September 19, 2006
Jason Fornicola
(202) 639-6448

AFGE Calls OMB's Financial Management Initiative Anti-Competitive

WASHINGTON — The American Federation of Government Employees (AFGE) reports that the Office of Management and Budget’s (OMB) finalized guidance for its Financial Management Line of Business (FMLoB) initiative allows contractors to take work from federal employees in all agencies without any public-private competition, use a “best value” (sic) competition process so vulnerable to abuse that even OMB would not sanction it when revising the Circular A-76 in May 2003, and imposes a numerical privatization quota on federal employees in all agencies who perform financial management services.

“OMB’s FMLoB guidance reveals that OMB’s privatization agenda is all about replacing federal employees with contractors, regardless of the costs to taxpayers,” declared AFGE Public Policy Director Jacque Simon, who testified on the initiative in June before a House subcommittee.

The controversial FMLoB initiative forces all agencies to either compete or convert their financial management functions, regardless of their unique missions or specialized needs. OMB referred to the guidance published earlier this month as “Version 1”.

1. The OMB’s guidance encourages agencies to give work to contractors without any public-private competition.

In direct contravention of the Circular A-76, as revised by this OMB on May 29, 2003, the guidance provides that an “agency may, but is not required to follow Circular A-76…for activities involving 10 or fewer FTEs (Full-Time Equivalents).” Please note that OMB did not thus authorize “direct conversions” in particular instances for the FMLoB initiative; rather, OMB is authorizing it in every instance.

2. OMB’s guidance allows agencies to use a version of the subjective “best value” (sic) process so extreme and so vulnerable to abuse that it has been outlawed by the Congress and repudiated by the OMB.

The use of “best value” in public-private competitions has been outlawed for the Department of Defense since 2004 and for all other agencies since 2006. Of course, OMB officials also understand how easily the “best value” (sic) process can be abused. The current A-76 circular, as revised by this OMB, in May 2003, severely limits the use of subjective, non-cost factors in all competitions, including for competitions for functions performed by up to 10 FTEs. However, OMB’s FMLoB guidance, by referencing FAR 15.101-1, actually encourages the use of subjective factors “to consider award to other than the lowest price offeror.”

3. OMB’s guidance brings back the same numerical privatization quotas—subjecting certain numbers of federal employees to privatization reviews—that have been outlawed by the Congress and repudiated by OMB.

OMB is insisting that all agencies, in all but the most extraordinary circumstances, must compete under the Circular A-76 or directly convert a certain number of jobs—or face sanctions in the budget process. However, instead of that numerical privatization quota being 15% of an agency’s “commercial” workforce, as it was in FY03, it is instead 100% of an agency’s financial management workforce.

“AFGE is in strong opposition to this one-sided and unnecessary financial management initiative,” said AFGE National President John Gage. “OMB is implementing a practice that is anti-competitive and won't save taxpayer dollars.”

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