Infotech and the Law

Sharks Are Circling Outsourcing Act

James Fontana

By James Fontana

Government outsourcing seems to be in full swing. That includes work already performed by contractors but now consolidated into single, governmentwide contracts. It also includes privatizing government functions traditionally performed by federal employees.

Last October, Congress passed the Federal Activities Reform Act of 1998 (FAIR) to facilitate outsourcing and privatization of government activities. Essentially, the FAIR Act requires that procuring agencies prepare and submit annually to the Office of Management and Budget and to Congress a list of "non-inherently governmental functions" currently performed by federal employees.

Although the FAIR Act was designed to promote more outsourcing, its impact has been mixed. The FAIR Act's definition of inherently governmental function runs almost a full page. As a lawyer, I will not torture the readers in summarizing it. Suffice it to say it entails those noncommercial activities so intimately related to the public interest as to require the agency to perform that function.

For example, a Defense Department agency's IT communications functions may not be considered inherently governmental, but using those functions to conduct command and control activities in a combat situation would.

To be precise, the FAIR Act includes as inherently governmental such functions as military or diplomatic matters; activities not generally available from commercial sources; matters requiring application of special government authority (e.g., agency policies); matters that would bind contractually the government or its property; judicial proceedings; appointment and control of federal employees; and matters that affect the life, liberty or property of private persons.

Armed with the list of non-inherently governmental functions ? which includes the number of full-time federal employees needed to fulfill them ? agencies also are required to review the list and do cost comparisons (using OMB Circular A-76 procedures) to determine whether there should be a competition for the activity between a private sector source and the agency itself.

Open competition between agencies and private sources is not mandated. The FAIR Act directs that agencies must use the cost comparisons to determine the "make or buy" decision. Outsourcing companies see this as potential to receive more contracts to perform the government's commercial activities. But the lawyers like the fact that the statute allows for challenges against which activity is included or not included on the list.

The protester may be a potential offerer, a government employee performing an activity on the list, an association representing offerers, agencies which are potential offerers or a labor union representing affected federal employees.

So just when you thought it was safe to go back into the water after General Services Administration board protests were eliminated for IT procurement, there is potential for a flood of new protests regarding government outsourcing decisions. And in Washington, there is no shortage of sharks in that water. Foes of the FAIR Act may be found in the procuring agencies themselves. Understandably, some agency officials have favored keeping an in-house work force despite cost comparisons suggesting that outsourcing is the most efficient way to meet performance requirements.

One weakness in the A-76 cost comparison is that, in some cases, those government personnel involved in the comparison often are connected with the activity considered for outsourcing. In one recent case, the General Accounting Office sustained a protest challenging an A-76 comparison of several Air Force operations because 14 of the 16 agency evaluators involved held positions that would have been outsourced under the solicitation.

In addition, unions representing federal workers have an interest in maintaining the status quo simply because once those workers are employed by a private concern, they will no longer fall under the union's membership.

Opposing forces may find help from members of Congress. In May, Rep. James Talent, R-Mo., introduced an amendment to the fiscal year 2000 Defense Authorization bill that would block the Army's plan to outsource badly needed software upgrades and maintenance at two Army Materiel Command centers. Some say that bill merely is to prevent displacement of more than 500 federal workers.

Whether the bill lives or dies may be overshadowed by the fact that there is yet another mechanism to thwart the government's push to outsource more of its commercial functions.



James Fontana is vice president and corporate counsel of Wang Government Services Inc. in McLean, Va. His e-mail address is james.fontana@wang.com. Scott Chaplin contributed to this article.

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