National Federation of Federal Employees 2003 Legislative Position

National Federation of Federal Employees
2003 Legislative Position:
Competitive Sourcing Mandates

Executive Summary__________________________________________

The Competitive Sourcing Initiative as it is being implemented by the Office of Management and Budget (OMB) mandates that federal agencies rush into A-76 competitions without the ability to adequately analyze or describe the nature of the work to be competed. Quotas for numbers of positions to be competed coupled with the unfamiliarity of civilian agencies with the A-76 process will result in radical outsourcing of Federal functions without any assurance that such outsourcing will actually save costs while allowing agencies to fulfill their missions.

Specifically we have concerns that:

Agencies are conducting competitions to meet quotas, not because there are valid reasons to believe that the private sector could do the work more effectively.
Agencies do not have the expertise to do competitions effectively.
Even when A-76 competitions are adequately performed, careful analysis cannot establish that A-76 decisions have been beneficial and cost-effective.
Outsourcing "decisions" will not be made based on merit or cost savings, but on OMB's mandates and the lack of agency familiarity with the A-76 process.
Because of the unprecedented magnitude of OMB's quotas, the very ability of agencies to fulfill their missions will be put at substantial risk, and tens to hundreds of thousands of civil servants will be gratuitously displaced.
OMB's mandates are driving a radical increase in contracting out that opens the door for a return to the spoils system that the civil service was created to eliminate.

We wholeheartedly support increasing the efficiency and effectiveness of public institutions; however, policies to effect such changes should be based upon sound business principles and not numerical quotas mandated by uninformed bureaucrats. Currently, ill-prepared agencies are rushing into A-76 competitions to meet quotas imposed by OMB; the result will be disorganized and dysfunctional agencies whose contracted workforces will not be directly accountable to the taxpayers. It is crucial that this issue be brought before Congress for debate before the public infrastructure upon which the American public depends is dismantled by this unprecedented and undebated policy.

Congressional Actions Requested
On a government-wide basis, we request that you:

Work to convene hearings on the competitive sourcing initiative, to address such questions as:
- Are OMB's quotas justified by considered research and sound analysis, and are they consistent with the mission of the agencies? Are internal agency quotas so justified?
- Is OMB in compliance with Section 647 of Division J, Public Law No. 108-7? Are agencies, in particular the Forest Service (FS), in compliance?
- Do the agencies have the resources to carry out fair and equitable competitions?
- Have federal agencies lost the capability to effectively perform their missions due to over-outsourcing? How will current competitive sourcing quotas affect their capabilities? For example, to what extent would the ability of the FS to protect life and property be affected as a result of the dismantling of the "fire militia" via random outsourcing?
- What are the short and long term effects of current competitive sourcing policies on the nation's public infrastructure?
Work to bring OMB into compliance with Section 647 of Division J, Public Law No. 108-7. In particular, OMB's posting at www.whitehouse.gov/omb/memoranda/m02-02standards.pdf continues to apply an arbitrary quota of 50%, and should be removed. We urge you to investigate OMB's role in enforcing arbitrary quotas by holding senior agency officials accountable to these quotas on their performance appraisals and by other means.
Sponsor and work for passage of strong language to (1) prohibit the assignment of numerical targets to agencies by OMB, (2) require that all A-76 studies and direct conversions to contract be justified to Congress, and (3) require that the new A-76 circular be rigorously tested as a Demonstration Project and the results reported to Congress before it is implemented government-wide.
Sponsor and work for passage of the Truthfulness, Responsibility, and Accountability in Contracting (TRAC) Act and work for repeal of the Federal Activities Inventory Reform (FAIR) Act.

Regarding specifically the FS, we ask that you:

Do all that is within your power to halt the FS FY 2003 studies until an analysis consistent with Section 647 of Division J, Public Law No. 108-7 is performed and the results reported to Congress.
Sponsor and work for passage of legislation to prohibit the outsourcing of the core FS functions of land management, fire suppression, and scientific research that support these functions.

The A-76 Process

OMB's A-76 circular provides the formal framework for "public-private competitions" to determine whether it is more cost effective for government work to be carried out by public employees or by contractors. When used properly, the A-76 competition process results in an impartial cost-comparison to determine whether substantial work should be contracted out or performed in house. If A-76 calculations predict that outsourcing would be expected to generate savings, the agency is bound by this finding to outsource the work.

The A-76 process is designed for cost comparisons involving simple, well-defined work for which a complete, quantitative description of the work can be made. This is a reasonable task when employees are assigned to single work functions and the work can be readily quantified. Completely describing and quantifying more complex work is a daunting task, and any work that is left out of the description biases the result toward outsourcing. In a variety of situations (complex work, multi-function employees, small offices), there are very serious challenges in conducting A-76 studies, as well as making subsequent staffing decisions. Clearly, the decision to enter into the A-76 process should be a carefully considered strategic decision taking into account the requirements of the agency and the limitations of the process.

Prior to the current initiative, the decision to enter into the A-76 process was an informed decision made by agency management on the front lines. It is these managers who possess an intimate knowledge of the work function(s) and the organization for which the outsourcing is being considered. It is this proper exercise of local management discretion that takes factors other than strictly cost (quality, agency human capital needs, technical A-76 barriers, etc.) into account.

OMB's Role in the Competitive Sourcing Initiative

OMB promotes the competitive sourcing initiative as a means to improve the efficiency of government through competition. While we agree that improving efficiency is a laudable goal, thoughtful analysis reveals that the current policies enacting competitive sourcing will have the opposite effect. The following policies have been enacted:

OMB has assigned agencies numerical quotas of full time equivalents (FTEs) that must either be studied under the provisions of the A-76 circular or converted directly to contract. OMB has mandated that agencies study 15% of the FTEs listed on their FAIR Act inventory by the end of FY 2003.
OMB's stated goal is to require that 50% of FAIR Act FTEs (approximately 425,000 FTEs) be subjected to A-76 or contracted out. According to FS documents, OMB has mandated that a quota of 50% be met by the end of FY 2005.
Agency work that remains in-house will be re-competed in a never-ending cycle every three to five years.
OMB has rewritten the A-76 circular. Although not yet implemented, the draft of this document:

Mandates unreasonable timelines for A-76 studies.
Changes the cost-comparison formula to make direct conversions to contract more likely, even in cases where study shows the in-house cost to be less than the average expected cost of contracting out the same work.
Changes the definition of "inherently governmental" work such that the vast majority of the approximately 1.8 million federal workforce will be subject to A-76 study.

These policies threaten to destroy the public infrastructure upon which American citizens depend for a vast array of services. The greatest previous use of A-76 occurred in the late 1980s, at which time 2% of the federal workforce was studied. OMB's current objective to study 50% by 2005 represents a 25-fold increase in the previous greatest use of the A-76 process. The magnitude of this increase alone makes competitive sourcing a radical initiative.

Along with this radical acceleration of competitive sourcing, OMB plans to introduce a new and untested A-76 process. Although OMB officials have indicated that some of the more radical provisions of the new A-76 circular will be moderated, the exact nature of the new rules remains to be seen. In any event, the new circular is in actuality an experimental procedure that OMB plans to implement government-wide. Applying an untested process to competitions on a heretofore unimagined scale runs the risk of producing flawed results on an enormous scale; results that the American people will have to endure for many years to come.

Arbitrary Quotas: Against the Will of Congress and Against the Law

Section 647 of Division J, Public Law No. 108-7 states, "none of the funds made available in this Act may be used by an agency of the executive branch to establish, apply, or enforce any numerical goal, target, or quota for subjecting the employees of the executive agency to public-private competitions or for converting such employees or the work performed by such employees to private contractor performance under the Office of Management and Budget Circular A-76 or any other administrative regulation, directive, or policy unless the goal, target, or quota is based on considered research and sound analysis of past activities and is consistent with the stated mission of the executive agency." Further, House Report 108-010 states, "the conferees want to emphasize the strong opposition in both chambers to the establishment of arbitrary goals, targets, and quotas."

We wish to thank the Congress for these words, and to acknowledge that they have had positive effects. The President's 2004 budget assigns no quotas, and OMB officials have moderated their public stance regarding the new A-76 rules. And yet, we as employees must report from the front lines that nothing has really changed: The pace of "competitive sourcing" continues unabated, driven by arbitrary numerical quotas.

According to staffers of the Senate Subcommittee of Oversight of Government, OMB has indicated to Congress that they were willing to work with agencies to moderate their quotas and strict timelines, and that there are no quotas beyond FY 2003. Actions speak louder than words: The FS, in spite of the strong opposition of both chambers of Congress to arbitrary quotas, continues to implement "competitive sourcing" based on numerical quotas they say come from OMB. This is substantiated by a March 6, 2003 FS document that attributes quotas of 10% for FY 2004 and 25% for FY 2005 to OMB.

Clearly, someone is not telling the truth.

The role of Congress is subverted in other ways by this initiative, even with respect to the appropriation of funds for specific work. According to FS documents, "OMB has stated that the agencies that implement competitive sourcing can retain the FTEs and savings for use for other purposes." This is not only inconsistent with budgetary and appropriations processes, but would provide no financial benefit to the taxpayer.

Forest Service Quotas Are Arbitrary

In reference to government-wide quotas, GAO Comptroller General David Walker states, "I have seen no evidence to indicate that [OMB's] numerical FTE goals were based on considered research and sound analysis (GAO-02-1022R)." This is certainly true of FS quotas. When the Union asked for the research, the agency was unable to produce a single document based on research and analysis either received from or provided to OMB, from whence the quotas came. In addition, numerous FS documents demonstrate the quota-driven nature of the "decisions" to study certain functions:

Information Technology (IT) was chosen for study because it was "the right size" and because it "has been competed in other organizations." No analysis was done regarding mission-specific aspects, such as geographic information systems (GIS) and emergency support function (ESF) capabilities. No analysis of market trends was performed. This is unfortunate, as a recent DiamondCluster International study shows that 78% of private firms that have outsourced an IT function have had to terminate that agreement early for reasons of poor service, inflexibility, and high costs.
The decision to study IT and maintenance work (buildings, grounds, fleet, etc.) was announced on September 4, 2002. Many of these employees perform collateral duties in fire suppression on a seasonal basis; they form the agency's fire "militia." The success of this approach is discussed in some length in the April, 2003 briefing paper provided to Congress by the FS. The loss of this pool of expertise in fire suppression has the potential to severely impair the agency's fire suppression capabilities. This issue has not been analyzed; in fact, the agency only began to collect data regarding the number of collateral duty FTEs in the study categories in April, 2003. Regardless of the data, the studies will go on, driven by OMB's quotas and strict timelines rather than by realistic agency mission requirements.

The arbitrary nature of OMB's quotas is also demonstrated by inter-agency comparisons:

The FS mission is to sustain the health, diversity, and productivity of the Nation's forests and grasslands to meet the needs of present and future generations. The Bureau of Land Management (BLM) has very similar responsibilities. Yet, while 77% of FS FTEs are eligible for outsourcing, only 29% of BLM FTEs are.
The FS is the lead Federal agency in land and resource management. The FS manages the 191 million acre National Forest System. The Department of Defense (DOD) manages only about 25 million acres. Yet, the military is prohibited by Law (Sikes Act) from outsourcing its natural resource management functions; whereas FS professional natural resources personnel are eligible for outsourcing.
The FS is the primary agency for the Federal Emergency Management Agency's ESF #4: detecting and suppressing wildland, rural, and urban fires resulting from, or occurring coincidentally with, a major disaster or emergency requiring Federal response assistance. DOD fire suppression personnel are primarily responsible for suppressing fires on military bases. Yet, the military is prohibited by Law (10 USC 2465) from outsourcing its fire suppression functions; whereas FS fire suppression personnel are eligible for outsourcing.

The Forest Service Continues to Implement Arbitrary Quotas

The Union filed a grievance asserting that the FS "competitive sourcing" activities are not based considered research and sound analysis of past activities and therefore violated Section 647 of Division J, Public Law No. 108-7. In response, the FS asserted that this provision does not apply to it, but only to those agencies funded within Division J.

Conspicuously, the agency did not assert that its "competitive sourcing" agenda was based on anything other than arbitrary quotas from OMB. In fact, a high-ranking official told us, "You know we wouldn't be doing this if it weren't for OMB's quotas."

The FS is continuing to implement its 15% quota for FY 2003. Most of these studies are scheduled for completion in 2003. The FS also continues to actively work toward meeting its FY 2004 and FY 2005 quotas of 10% and 25%, respectively.

The Cost of Doing "Competitive Sourcing" in the Forest Service

Political pressure runs downhill. Privately, even top agency officials express their strong disagreement with this initiative; however, they must show their support in public. It is within this context that agency cheerleading must be analyzed.

The cost and savings figures presented by the FS in its April, 2003 briefing of Congress are substantially flawed. We seriously doubt they are based on "considered research and sound analysis," as the agency has been unable to produce such an analysis.

The FS briefing based its expected savings figure solely on "the experience by others with competitive sourcing." The experience of "others" is not a relevant basis for projection of potential FS savings:

"Others" is mostly the DOD, which has decades of experience with the complex A-76 process, and therefore the requisite infrastructure and expertise to do it well.
DoD functions are more homogeneous and are a better fit for the A-76 process.
Past studies involved a much smaller percentage of the agency, and consequently did not face the scarcity of resources that current studies do.
Earlier studies were not subject to tight, unreasonable timelines. DOD reports that multifunctional A-76 studies required on average 31 months to complete (GAO-02-498T). To meet OMB's FY 2003 quota, the FS plans to complete multifunctional A-76 studies in 5 months.
The savings of others are unknown. "Projected savings expected" is a better term for the estimates that are bandied about, and these are highly suspect. A detailed GAO analysis concludes, "DOD's reported savings figures are incomplete and inaccurate (GAO/GGD-90-58)." The flawed methodology discussed in this report has not improved in the intervening years. More recently, Barry Holman, Director of Defense Capabilities and Management, reported similar problems in "developing and maintaining reliable estimates of projected savings expected from competitions (GAO-02-498T)."

The agency's estimate of the cost of performing FY 2003 competitive sourcing studies is also without merit. The agency has not collected the cost data required for a valid estimate, and the immense diversion of personnel for training and work on "competitive sourcing" was clearly not considered. According to our engineering cost estimate, the FS will spend $100-150 million in FY 2003 on this unfunded executive mandate. As a consequence, substantial mission work for which these funds were appropriated will not be done.

Ironically, one of the FS objectives is to "avoid doing something dumb while going through a complex process on the way to reaching aggressive FTE targets." This objective is not achievable even by a "can do" organization in the face of OMB's quotas and deadlines.

The Results of Unchecked Arbitrary Outsourcing

Current "competitive sourcing" policy replaces informed managerial discretion with numerical quotas forced on civilian agencies lacking the infrastructure and expertise to carry out fair competitions using the complex A-76 process. As a result, agency outsourcing "strategy" is being driven by quotas and sourcing "decisions" by the lack of agency expertise in the A-76 process. The results will be disastrous:

Haphazard, extensive outsourcing will seriously erode the ability of agencies to effectively perform their missions. Private firms have learned that directly accountable employees are their greatest resource, and consequently 4 of 5 private firms outsource less than 10% of their work. In contrast, the government already outsources 75% of its work. DOE and NASA, which outsource over 90% of their work, provide clear and compelling examples of the consequences of over-outsourcing. These agencies are poor role models for government reform.
Over-outsourcing diffuses accountability by adding multiple layers of management with divided loyalties. Contract employees are directly accountable to the contractor, not to the employing agency. The contrast between corporate CEOs and civil servants has been brought into focus recently by Enron and other corporate scandals. Dozens of hearings by the Civil Service Subcommittee have revealed conflicts of interest, hidden cost, and poor performance associated with contracting out.
The United States government will become increasingly dependent upon corporate contractors, many of them international in scope. The goals and motives of these corporations and their employees will not necessarily coincide with those of the government, to the possible detriment of national security.
Advocates point to cost savings. However, "GAO cannot prove or disprove that the results of federal agencies' A-76 decisions have been beneficial and cost-effective (GAO/T-GGD-95-131)." Common sense demonstrates that in the long term, costs will surely increase and/or quality will suffer. Employees (federal or contract) will still be needed to get the work done. Federal management will still be needed. Add to this the costs of contract oversight, contractor management, and profit for the company. A company may bid low to get the work, but in the long run must raise prices, exploit workers, or cut corners. Ironically, the FS contract with the consultant hired to assist in one competitive sourcing study will need to be modified due to a greater than anticipated workload, resulting in a greater than anticipated cost.
Public employees take special pride in their jobs, and care deeply about the missions and goals of their agencies. Their missions are diverse and include providing national security, protecting sustainable forests, providing health care to our veterans, planning and building infrastructure, and conducting a myriad research activities from agricultural to national economics. There is no place on the A-76 forms and templates to input such complexity, and such dedication does not come with the lowest bidder.
The standing of the United States in the world and the quality of life enjoyed by our citizens is due in no small part to our public institutions and the hard-working men and women that staff them. Hundreds of thousands of these dedicated public servants, through no fault of their own, risk being pushed out of their current positions, victims of arbitrary quotas.
The federal civil service, with its careful protection of workers from political pressure, was created to eliminate the corrupt spoils system of the 19th Century. The increased privatization of government jobs circumvents these protections and provides an avenue for the award of work based on political patronage rather than merit.
Americans owe veterans a great debt of gratitude for their service to our country. One of the ways our society repays this debt is by giving veterans preference for Federal jobs. Veterans make up 26% of the civilian Federal workforce. OMB's quotas will cost many of them their jobs.

Who we are:
The Forest Service Council represents over 14,000 Forest Service employees through our membership in the National Federation of Federal Employees and our affiliation with the International Association of Machinists and Aerospace Workers.

Contact:
William Doagan, President
wdoagan@fs.fed.us
(907) 747-4285