U.S. Chamber of Commerce: Federal Contracting

Privatization and Procurement
Federal Contracting - TRAC

ON: FEDERAL AND SERVICE CONTRACT WORKFORCE
TO: SENATE GOVERNMENTAL AFFAIRS COMMITTEE
DATE: March 6, 2002

Statement of the U.S. Chamber of Commerce
Submitted for the Record of the
Hearing on Federal And Service Contract Workforce
Before the Senate Governmental Affairs Committee
March 6, 2002

The U.S Chamber of Commerce is the world’s largest federation of business organizations, representing more than three million businesses and professional organizations of every size, sector and region of the country. The Chamber serves as the principal voice of the American business community. The Chamber appreciates the opportunity to submit these comments for the record of the Senate Governmental Affairs hearing on the monitoring, accountability and competition in the Federal and service contract workforce.

These comments are offered on behalf of the entire business community, but especially for the Chamber members involved in government contracting and those vying for increased opportunities in the federal market. These businesses, small and large, rely on an efficient, fair competitive process in providing the federal government with goods and services to maintain and grow their businesses.

Introduction

The Chamber has a long-standing policy that the government should not perform the production of goods and services for itself or others if acceptable privately owned and operated services are or can be made available for such purposes. Functions of the federal government should be limited to those that are (1) inherently governmental, (2) related to national security, or (3) functions that the private sector cannot perform. The government should not be providing goods and services, outside these limitations, that could be performed by the private sector at a higher quality and better value to the taxpayer.

Government should rely upon the private sector to provide goods and services necessary for the operation and management of federal agencies and departments. When the government engages in commercial activities beyond its core functions, its focus is diverted from executing its primary mission and is in direct competition with the private sector. Outsourcing reduces the size of government and increases efficiency by limiting government to performing its core mission functions.

Since the Eisenhower Administration, and through successive Democrat and Republican Administrations, the Federal Government has supported this concept. In 1955 President Eisenhower issued the following policy directive:

“the Federal Government will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels.”

This policy is embodied in the Office of Management and Budget (OMB) Circular A-76, “Performance of Commercial Activities,” which established the formal process by which Federal commercial activities could be opened for private/public sector competitions or direct conversion to private sector performance.

Private Sector Services and 9-11

These are unique and challenging times for our nation and American businesses. The importance of private sector participation in federal service contracting is even more apparent since the 9-11 terrorist attacks. Businesses across the country responded instantly to the extraordinary challenges brought on by these attacks. The Environmental Protection Agency has publicly stated that without the expertise of private sector service contractors, anthrax cleanup in the Senate Hart Office Building and elsewhere would have been next to impossible. Many private sector defense contractors responded to the needs of the civilian agencies as well as the Pentagon and defense facilities around the world. Their efforts included, but are certainly not limited to:

Delivering, installing and testing more than 800 feet of conduit, 4,000 feet of wire, two power distribution units and approximately 24 branch circuits within 24 hours at the Pentagon.
Providing equipment quickly to provide a work environment and sense of normalcy for displaced Pentagon workers. In particular, this meant getting into operation the IT systems necessary to allow 1,000 relocated Pentagon personnel to be fully functional within one week of the attack - an extraordinary effort that earned a special commendation from the Administrator of the General Services Administration.
Providing emergency, temporary office facilities, within four hours of the Pentagon attack, to 125 Air Force personnel in the company’s Northern Virginia offices.
Providing aircraft to transport the largest Centers for Disease Control emergency mobilization team ever assembled from Atlanta to ground zero in New York City.
Providing 24/7 technical support - with most personnel working 12-hour shifts seven days a week - to the Office of the Secretary of Defense Public Affairs team and other critical organizations.
Providing 24/7 operations support to DOD’s Information Assurance Technology Analysis Center, a key center in ensuring information assurance and security.
Establishing a 24/7 special teleconferencing connection linking officials of the City of New York and Port Authorities of New York and New Jersey to allow for more efficient responses to emergency communications requirements.
Increasing support at military medical facilities as well as providing high-speed communications to the naval hospital ship, the USNS Comfort, docked in New York Harbor.
Providing transportable satellite communications facilities and technicians to the New York Police Department to quickly provide voice and data services.
Augmenting military personnel to enhance security and help with evacuations.
Ensuring uninterrupted power production and engineering support at key facilities.
Providing 24/7 support at fueling facilities as well as providing 24/7 support in vehicle operations and maintenance (e.g., helicopters and trucks, etc.).
Ensuring timely delivery of mail via ground transportation.

Benefits of Competition and Outsourcing

American business accounts for over 80 percent of the output, inventions and innovations of our $9 trillion economy. American businesses have also added $2.4 trillion to the gross domestic product over the past ten years. The private sector fuels the economy, yet federal agencies and departments continue to perform countless services and functions that could be performed more efficiently by competitive private sector enterprises, saving billions of dollars annually.

Studies by the Center for Naval Analysis, OMB, and others show that, on average, 30% is saved when a Federal activity contracted to the private sector performance. The taxpayer benefits when there is competition among competing private sector firms because of the cost savings that result -- a true testament to the value of competition in the free market economy.

By outsourcing functions that are commercial in nature significant revenue can be claimed by Federal, State and local government as well, thus expanding the tax base, since government entities pay no income, property or sales taxes while private firms performing government contracts are subject to such taxes. Outsourcing provides a stimulus to economic growth, while in-house performance and unfair government competition with the private sector retards such growth in the private sector, particularly among small businesses. Performance of commercial activities by government agencies also manipulates the marketplace since government services are often priced below market price.

Outsourcing also helps focus Federal agencies on core missions and those inherently governmental activities that citizens expect from the government and which only government can perform. Agencies using the private sector report that outsourcing provides access to personnel and skills that cannot be efficiently recruited or retained through the Federal personnel system, and outsourcing provides the government agencies access to innovation and technology that cannot as easily be accessed, be created or maintained within the government.

TRAC Act

For decades, businesses have worked in cooperation with the federal government to provide efficient and cost effective services for America's taxpayers. Through federal service contracts, thousands of businesses help our nation’s government run more efficiently. All parties involved in these relationships benefit, including the government, business, and the American taxpayer. The government saves taxpayers billions of dollars by partnering with business, and government investment in these companies helps sustain our nation’s competitive edge in industries such as defense, information technology and management.

This mutually beneficial relationship is being threatened by the Truthfulness, Responsibility and Accountability in Contracting (TRAC) Act (H.R. 721/S. 1152). The TRAC Act would force a virtual shutdown of critical government activities by imposing a moratorium on all federal service contracts, including those involving environmental protection, air traffic control systems, school and highway construction, homeland defense and national security.

The proposed added steps in the already massive bureaucracy will impose substantial delays in performance of government services as all existing and new government services contracts would be subject to lengthy, expensive and unfair public-private A-76 competitions, which take a minimum of 18 months and often as long as 3 years to complete, as compared to most new competitive procurements that can be completed in weeks or months. The government would lose its flexibility to purchase innovative solutions needed to improve government performance, safety, security and efficiency. All this will occur at the expense of U.S. businesses and taxpayers, despite the fact that the private sector has repeatedly demonstrated it can perform these functions for the government faster, better and cheaper.

There are many monitoring and accountability mechanisms already in place. Virtually all contract work is subject to intense competition and re-competition between companies in the private sector. This competition is closely monitored by contracting officials and is subject to pricing, conflict of interest, and past performance evaluation factors under stringent audit rules and guidelines. Government contractors are one the most regulated and audited industries in the country. Contractors must abide by a host of rules that include, but are not limited to:

Federal Acquisition Regulations
Contract Accounting Standards & Defense Contract Audit Agency Audits
Competition in Contracting Act
Procurement Integrity Act and Conflict of Interest rules
Pre-Award Surveys
Post-Award Audits
Service Contract Act, Davis Bacon Act and DOL Wage Rates
Fair Labor Standards Act and State Labor Regulations

Congress has already spoken on this issue. Attempts to insert TRAC-like amendments to the House Treasury Postal Appropriations and the National Defense Authorization Act were defeated last year. The time is now to create more efficient and effective partnerships between the pubic and private sector, especially as we face the complex challenges of homeland security and national defense, and keeping our borders, economy and society both safe and free. The TRAC Act will lead our government in the opposite direction.

Conclusion

The philosophical argument for outsourcing is based on the premise that the free market offers benefits not found in the public sector, such as relative ease of innovation, quicker decision-making, and general efficiency resulting from market discipline and the need to compete for business. In fact, these free-market tendencies are considered beneficial because they actually threaten the destruction of businesses that do not provide the best value for their customers and thereby encourage creativity and economical customer service. Driven by profits and regulated by market forces, the private sector has proven to perform more efficiently, effectively and at a lower cost than government.

Thank you for allowing our comments to be submitted for the record of the hearing on the monitoring, accountability and competition in the Federal and service contract workforce. Please feel free to contact us should you have any questions or require additional information.

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