with respect to federal employee costs, they strenuously fight any effort to ensure they comply with the same requirements. As part of its "true costs" legislation, will the Administration ensure even-handedness by defending and strengthening the cost accounting standards necessary to keep contractors honest˘or will it instead impose "true costs" only on federal employees and allow contractors to hide their actual costs to taxpayers?
In addition, the Administration, according to the Administrator of the Office of Federal Procurement Policy, in her pre-confirmation submission to the Senate Governmental Affairs Committee, is
The requirement for competition for all interservice support agreements, when one agency performs a service for another service, is, obviously, a significant change of policy. Interestingly, Administration officials have criticized the TRAC Act for requiring public-private competition before new work is given to contractors. OMB Circular A-76 already requires that agenciesĦ new interservice support agreements be subjected to competition. However, OMB, according to the OFPP Administrator, is on the brink of requiring that all interservice support agreements, both past and future arrangements, be subject to competition, which goes well beyond the TRAC ActĦs public-private competition requirement.
Due to the comprehensive nature of the AdministrationĦs pro-contractor agenda, it is disingenuous for contractors to demand that federal employees stop lobbying in support of the TRAC Act until the GAO Panel has finished with its deliberations. Given that the Administration and contractors are working hand-in-hand to sell off much of the federal government over the next four years, it would constitute unilateral surrender for federal employees to sit back and wait patiently for the panelĦs recommendations.
And, Mr. Chairman, I know that you are not waiting for the panel before attempting to move federal service contracting-related legislation. At the subcommitteeĦs May 22 hearing, you revealed your determination to seek quick passage of a Services Acquisition Reform Act that will include, among other things, broadly expansive authority for agencies to enter into controversial share-in-savings contracts. Consequently, AFGE members know that the "wait-for-the-panel" excuse is one that will carry no weight in this subcommitteeĦs deliberations.
As for the panel itself, we appreciate the hard work and attention to detail of Comptroller General David Walker and his staff. At the same time, we note that Mr. Walker, in his selection of the panelĦs members, was forced to labor under the constraint of the statute that established the panel. That means the twelve-member panel has a solid pro-contractor majority of four Bush Administration officials, two contractors, and one pro-contractor academic. National Treasury Employees Union (NTEU) National President Colleen Kelley and I represent the interests of federal employees and taxpayers. The three independent panelists are Comptroller General Walker, an academic from American University who served previously as NTEUĦs National President, and an academic from Harvard University.
AFGE was urging the Congress to require agencies to carefully track the costs of contractors, 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, develop a better understanding of the human toll from service contracting, and provide federal employees with the same legal rights as contractors before the GAO Panel was established because those principles promote the interests of taxpayers and anyone who depends on the federal government for service. Regardless of the recommendations offered by the GAO Panel next year, AFGE will be fighting for those same principles.
H.R. 721 is, quite simply, our best hope of ending the human capital crisis, strengthening the administration of service contracts, and ensuring that the service contracting process is made more accountable to taxpayers and more equitable for federal employees.
The Problem: Tracking the Costs of Service Contracting
I shall speak a lot about the Department of Defense (DoD) in my testimony. That is because DoD has the most experience with service contracting, spending the majority of service contracting dollars. It is also one of the few agencies that has over the last several years been subjected to more than cursory Congressional oversight of its service contracting because of the bipartisan concern generated over how service contracting has undermined readiness and failed to come even remotely close to achieving the savings goals established by its proponents. Mr. Chairman, your colleague, Representative Curt Weldon (R-PA), the chairman of the House Armed Services Committee on Readiness, referred to DoD service contracting at a March briefing as a "cesspool." However, because of the absence of strong oversight, the severe problems associated with DoDĦs service contracting are likely far worse in other agencies.
We donĦt even know how much DoD is spending on service contracting, let alone if those hundreds of 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 682,000 in 2000. (Chart 1) Service contracting, on the other hand, increased from $39.9 billion in 1992 to $51.8 billion in 1999, according to the Inspector General (IG). (Chart 2) (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 DoDĦs service contracting crusade has been giving the jobs of federal employees to contractors, not in making sure that work has been well done.
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 DoDĦs massive transfer of work from federal employees to the private sector, Dr. Jacques Gansler, was sheepish when asked during a Senate Readiness Subcommittee hearing last year about the IGĦs 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)tĦs probably going to take us a few yearsto 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.
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,
General Accounting Office, DoD Competitive Sourcing: Results of Recent Competitions (NSIAD-99-44), March 2000.
According to a recent GAO report, DoD has chosen not to keep its commitment to the Congress to improve its system for reporting the costs of contract services.
General Accounting Office, CONTRACT MANAGEMENT: No DoD Proposal to Improve Contract Service Costs Reporting (01-295), February 2001.
In that last report, GAO even provided us with some rare comic relief in the "Agency Comments" section:
Even Armed Forces Journal, a reliably pro-contractor publication, took aim in its May issue at the failure of the PentagonĦs previous leadership to track the costs of contracting, firing one of its feared darts at
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.
To her credit, the new OFPP Administrator admits in her pre-confirmation submission 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 or compete at least 425,000 jobs over the next four years. However, she also insists that "the federal government should carefully weigh the costs of developing an automated system to precisely measure these savings on a recurring basis, against the benefits of a precise measurement." Surely it is not too much to expect, Mr. Chairman, that agencies should 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.
H.R. 721 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 supporters should feel very flattered, indeed. Last yearĦs 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 Act would establish a similar system for all contracts in all agencies. The OFPP Administrator acknowledges that the federal government contracts out for $130 billion in services annually. Surely, it is not too much to expect that agencies track the actual costs of all that service contracting, especially given the persistent and longstanding problems with waste, fraud, and abuse in service contracting.
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 Federal Times, "(Contract Services Association Gary) Engebretson said he agrees with part of (H.R. 721) that calls for more reliable accounting systems to track the cost and savings from outsourcing." Mr. Chairman, the TRAC ActĦs cost-tracking requirement offers real hope that federal service contractors will finally be held accountable to the taxpayers.
Problem: Tracking the Quality of Service Contracting
Contractors are quick to insist that costs should not be the only criterion by which their work is judged. Although the outcome of any public-private competition process should always ultimately be decided on the basis of cost, there is no question that the quality of contractorsĦ work should be scrutinized, especially given the increased use of performance-based service contracting. Although performance-based service contracting has been around for years˘and consistently failed to catch on˘it has become the acquisition establishmentĦs magic bullet du jour, the long-sought solution to the waste, fraud, and abuse that is intrinsically part of service contracting. Performance-based service contracting, by emphasizing results at the expense of the process by which satisfactory results can be achieved and assessed, makes it particularly imperative that agencies be prepared to render informed judgments about the quality of their service contractorsĦ work.
The TRAC Act requires 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.
Problem: Tracking the Size of the Service Contractor Workforce.
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 has grown to at least twice the size of the federal government's in-house staff.
The shadow workforce of contractors has been built up over many, many years. As Light has observed, the shadow workforce reflects in large part
OMB officials 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 canĦt say how well contractors are actually performing.)
In documents ranging from the federal budget to the OMB Circular A-76 inventory, detailed information is kept on the number of federal employees, at both the micro and macro levels. Clearly, Bush Administration officials, like those who came before them, believe it is very important to maintain meticulous records about the size of the federal government's in-house workforce. However, they have historically professed no interest whatsoever in keeping the same statistics about the contractor workforce.
Reason #1: Why Tracking the Service Contractor Workforce is Important: Equity
The government's ability to easily quantify its in-house workforce has put federal employees at a severe disadvantage vis-a-vis their contractor counterparts. Put bluntly, if the Administration and the Congress know who you are and where you are, they can hurt you.
Contrary to the assertions of OMB officials, numbers do count˘at least for federal employees. In order to ensure equity, the contractor workforce must be documented in a similar manner.
Reason #2: Why Tracking the Service Contractor Workforce is Important: Minimizing Politics
Of course, the importance of documenting the size of the contractor workforce is not just that it puts contractor employees at the same disadvantage in the budget process as federal employees. Light reminds us that, "More information about the size of the contractor workforce would also influence agencies' contracting out decisions."
For example, the Department of the Army determined after a comprehensive review of its records for fiscal year 1996 that it employed 224,000 contractor employees. Prior to conducting the research that went into the report, the Army had assumed it employed only 47,000 contractor employees. Analysts pointed out that the failure of the Army to
That is, the more an agencyĦs managers understand just how much work has already been contracted out, the less likely they would be to contract out even more work.
Reason #3: Why Tracking the Service Contractor Workforce is Important: Accountability
Moreover, we cannot talk intelligently about what government does and what it needs to do without an accurate head count of the contractor workforce. As Paul Light concludes,
The Department of the Army Leads the Way on Tracking the Service Contractor Workforce
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 establishment have worked so hard to kill this important initiative. The Army contractor inventory was established on December 26, 2000, after the usual publish-and-comment process. Comments from contractors were muted. According to the rule,
In addition to tracking costs and size, the information collected would be used 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.
The statutory basis for the ArmyĦs contractor inventory includes:
DoD has historically not complied with the first two statutes listed above because of inadequate information regarding its contractor workforce, a dereliction that can be corrected by the methodology used by the Army in its inventory.
Absent reliable data on which work is being performed by contractors and how much they cost, DoD is obviously unprepared to adequately comply with the statutory requirements in 10 U.S.C. 129a and 10 U.S.C. 2461(g) to consider shifting work from contractor performance to federal employee performance and to accurately report on which services and to what extent those services are being delivered by contractors.
This inadequate compliance is demonstrated by the sheer lopsidedness of the public-private competition process. For example, of the 286 OMB Circular A-76 reviews conducted by DoD between 1995 and 1999, less than 3% involved work performed by contractors. With respect to the 2461(g) reports, DoDĦs estimates as to the size of the contractor workforce have grown from 197,000 in 1996 to 734,000 in 1999, suggesting significant historical problems with compliance. (Chart 5)
The rule establishes basic contractor reporting requirements to identify the number and value of direct and associated indirect labor work year equivalents for contracted services in support of the Army. Generally, data submitted would be current, unless the contractor prefers to provide retrospective data, and be submitted to a secure website contemporaneously with requests for payment, although payment is not contingent upon compliance. Contractors that lack an internal payroll accounting system permitting compliance are exempted from the reporting requirement. To ensure that proprietary data is protected, reporting is required only at the functional level by organization.
The worst case cost estimate for ArmyĦs compliance is reportedly $15M annually, which is believed to be small in comparison with the cost of compliance with the extremely labor-intensive FAIR Act. Moreover, it would represent a very reasonably priced investment in more effectively administering DoDĦs $100B in annual service contracting expenses.
Here are the views of various officials and organizations:
March 21, 2000, "Army Rule Requires Service Contractors to Provide Labor Hour Data," Federal Contracts Report
(Note: This organization subsequently changed its views, perhaps when the utility of the inventory in tracking contractor costs and encouraging contracting in became too obvious to ignore.)
September 2000, "Competitive Contracting," General Accounting Office
February 28, 2001, letter to the Pentagon from Representatives Curt Weldon (R-PA) and Solomon Ortiz (D-TX), chair and ranking member of the House Readiness Subcommittee
"Only recently has significant attention been drawn to the large number of federal contract employees that ought to be considered along with the direct federal workforce in evaluating the size of government. We commend the recent effort by the Department of the Army to learn more about its contractor workforce, including such matters as how much they get paid and how many hours they work, as this will enhance the understanding of the total workforce supported by federal appropriations."
May 24, 2001, Presidential Transition Memorandum No. 6, National Academy of Public Administration
"(I)t is disingenuous to argue for including military and inherently government civilian employees on the FAIR inventory based on a professed need for a complete picture for purposes of making better decisions, and yet dogmatically resist at the same time getting a complete picture of the contractor workforceA contractor inventory like that currently being compiled by the Army (should be) maintained and used"
May 25, 2001, Testimony to the GAO Commercial Activities Panel by the Reserve Officers Association
Meticulous statistics are kept about federal employees, their numbers, their salaries, and their work. Virtually nothing, however, is known about the federal governmentĦs estimated four million-strong contractor workforce. The work of federal employees is transparent as a result of the budget process, the appropriations process, the FAIR Act, and the Government Performance and Results Act. Using the Army contractor inventoryĦs methodology will allow agencies to fulfill the TRAC ActĦs requirement to track their contractor workforces.
Problem: Contrary to the interests of taxpayers and federal employees, almost all work is given to contractors without any public-private competition, even though federal employees win 60% of the competitions actually conducted.
As is common knowledge, Mr. Chairman, almost all work is given to contractors without any public-private competition. DoD, the agency considered to be the champion of public-private competition, nevertheless, almost never uses public-private competition before giving work to contractors. (Please see Chart 3.)
Jacques Gansler, Under Secretary for Acquisition & Technology, Department of Defense; Senate Report 106-53; December 26, 2000.
At the same time that DoDĦs civilian workforce has been significantly downsized, service contracting in DoD has increased dramatically.
Robert J. Lieberman, Assistant Inspector General, Department of Defense; "Federal Acquisition: Why Are Billions of Dollars Being Wasted?" (testimony before the House Subcommittee on Government Management, Information, and Technology); March 16, 2000.
That is, DoD has dramatically increased service contracting and, as discussed earlier, reduced its civilian employee workforce˘while almost never using public-private competitions.
There is actually even less public-private competition outside of DoD. According to GAO, in the handbook for the Commercial Activities PanelĦs organizing meeting, "OMB reports that one-tenth of one percent of civilian agency commercial activities has been competed using OMB Circular A-76." (Chart 6) It is important to keep in mind that non-DoD agencies may contract out for as much as $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 DoIĦs 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 last year 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."
As you know, Mr. Chairman, the relative absence of private-private competition holds true with regard to information technology contracts as well.
General Accounting Office, "Contract Management: Few Competing Proposals for Large DoD Information Technology Orders" (GAO/NSIAD-00-56), p. 4.
To her credit, the new Administrator of the Office of Federal Procurement Policy has pointed out the growing problems associated with private-private competition for service contracts.
Angela Styles, then the Nominee to be Administrator of the Office of Federal Procurement Policy, Hearing of the Senate Governmental Affairs Committee; May 17, 2001; p. 2.
The Efficiency of Ensuring that Federal Employees Have a Right to Compete Before Their Work or New Work is Given to Contractors
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.
If agencies were being run in the interests of taxpayers and the people who depend on the federal government for services, managers would be actively considering in-house performance of work. Would a firm in the private sector˘a big defense contractor, letĦs say˘automatically contract out almost all new work, as DoD does now? Of course not.
ItĦs 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 more effective we are, no matter how much more efficient we are, and no matter how much more reliable we are.
The Equity of Ensuring that Federal Employees Have a Right to Compete Before Their Work or New Work is Given to Contractors
Of course, ensuring that federal employees have a right to compete for work is not just a matter of efficiency; itĦs a matter of equity as well. The obvious inequity raised by the failure to accord federal employees a right to compete has probably never been more apparent than this year for lawmakers in the Washington, DC, metropolitan area.
As a result of a loophole in the defense appropriations bill, the National Imagery and Mapping Agency (NIMA) is poised to give 600 jobs away to a contractor just because the firm happens to be at least 51% Native American owned. Although the work is almost entirely performed at NIMA facilities in Bethesda, MD, and St. Louis, MO, a significant minority of the East Coast federal workers live in Northern Virginia. Moreover, some of the affected NIMA employees actually work in Reston, VA.
This is the third time that DoD has used this loophole in the last two years, to the best of AFGEĦs knowledge. What lawmakers need to know is that at any time, at any place, for any line of work, DoD can take jobs away from civilian employees in their districts and give them to any contractor that claims to be majority-owned by Native Americans. AFGE, which is as diverse as the federal workforce it represents, bears no animus towards Native Americans. In fact, AFGE supports the use of small business set-aside contracts that benefit, among others, Native Americans. However, the Native American direct conversion process is fundamentally different, a public policy scandal that is as bad for federal employees as it is for taxpayers.
Thanks to the leadership of Representative Richard Gephardt (D-MO) and Senator Jean Carnahan (D-MO), NIMAĦs pork-barrel, sole-source, sweetheart contract is receiving the notoriety it deserves. We appreciate that several Washington, DC, area lawmakers, including Representatives Connie Morella (R-MD) and Jim Moran (D-VA), signed a letter of opposition to the direct conversion of the NIMA jobs and urged agency officials to allow the 600 federal employees threatened to compete in defense of their jobs.
Given your position as chair of the House Government Reform subcommittee that has jurisdiction over government-wide service contracting issues and your traditionally strong support for federal employees and their families, we were disappointed that you were unable to sign that letter.
LetĦs turn our attention to direct conversions on a much grander scale: OMBĦs scheme to review at least 425,000 jobs over the next four years for conversions (giving work to contractors without public-private competition) and competitions. In FY02, every single agency is required to convert or compete 5% of the federal employee jobs on their FAIR Act inventories. For the entire government, that works out to 42,500 jobs in FY02 alone. In FY03, that quota is hiked to 10%--thatĦs another 85,000 jobs.
Because agencies have little experience with OMB Circular A-76, having long grown accustomed to simply giving work to contractors with no public-private competition, and because contractors, many of whom have become completely dependent on government contracts because of a failure to compete successfully in the private sector, want work now, not later, there is fear that agencies will fulfill their quotas by simply giving the federal employee jobs reviewed to contractors without public-private competition, i.e., through direct conversions.
According to an article posted on the GovExec.com website on June 6, OMB Deputy Director for Management Sean OĦKeefe, after declaring his devotion to public-private competition, was "asked what he would tell agencies that only use direct conversions to meet the 5 percent target, (and) OĦKeefe replied,
That is, if agencies hit their combined target of 42,500 jobs in FY02 and 85,000 in FY03 through direct conversions, Mr. OĦKeefe would have a chat with those agencies afterwards. Mr. Chairman, thatĦs not good enough for me. It should not be good enough for any friends of taxpayers and federal employees. I would hope thatĦs not good enough for you. How desperately in need of reform is a system that allows agencies to give away tens of thousands of jobs without any guarantee of savings to the taxpayers?
Bush Administration officials talk a good game on public-private competition. For example, Mr. OĦKeefe in the article discussed above averred that he is "very much more an advocate of public-private competition, because it brings out the element of efficiencyThere is no bias towards privatization or outsourcing(We are trying) to get agencies to think about different ways of delivering their services."
However, the service contracting policies developed by Bush Administration officials betray their real positions. In spite of the rhetorical support of public-private competition, Bush Administration officials oppose allowing federal employees to compete for new work and for contractor work. And many, if not most, of the federal employee jobs reviewed will be given to contractors without public-private competition. That is, public-private competition only "brings out the element of efficiency" when federal employee jobs are subjected to public-private competition, but not when the work is new or performed by contractors. And even when the work is performed by federal employees, the "element of efficiency" doesnĦt always leap out; hence, the Bush AdministrationĦs strong emphasis on direct conversions. Put another way, the Bush Administration believes that agencies should "think about different ways of delivering their services"˘as long as it means federal employees lose their work to contractors, with or without public-private competition. ThatĦs not a philosophy of public-private competition. Rather, itĦs merely pork-barrel politics: rewarding contractors for past and future favors.
The sponsors of the TRAC Act donĦt just talk public-private competition; they mean it. The legislation 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 date of enactment, including the renewals of contracts in effect when the legislation becomes law.
Here are two recent precedents for this much-needed reform:
The TRAC ActĦs requirement that work currently performed by federal employees as well as new work be subjected to public-private competition before it is given to contractors would not just benefit taxpayers and everyone who depends on federal agencies for important services by ensuring reduced costs and real choices in service delivery. It would have many additional benefits as well:
Some contractors have said that the TRAC Act would curtail or even eliminate DoDĦs "strategic sourcing" initiative. To the extent that "strategic sourcing" is about taking work from federal employees and giving it to politically well-connected contractors without public-private competition, that is true. To the extent that strategic sourcing is about reorganizing, reengineering, and reinventing how DoD provides services, that is false. In fact, by eliminating the unsavory, pork-barrel aspects of strategic sourcing through a public-private competition requirement, DoD managers can be more creative than ever.
I realize that the public-private competition requirement of the TRAC Act is difficult for contractors to take. However, during the unprecedented downsizing of the civil service over the last eight years, I often heard it said that "the federal government is not a jobs program for federal employees." Well, you know what, Mr. Chairman, the federal government is not a dividend-enhancement program for contractor executives whose firms have been sheltered from actual competition, whether it be public-private or private-private, for far too long. In fact, according to an article in the May 7 edition of Federal Times ("Government Is Hot New Market for Contractors"), contractors
TRAC ACT OBJECTIVE #3: Agencies would be freed from the shackles of anti-federal employee and anti-taxpayer in-house personnel ceilings that prevent federal employees from competing for work and force agencies to contract out work that could be performed more efficiently by reliable and experienced federal employees.
The Problem: Arbitrary in-house personnel ceilings prevent agencies from choosing the more efficient service provider.
A major reason why federal employees are prevented from competing for work is the use of arbitrary personnel ceilings that keep agencies from hiring or forces the firing of in-house staff. Agencies then simply contract out the work˘often at higher costs. Agencies should be required to manage their workforces by workloads and budgets, not by arbitrary numbers. When workload exceeds arbitrary limitations on workforce, contracting out should not be the only option.
According to OMB, during the Clinton Administration, several agencies˘including the Departments of Agriculture, Health & Human Services, Housing & Urban Development, State, Education, and Treasury, as well as the Environmental Protection Agency˘said that they each could have saved millions of dollars by performing work with federal employees instead of contractors but did not do so because they were forced to work under arbitrary personnel ceilings. GAO has also reported that agencies sometimes manage their in-house workforces by personnel ceilings set by OMB that "frequently have the effect of encouraging agencies to contract out regardless of the results of cost, policy, or high-risk studies."
The problem is particularly bad at DoD. In 1995, the personnel directors of the four branches of the Armed Forces told the Congress that arbitrary personnel ceilings˘not workload, cost, or readiness concerns˘were forcing them to send work to contractors that could be performed more cheaply in-house. GAO reported in 1997 that a "senior command official in the Army stated that the need to reduce civilian positions is greater than the need to save money". An earlier report by the DoD Inspector General noted that the goal of downsizing the public workforce is widely perceived as placing the DoD in a position of having to contract for services regardless of what is more desirable and cost-effective.
The tradition of arbitrary personnel ceilings is, alas, being faithfully observed by the Bush Administration. On the campaign trail, then Governor Bush promised to arbitrarily reduce the number of federal managers by 40,000. And, of course, the direct conversion component of the Bush AdministrationĦs review of at least 425,000 federal employees over the next four years is nothing more than an arbitrary reduction of the number of federal workers so that they can be replaced by contractors without any public-private competition.
The TRAC Act would move us away from sterile debates about downsizing and upsizing so that we can finally talk about rightsizing. If agencies prove they can do work more efficiently through a public-private competition, they can hire the additional employees necessary to do the work, notwithstanding any arbitrary personnel ceilings imposed by OMB. If they canĦt do the work, then the agency couldnĦt 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.
TRAC ACT OBJECTIVE #4: Agencies would be required to look to their massive contractor workforces for savings and efficiencies by ensuring that contracting in is emphasized to the same extent as contracting out.
The Problem: Despite acquiring their work with virtually no public-private competition and little private-private competition, contractors are never subjected to much-needed public-private competition to see if their work could be performed more efficiently by reliable and experienced federal employees.
The prospect of contracting in would keep contractors from forcing taxpayers to swallow costly post-award mark-ups. Usually, there is very little competition among contractors for work, especially when the initial contract comes up for renewal. Columbia University Professor Elliot Sclar, who testified before the House Government Reform Subcommittee on Government Management in 1998 on contracting out, has described service contracting as a
The Department of Energy (DoE) is a notorious example of what happens when an agency becomes completely dependent on sole-source contractors because it can provide no in-house competition when expensive contracts come up for renewal. In 1994, DoE officials became alarmed at skyrocketing service contract costs. Noting that only a handful of contracts had been put up for bid when an incumbent contractor wanted to stay on, DoE officials put their collective foot down and said that service contracts would no longer be automatically renewed.
What was the response from DoE contractors? According to The Washington Post, "the `specter of competition' led some contractors, including Westinghouse Electric Corp...to offer to reduce costs by 15 percent to 20 percent `If implied competition will do that, imagine what real competition will do,' quipped a DoE official."
This could have been a success story˘recompeting contracts seemed so simple a solution. But by 1997 it was clear that this reform effort was not going to have a happy ending. According to GAO, DoE continues to make noncompetitive awards for management and operating (M&O) contracts despite having changed its policy and adopted competitive contract awards as the standards for these contracts. "Of 24 M&O contracts awarded between July 1994 and August 1996, DoE awarded 16 noncompetitively. Also, DoE decided not to compete three major contracts before it renegotiated the terms of the contract renewal˘a practice that is contrary to contract reform."
Because DoE has given up the capability to do the work itself and will not reconstitute that capability in-house so that work might be contracted in, taxpayers are paying far more than they should for dozens of multi-billion dollar service contracts. Obviously, DoE's contractors have not been shy about using their influence in the executive branch and in the Congress to make sure that their sole-source arrangements are left undisturbed.
Mr. Chairman, AFGE has long believed that if savings were possible from competing the jobs of federal employees, then they were possible from competing the jobs of contractors as well. As you know, OMB Circular A-76 provides for insourcing as well as outsourcing. The same rules and the same rationales apply.
The Clinton Administration agreed with us˘or so we believed. A senior OMB official even committed to ensure that agencies undertook more contracting in. In a February 2, 1999, letter to me, Acting Deputy Director for Management G. Edward DeSeve wrote,
No such guidance was ever offered. We were not deterred, however. Working with lawmakers on the House and Senate defense appropriations subcommittees, we secured the enactment of this report requirement:
U.S. Congress, FY 2000 Defense Appropriations Act, Section 8109.
The resulting report on DoDĦs contracting in activities˘or, more precisely, the lack of contracting in activities˘was hardly a surprise. DoDĦs compliance˘or, more precisely, DoDĦs complete failure to comply˘with the second requirement to develop a contracting in policy did cause me some surprise.
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. (Chart 4) 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 contractorsĦ work is never subjected to the scrutiny of public-private competition.
With respect to contracting in, itĦs illustrative to look at local government, using survey data collected by the International City / County Management Association.
Mildred Warner and Amir Hefetz, Privatization and the Market Structuring Role of Local Government, Cornell University Department of City and Regional Planning Working Paper #197, December 2000."
Why so much contracting in? The authors explain:
LetĦs revisit the scene at the federal level: The A-76 process is a money loser. Contract administration is virtually nonexistent. Sole-source contractors have federal agencies at their mercy. To engage in a bit of understatement, itĦs safe to say that conditions are ripe in federal agencies for the same sort of corrective contracting in thatĦs occurring in local government.
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 governmentĦs work because of the much greater complexity of the work required and contract administration problems are so much more severe?
HereĦs the most likely explanation:
In other words, local officials want to do whatĦs right for their communities. Can the same good intentions be attributed to those who have run federal service contracting in recent years? What about those now in charge of federal service contracting policies? During the next four years, the Bush Administration will convert or compete at least 425,000 federal employee jobs. During that time, not a single contractor job will be reviewed for conversion or competition.If only work performed by federal employees is subjected to public-private competition, then Bush Administration officials are simply replacing federal employees with contractors, rather than trying to make the federal government more efficient.
The TRAC Act would neither prohibit contracting out nor require contracting in. Rather, the legislation would simply require agencies to subject equivalent numbers of federal employee and contractor jobs to public-private competition. That is, agencies would choose how many and which contractor jobs would be subjected to public-private competition.
It should also be pointed out that this comparability of competitions provision is far more generous to contractors than they deserve. This provision does not encourage˘let alone require˘the use of direct conversions on work performed by contractors. Rather, any work brought back in-house would come as the result of fair and full public-private competitions. Unlike contractors, who simply want to take our work without bothering to prove that they can perform more efficiently, federal employees are confident that they can compete˘and win˘on their own merits.
TRAC ACT OBJECTIVE #5: The Office of Personnel Management and the Department of Labor would be charged with comparing the pay and benefits of federal employees to their contractor counterparts and then report back to the Congress in order to determine the human toll from contracting out.
The Problem: Little Is Known About The Human Toll From Federal Service Contracting.
It is well-established that contracting out has been used in the private sector and in the non-federal public sector to shortchange workers on their pay and benefits and to avoid unions. It is likely that this pernicious phenomenon 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 couldnĦt be helpful because they didnĦt keep the relevant information and contractors did not respond to surveys. A survey conducted by GAO in 1985 of federal employees who were involuntarily separated after their jobs were contracted out revealed that over half "said that they had received lower wages, and most reported that contractor benefits were not as good as their government benefits."
The Economic Policy Institute (EPI), in a recent ground-breaking study, determined that more than one in ten federal contractor employees earn less than the "living wage" of $17,000 per annum, i.e., the amount of money necessary to keep a family of four out of poverty.
"The federal government saves money by contracting work to employers who pay less than a living wage ($8.20 per hour). Even the federal government jobs at the low end of the pay scale have historically paid better and have had more generous benefits than comparable private sector jobs. As a result, workers who work indirectly for the federal government through contracts with private industry are not likely to receive wages and benefits comparable to federal workers
Economic Policy Institute; "The Forgotten Workforce: More Than One in 10 Federal Contract Workers Earn Less Than a Living Wage"; November 27, 2000; page 2.
Contractors ritualistically invoke the Service Contract Act whenever the human toll from service contracting is raised. However, EPIĦs research reveals the very limited reach of that prevailing wage law.
Economic Policy Institute; "The Forgotten Workforce: More Than One in 10 Federal Contract Workers Earn Less Than a Living Wage"; November 27, 2000; page 2.
GAO has been unable to determine the extent to which contracting out undercuts workers on their wages and benefits. And despite its pioneering work in this area, EPI acknowledges that
It is outrageous that the Administration and the Congress˘despite their words of support for working Americans˘continue to allow contractors to take work away from federal employees simply because, in many cases, they pay their workers less and provide them with inferior benefits. When the budget has generated unprecedented surpluses and the economy's booming, how can any politician justify replacing working and middle class Americans with contingent workers who are forced to make do with significantly smaller compensation packages?
The TRAC Act, by itself, would not require comparability of wages and benefits between federal employees and contractors; nor would the legislation take wages and benefits out of the public-private competition process. Instead, the legislation would require that the Office of Personnel Management (OPM) and the Department of Labor (DoL) compare the wages and benefits of federal employees to their contractor counterparts and then report the findings to the Congress.
The OPM-DoL report would give lawmakers all the information they need to address the human toll from federal service contracting in a forthright manner. In the interim, this subcommittee can begin to address the human toll of service contracting on wages and benefits by ensuring the expedited consideration of Representative GutierrezĦs "living wage" legislation" (H.R. 721), which I discussed earlier in my testimony.
As an enforcement mechanism to ensure agenciesĦ prompt compliance with the TRAC ActĦs 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, the legislation includes an enforcement mechanism.
AFGE worked seriously and constructively with the Clinton Administration to deal with the concerns of federal employees about the service contracting process. Despite commitments˘to develop a contractor inventory, start contracting in work, stop managing federal employees by arbitrary in-house personnel ceilings, and establish a system to track contractor costs˘and laws˘to end the practice of managing the DoD civilian workforce by personnel ceilings, develop a plan for contracting in work, regularly consider contracting in 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 likely to make this situation far, far worse.
ThatĦs why it became necessary to secure agenciesĦ prompt compliance by including a temporary suspension on new service contracting in the TRAC Act. That will give agencies the necessary incentive to correct longstanding problems as soon as possible. This enforcement mechanism does not interfere in any way with existing contracts or renewals of existing contracts. Section 4, which includes the temporary suspension, "does not apply to work performed by the private sector prior to the date of enactment of this Act."
Moreover, the exceptions allow agencies sufficient flexibility to continue necessary service contracting: when itĦs essential to 1) national security, 2) patient care, or to 3) avoid extraordinary economic harm. There are no administrative, legislative, or judicial reviews or appeals to the use of the exceptions. AFGE canĦt tie up agencies in courts or Congress over the use of those three broadly-worded exceptions.
The temporary suspension is intended to last only as long as it takes for agencies to make the much-needed reforms required by the TRAC Act. It is temporary, instead of being for a fixed period of time, in order to give agencies the incentive to accomplish these important tasks as soon as possible. If it takes three days, the Congress can lift the suspension in three days. If it takes longer, the Congress can lift the suspension later. Moreover, the criteria the Congress uses to make its decision are completely up to lawmakers in order to allow them the maximum flexibility. The Congress could wait until the work is done before lifting the suspension or lawmakers could merely wait until the agencies had begun a good faith effort.
Mr. Chairman, I will now provide additional details about why an enforcement mechanism is a necessary part of TRAC.
Here are the commitments made by the Clinton Administration to address long-standing problems in the service contracting process:
Not a single one of those commitments was kept.
Here are the laws that were enacted, particularly in the context of DoD, to address long-standing problems in the service contracting process:
DoD still regularly manages it workforce by arbitrary personnel ceilings. It is widely acknowledged that agencies replaced federal employees downsized by the Federal Workforce Restructuring Act with contractors without public-private competition. DoD never came up with the required contracting in plan and has consistently failed to follow 10 U.S.C. 129a.
The Bush AdministrationĦs aggressively pro-contractor agenda indicates that they have no intention of making the federal service contracting process more fair to federal employees and more accountable to the taxpayers:
Contractors have always had˘and will always have˘an important role to play in the provision of services that are truly commercial in nature, particularly those that are nonrecurring or highly specialized. The temporary suspension in the legislation is a mean to an end˘securing compliance with the TRAC ActĦs requirements˘not an end in itself. It is the least important part of the legislation and was included only to ensure compliance with the essence of the TRAC Act: tracking contractor costs and ensuring full and fair public-private competition.
I would be the first supporter of the TRAC Act to go to its sponsors and ask them to eliminate the temporary suspension section˘provided that an acceptable alternative enforcement was put in its place.
TRAC Act, OMB is responsible for certifying "substantial progress" towards compliance on an agency-by-agency basis. If OMB, which is commonly acknowledged to be run and staffed by those who are predisposed towards downsizing and service contracting, is unable to certify that a particular agency is in compliance, that agency may not undertake any new service contracts. That agency, however, may ask OMB at any time˘the next week, the next day, or later that afternoon˘for another chance to be certified, presumably as a result of making "substantial progress" towards reforming its service contracting processes. During any 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. (This provision, incidentally, was based on a bipartisan, non-controversial provision in last yearĦs Senate 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.)
Mr. Chairman, AFGE understands that you donĦt care for the TRAC ActĦs enforcement mechanism. Given the failure of the previous Administration to follow up on its commitments or carry out the law and the determination of the current Administration to implement a wholly one-sided pro-contractor agenda, what alternative enforcement mechanism would you include in the TRAC Act in place of a temporary suspension?
Your opinion means a lot to AFGE, Mr. Chairman. We know the influence you have with this Administration on federal service contracting issues. If you could personally guarantee that the TRAC ActĦs cost tracking and public-private competition requirements would be faithfully implemented, I believe the sponsors would remove the temporary suspension provision on their own. In any event, it is imperative that we get beyond concerns over the temporary suspension provision, whether real or manufactured, so we can instead concentrate on the rest of the legislation and how we can ensure that when the TRAC Act becomes the law of the land that this time the federal service contracting process will finally be made fair to federal employees and accountable to the taxpayers.
Giving work performed by federal employees to contractors without public-private competition is pork-barrel politics at its worst. AFGEĦs 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.
Atr the same time, public-private competition must be used to make the federal government more efficient, not as a "spoils system" by the new Administration to replace federal employees with the businesses of politically well-connected contractors. Contractors and their allies can no longer have it both ways, the federal sector always under scrutiny, the contractor sector immune from review; competitions and conversions mandatory for the jobs of federal employees but strictly off-limits for contractors; showering new work on contractors while putting federal employees on a starvation diet.
The establishment of a process that subjects work to public-private competition before it is given to contractors and holds contractors to the same scrutiny as that experienced by federal employees, like that in the TRAC Act, will benefit taxpayers and all Americans who depend on agencies for important services.
First, taxpayers will save money because contractors will finally have real competition. Second, the quality of work will be improved because managers will finally have real choices in the delivery of services. Third, a real public-private competition process will bolster contract administration and thus reduce waste, fraud, and abuse. Fourth, ensuring that agencies consider the appropriateness of in-house performance will help to end the "human capital crisis."
ItĦs time for contractors and their friends in the Congress and on this subcommittee in particular 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 isnĦt right for contractor work or new work, then itĦs not right for federal employee work either˘and the entire outsourcing process must be shut down.
Mr. Chairman, that concludes my testimony. I would be happy to entertain any questions.