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AFGE Statement for OMB HearingWednesday July 22, 2009 INTRODUCTION AFGE supported the election of President Obama and was pleased that he came to the White House pledging to restore the American people’s faith in the public sector and curb the drive to privatize government services. Our support for the President was reinforced in March 2009 when he announced significant reforms in government contracting, including a call for all inherently governmental work to be returned to federal employees. AFGE has long insisted that such tasks should always be performed by reliable and experienced federal employees who put the public interest first. The Department of the Army has shown extraordinary leadership in insourcing functions that were inappropriately outsourced, determining which functions are inherently governmental, and taking stock of the contractor workforce, and we encourage the rest of the federal government to follow suit. Our members understand that cleaning up the federal contracting problems left behind by the Bush administration will take a significant amount of work. That’s why AFGE is pushing on a number of fronts to reform the contracting system and begin the process of returning certain functions to the federal government. Below are our specific comments to the questions presented by OMB. TABLE of COMMENTS
[Area 4(d): How do federal contracting policies affect practices in the private sector labor market?] The time has come when action can finally be taken to improve the lives of federal contractor employees. However, it is imperative in doing so that we don’t politicize the procurement process. Significant or repeat violators of workplace, tax, and environmental laws should not receive federal contracts, and contractors generally should be expected to adhere to clear standards for pay, health care, and retirement benefits for federal contractor employees. If federal contractors generally are required to meet clear standards for their employees’ pay and compensation, there is no need to put `a thumb on the scale’ with preferences and set-asides in order to steer contracts to contractors who have better labor records but who are also more expensive. It may be tempting to use preferences for small businesses as a precedent for giving a new preference to federal contractors with better labor records. However, such an explicitly political preference, although well-intentioned, would be the first of its kind. All previous preferences have been for small businesses, the blind and the handicapped, and Federal Prison Industries. Preferences based on a contractor’s labor record would open up the procurement process to additional political preferences which would undermine the integrity of the procurement process and most likely the interests of both federal employees and contractor employees. The firms most likely to qualify for special political preferences would be large contractors. Consequently, the special political preference would require taxpayers to pay more than they otherwise would to firms that would bear no resemblance to the small and disadvantaged businesses that benefitted from earlier preferences. And that would clearly be contrary to President Obama’s March 4, 2009, Government Contracting memorandum. Earlier preferences have resulted in significant and systematic waste, fraud, and abuse. Indeed, contractors with preferences regularly pass on work to ineligible contractors, both legally and illegally. Enforcement of illegal subcontracts is rare. In fact, preferences can be used to steer work towards certain contractors. Some contractors might even establish small subsidiaries just to qualify for special political preferences and thus win large contracts, but then pass on the work to ineligible entities. Because this special political preference would benefit large contractors, rather than small businesses, the harm to taxpayers would surely be far worse. AFGE believes that, as the effort to reconstruct the federal government’s executive branch civil service begins again, we must not implement reforms - no matter how well-intentioned - that would lead to inefficient and unfair decisions to contract out federal employees. If the special political preferences were used in public-private competitions or direct conversions, i.e., giving work performed by federal employees to contractors without public-private competition, federal employees would be at a distinct disadvantage. No matter how much more efficient, federal employees could still lose because the purpose of the special political preference is to give work to more expensive contractors. Moreover, if a pitched legislative battle is necessary to enact a special political preference, it would clearly be better for working Americans if that fight was instead about requiring contractors generally to adhere to clear standards for pay, health care, and retirement benefits. That battle could benefit all federal contractor employees instead of the small minority who work for contractors with better labor records. Our proposal would not politicize the procurement process or undermine its integrity; nor would it result in inefficient or unfair decisions to contract out work performed by federal employees. Instead, our proposal would be a win-win-win for federal employees, contractor employees and taxpayers, and result in a more honest and apolitical procurement process. We are still cleaning up the mess left behind by the previous Administration which completely politicized the procurement process, using it as a tool to reward friends, thus becoming ensnared in scandal after scandal. Even with noble intentions, it is imperative that we don’t repeat those mistakes by trying to use the procurement process to reward another set of friends.
[Area 4(c) What criteria should agencies use in deciding whether a government activity should be competed?] Impose an A-76 Moratorium AFGE is asking the Obama administration to suspend the use of the A-76 process until much-needed reforms have been implemented and cancel ongoing A-76 studies. A 2006 DoD Inspector General report and two 2008 Government Accountability Office (GAO) reports detail how poor guidance from the Bush Administration OMB on the A-76 process resulted in systematically overstated savings and understated costs as well as a disproportionately adverse impact on older, female, and African-American civil servants.
“DoD had not effectively implemented a system to track and assess the cost of the performance of functions under the competitive sourcing program…The overall costs and the estimated savings of the competitive sourcing program may be either overstated or understated. In addition, legislators and Government officials were not receiving reliable information to determine the costs and benefits of the competitive sourcing program and whether it is achieving the desired objectives and outcomes…DoD had not implemented a comprehensive system to track and assess the quality of contractor and MEO (in-house) performance under the competitive sourcing program…Accordingly, Congress and Government officials do not have an effective management tool to assess the quality of either contractor or MEO performance under the competitive sourcing program.”
“(W)ithout clear guidance, and in light of its plans to examine the activities of two thirds of its workforce, we believe that the (Forest Service) is at risk of subjecting inherently governmental and core-commercial activities to future competitive sourcing competitions… “For fiscal years 2004 through 2006, we found that the Forest Service lacked sufficiently complete and reliable cost data to…accurately report competitive sourcing savings to Congress…(W)e found that the Forest Service did not consider certain substantial costs in its savings calculations, and thus Congress may not have an accurate measure of the savings produced by the Forest Service’s competitive sourcing competitions. Although OMB provides guidance on how to calculate the savings, the guidance does not specify all of the costs that should be included in the calculations, thus providing the Forest Service with some discretion on which costs to include.
“[The Department of Labor’s (DoL)] savings reports, while adhering to OMB reporting guidance, exclude many of the costs associated with competitive sourcing and are unreliable. In reporting its estimated $15.7 million in savings due to competitive sourcing from fiscal years 2004 through 2007, DOL excluded a number of substantial items, including the time in-house staff spent on competition activities, precompetition planning, certain transition costs, and postcompetition review activities. “OMB does not require agencies to report these costs because they reflect what would be incurred as part of an agency’s typical management responsibilities. However, our analysis shows that these costs can be substantial and that excluding them overstates savings achieved by competitive sourcing. For example, we found that including in-house staff time spent on competition activities would have doubled the costs reported for one competition. “In addition, DoL competition savings reports are unreliable and do not provide an accurate measure of competitive sourcing savings. All three of the competitions that we randomly selected and analyzed had inaccuracies. For example, DoL excluded contract administration costs from one competition’s savings figure, overstating savings by about $185,000 a year, or 25 percent. In addition to these inaccuracies, DoL used projections to estimate savings for seven of its competitions when actual numbers should have been used, sometimes resulting in overstated savings. In one competition, actual staffing costs were 45 percent higher than those originally projected. Finally, the cost baseline used by DoL to estimate savings was inaccurate and misrepresented savings in some cases, such as when preexisting, budgeted personnel vacancies increased the savings attributed to completed competitions... “We have previously reported that other federal agencies—the Department of Defense (DoD) and the Department of Agriculture’s (USDA) Forest Service, in particular—did not develop comprehensive estimates for the costs associated with competitive sourcing. This report identifies similar issues at DoL. Reforming the A-76 Process AFGE urges the Obama Administration to work with representatives of federal employees to reform the A-76 circular to make the process more accountable to taxpayers and more fair to federal employees. Below are several of the reforms proposed by AFGE:
Alternatives to the A-76 Process. Agencies should be encouraged to use Business Process Reengineering (BPR) in lieu of OMB Circular A-76 privatization reviews to achieve improvements in the delivery of services. As noted earlier, even the Bush Administration, however belatedly, was moving in this direction. Given the success of federal employees in OMB Circular A-76 privatization reviews, agencies should avoid incurring the costs and controversies of A-76 studies. Here are some related recommendations AFGE offers:
Area 4: (a) Managing the multi-sector workforce – How might the current definition of inherently governmental function be clarified to improve management of the multi-sector workforce? The federal government exists to serve the American public, and this obligation remains with the government, whether or not the government contracts with the private sector to perform particular functions. The government must keep for itself those functions necessary to carry out its missions and maintain control over all government actions in order to fulfill this obligation. Due to federal hiring restrictions, increasing requirements, and the indiscriminate privatization of the Bush Administration, the federal government has contracted out to the private sector functions that are inherently governmental, closely related to inherently government functions, or mission-essential and should never have been performed by the private sector. Bush Administration OMB officials inappropriately watered down the statutory definition of inherently governmental when they overhauled the A-76 Circular and pressured agencies to designate functions as commercial that managers considered inherently governmental or at least “inappropriate for contractor performance”. By imposing privatization quotas, Bush Administration OMB officials pressured agencies to review for privatization functions that managers often preferred to retain in-house. And by allowing agencies to contract out work without any consideration of in-house performance, more and more functions that are considered inherently governmental or otherwise inappropriate for contractor performance were ultimately turned over to contractors, many of whom have been either inadequately supervised or supervised by other contractors. The Department of Homeland Security (DHS) is an example of an agency that has critical and sensitive work performed by contractors. According to the GAO, DHS uses contractors to prepare budgets, develop policy, support acquisition, develop and interpret regulations, reorganize and plan, and administer A-76 efforts. In contracting out such work, agency officials don’t even bother to subject those contractors to extra surveillance, let alone look for opportunities to bring such work back in-house. The Bush Administration’s drive to privatize was characterized by two faulty assumptions: (1) that the federal government should provide a preference to relying on the private sector for the performance of commercial functions and (2) that every function that the government needs performed is commercial unless proven otherwise. While these assumptions have been extremely beneficial to the finances of federal contractor executives, they have failed the American public and driven up the costs of government. The first assumption is also a violation of federal law (10 U.S.C. 129(a)) requiring the Department of Defense to use the most cost effective source to perform commercial services. As President Obama stated in the March 4, 2009 memorandum on government contracting, the federal government has an overriding obligation to American taxpayers to perform its functions efficiently and effectively. To this end, the preference for using the private sector to perform any services (commercial or otherwise) should be abolished. In addition, all services needed by the government should be considered inherently governmental until otherwise determined by appropriate government officials. Overriding Concerns Previous efforts to define the term “inherently governmental” have focused on the characteristics of particular functions. While these definitions have been somewhat useful, there are other overriding concerns that should first be considered before turning to the character of the function. Technical Expertise/Institutional Memory Agencies must develop and retain the technical expertise and institutional memory needed to manage and provide all functions necessary to meet their missions. This expertise is not limited to that needed merely to oversee contractor performance but also to make decisions for the agency about those functions and to perform those functions if necessary. In addition, no function should be contracted to the private sector if to do so would endanger the future technical capacity and institutional memory of the agency. In the private sector, the rush to outsource functions considered routine has left many companies without the in-house expertise to effectively communicate with the contractors hired to do these functions. Too much outsourcing leads an entity to lose sight of what it needs from a function and how those goals can be achieved. Many private companies, and state and local governments, have insourced work in recent years so that they own the expertise rather than relying on someone else to tell them both what they need and how much it will cost. Federal agencies should undertake this same process. In the mad dash to hire contractors to perform tasks that, at first glance, seem to be commercial, agencies have been drained of in-house expertise in a multitude of functions. In-house technical expertise in all functions performed by an agency, in addition to contract management skills, is necessary to perform essential management functions. Most federal government contracting horror stories start with inadequate agency knowledge of the technical aspects of the work and unreasonable reliance on contractors to oversee themselves. Risk No function should be contracted out if it poses too great a risk of creating a contractor monopoly or interfering with an agency’s ability to perform its mission. Agencies face two kinds of risk when contracting for a function. First, if an agency relies too heavily on contracting to perform a function, it is possible that a contractor, by virtue of its work for an agency, could develop an exclusive expertise so that the agency cannot perform the function without a particular contractor. Second, the agency is ultimately responsible for performing a function, even if the selected contractor fails. The agency must determine the impact of contractor failure and whether it could interfere with the agency’s mission. Contract oversight is useless if an agency can’t penalize poor performance by removing the contractor without negatively impacting the mission. An agency must be able to reconstitute a function in-house if a selected contractor cannot satisfactorily perform the function. Transparency and Accountability No function should be contracted out if contractor performance could cause confusion to the public about whether or not the government is acting. As President Obama stated in a January 21, 2009 memorandum, transparency is important because it promotes accountability and provides information for citizens about what their government is doing. In order to determine what the government is doing, the public must be able to discern when the government is or is not acting. Decision-making Agencies must maintain sufficient in-house capability to be thoroughly in control of the policy and management of the agency. In so doing, government officials must be involved in the decision-making process to a greater degree than merely making the final policy decision on the basis of analysis and/or advice by a contractor or contractors. Agency officials must approve the analytical process leading to the decision options and use discretion and make the value judgments throughout the process. Development and Maintenance of the Federal Workforce Human resources must be treated as a critical business function, not just an administrative process. Agencies must place great importance on acquiring, developing, and retaining employees with the knowledge, skills, abilities, and experience needed to meet agencies’ missions. Before contracting with the private sector to perform any function, agencies must determine whether the work involved is a necessary part of internal workforce development. For example, some functions may seem to be commercial in the abstract but provide necessary experience for employee career progression to inherently governmental functions. Similarly, some functions that may seem to be commercial must be performed by military personnel for purposes of career progression or combat rotation. A major reason cited by agency officials for turning to contractors is a lack of authority to hire additional federal employees. Personnel ceilings must be removed in order to develop and maintain an adequate federal workforce. Personal services contracts are generally prohibited because they harm the development and maintenance of the federal workforce. There must be a clear understanding that the government does not contract out jobs but rather functions – functions that can be measured and for which the government can assess the quality of the work performed by a contractor. The contracting out of individual jobs leads to contractors working side-by-side with federal employees, so that the work product cannot be differentiated. The prohibition on personal services contracts should be retained and enforced. In his final appearance as GAO Chief before Congress in 2008, David Walker suggested that any redefinition of inherently governmental should, as a general rule, consider recurring governmental needs as inherently governmental. Thus, any government function that must be performed for long or indefinite periods of time should be considered inherently governmental and performed by federal employees. Contracts should require a finite or deliverable product which is different from the normal, routine work products of the agency. Contractor Oversight Agencies must ensure that they have the ability to oversee contracts, including the ability to:
Agencies must maintain an in-house workforce in every function in case of contractor failure and to provide a useful benchmark for determining whether contracted services are being provided at a reasonable cost and level of quality. Integration with Inherently Governmental Functions Some functions, while perhaps considered to be commercial in the abstract, are so integrated with inherently governmental functions that they cannot be separated. If poor performance by a contractor would interfere with the agency’s mission, then these functions should not be performed by contractors. Specific Training/Experience/Expertise Needed Many functions needed by the government require unique training, experience and/or expertise that can only be acquired by performing the function. Even if retired or former federal employees might be currently available to perform the function as contractor employees, these functions should not be contracted out, because the government would cease to develop employees with the experience/expertise needed to perform the function in the future. Particular Circumstances No function should be contracted out until the agency examines the particular circumstances in which the function is performed and whether segregating that function will negatively impact agency flexibility and efficiency. In many situations, agencies utilize federal employees to perform more than one function. For example, at the United States Military Academy at West Point, the employees who perform custodial work are often used to assist in performing public works functions when the custodial workload allows. Segregating the custodial workforce from the public works workforce would negatively impact agency flexibility and efficiency. Recommendations In order to encourage agencies to re-establish the boundary between functions that are commercial and functions that are or closely associated with inherently governmental functions, AFGE recommends the following:
Functions in need of Particular Attention Below we mention some specific functions that are currently performed by contractors or have been deemed appropriate for contractor performance under the FAIR Act Inventory or A-76 public-private competition process that we find particularly troubling. This list is by no means exhaustive and is meant to highlight a few of the more egregious situations that have been brought to our attention by federal employees. We find that these functions are inherently governmental or closely associated with inherently governmental functions and should only be performed by government personnel.
[Area 4(c) What criteria should agencies use in deciding whether a government activity should be competed?] AFGE urges the Obama administration to enforce the prohibitions against giving work last performed by federal employees to contractors without first conducting a full and fair public-private competition. Despite the extensive use of the A-76 privatization process and the resulting proof of the superiority of in-house workforces, much work is contracted out without any public-private competition, i.e., without any proof that giving work to contractors is better for taxpayers or better serves those Americans who depend on the federal government for important work. Federal employees represented by AFGE have experienced several direct conversions in recent years. In some of these situations, contracts have been awarded by an agency during a “surge” with the understanding that they would be short-term. But over time the contracts have expanded, with agencies bringing in contract employees to work side by side with government workers, without even an attempt at a public-private competition to determine if the contracting is more efficient for the agency and for taxpayers. Congress, on a bipartisan basis, has, repeatedly, prohibited agencies from perpetrating such conversions. For example:
Even Bush Administration OMB officials opposed direct conversions, at least rhetorically. The A-76 Circular, as revised in May 2003, requires agencies to conduct a public-private competition before converting any work last performed by federal employees to contractor performance. Unfortunately, Bush Administration OMB officials chose to be very selective when enforcing the prohibitions in the A-76 circular and in the laws against direct conversions. During the 2008 campaign, President Obama pledged to correct this problem. For example, in an October 20, 2008, letter to AFGE National President John Gage, then Senator Obama committed to cleaning up waste and mismanagement at the Transportation Security Administration (TSA), singling out “an enormous $1.2 billion sole source contract for human resources without regard to the rules that require them to allow current TSA employees to compete for that work”. In another letter to AFGE’s Gage, sent on the same date, then Senator Obama was “deeply troubled to learn of the VA’s initial plans to contract out work (required of the department as a result of enactment of an expansion of G.I. bill benefits), using a closed bidding process that lacked an opportunity for current VA employees to compete to keep their jobs, despite their excellent track record and the large numbers of veterans in those jobs. I am glad that VA reversed itself and decided to administer the program in-house.” AFGE urges the Obama Administration to ensure that all agencies, particularly VA and DoD, comply with all competition requirements established in law and the A-76 circular.
[Area 4(b) What types of criteria might help agencies identify non-inherently governmental functions that are critical to an agency, with respect to its unique missions and structure, and need to be performed by federal employees in order for the agency to maintain control of its mission and operations?] AFGE is pleased that Congress and the Obama administration have approved and implemented laws to encourage federal agencies to bring contracted work back into government. We believe that the public interest is best served when functions that are inherently governmental, closely related to inherently governmental functions, or mission-essential are performed by government employees within a defined chain of command and subject to vigorous oversight. To properly insource federal jobs, AFGE recommends that the Obama administration continue the practice, first established in the Intelligence Community, of creating a reliable and systematic inventory of federal tasks and reviewing it regularly. Insourcing simply cannot occur without a true inventory of jobs being performed in federal agencies by federal employees and contractors. The government must provide federal employees with full and fair opportunities to compete for new work as well as outsourced work. As mentioned earlier, the Department of the Army has taken the lead in establishing a service contractor inventory and selecting important functions to insource. Here are some of the steps that have been taken to adopt insourcing policies:
The following are AFGE recommendations in this area:
CONCLUSION AFGE is ready to assist the Obama administration and OMB in establishing a new framework for improving the federal acquisition system and managing – and nurturing - the federal workforce. The first step towards meaningful reform should be passage and enactment of The CLEAN UP (Correction of Longstanding Errors in Agencies Unsustainable Procurements) Act (S. 924, H.R. 2736), legislation introduced recently by Senator Barbara Mikulski (D-MD) and Representative John Sarbanes (D-MD). As AFGE National President John Gage declared, “The CLEAN UP Act is vital to any serious effort to save taxpayer dollars and restore integrity to the federal sourcing process. All Americans who depend on the federal government for important services have a compelling interest in making sure this important legislation becomes law.” The CLEAN UP Act would:
Thank you for the opportunity to comment on this important matter.
Need for Balance? Publicness in the Inherently Governmental Dialogue, Larkin Dudley, Sept 2008. http://www.maxwell.syr.edu/pa/minnowbrook3/PDF%20Files/Phase%20II%20Papers/Dudley%20-%20Balancing%20PublicnessV2.pdf Do you see a mistake or inaccuracy in this page? Please report it. |
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Nat'l President: John Gage - Nat'l Sec/Treas: J. David Cox - Nat'l VP, Women's & Fair Practices: Augusta Thomas |
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