Outsourcing Policy Heats Up on the Hill

Outsourcing Policy Heats Up on the Hill<@VM>Business Execs Urge Defense Outsourcing

Rep. Tom Davis

Rep. Albert Wynn

A battle is looming among lawmakers over whether the federal government should outsource more of its tasks and responsibilities to the private sector.

Although the Federal Activities Inventory Reform Act of 1998 directed federal agencies to identify jobs that could be turned over to the private sector, industry leaders and their supporters on Capitol Hill say the outsourcing effort stalled under the Clinton administration and has been effectively thwarted by agencies and labor groups that want to keep government jobs in-house.

Rep. Tom Davis, R-Va., chairman of the House Government Reform subcommittee on technology and procurement policy and a supporter of FAIR, intends to hold hearings this spring to find ways to strengthen the legislation and shift more jobs to the private sector.

"It does appear some agencies are simply going through the motions when it comes to compliance ? providing inventories of those jobs deemed not inherently governmental but not following through on the outsourcing of them," said David Marin, Davis' communications director.

Although the Bush administration has yet to weigh in formally on the outsourcing issue, President Bush raised industry hopes during the election campaign by calling for at least half of the roughly 900,000 jobs identified in the FAIR Act inventories to be outsourced.

"When we see rhetoric like that, we think there are some good goals that may be implemented," said George Sigalos, counsel and director of communications for the Contract Services Association of America, a Washington trade association representing companies that contract their services to the government.

For the information technology industry, outsourcing has provided several lucrative opportunities.

In October 2000, for example, Electronic Data Systems Corp. of Plano, Texas, won the five-year, $4.1 billion Navy-Marine Corps Intranet contract to provide voice, video and data services, networking, training and equipment to 350,000 sailors and Marines around the world.

Other major outsourcing contracts include the $2.2 billion NASA and Air Force Joint Base Operations Support Contract won by Logicon Inc. in 1999, and the $3.5 billion NASA Consolidated Space Operations Contract won by Lockheed Martin Corp. in 1998.

There also have been numerous task orders awarded under the General Services Administration Seat Management and NASA Desktop Outsourcing Initiative, known as ODIN, for desktop computer and network services.

Outsourcing, however, faces strong opposition from government labor unions and lawmakers who are skeptical whether the government really saves money by shifting jobs to the private sector.

Rep. Albert Wynn, D-Md., introduced Feb. 14 the Truthfulness, Responsibility and Accountability in Contracting Act, H.R. 721, that would temporarily suspend the contracting out of federal services until agencies can document the savings realized by outsourcing.

The bill also would allow federal workers to compete with the private sector for projects slated for outsourcing. It has almost 70 co-sponsors.

"The GAO and others say there is no credible evidence that privatization or outsourcing have saved the government money or created greater efficiencies," said Mike Rious, senior legislative assistant to Wynn. "This says specifically [that an outsourced contract] needs to show at least a 10 percent savings. If there are no savings, why contract out?"

Rious said the TRAC legislation is not directed at the FAIR Act, but has to do with making the government accountable for its decisions regarding outsourcing.

The FAIR Act required 24 major federal agencies to prepare inventories of jobs or activities that are not "inherently governmental" ? or commercial in nature ? and thus candidates for outsourcing. The third and final round of inventories for 2000 was released last month.

But after three years, the FAIR Act has fallen far short of its goal to move nongovernmental activities from the federal work force and transfer them to competitive businesses.

The General Accounting Office in September 2000 reported there were some 900,000 full-time positions in 24 major agencies identified as performing commercial activities. But the agencies exempted more than half, about 513,000 jobs, from consideration for outsourcing.

Industry representatives filed 145 appeals and challenges last year to jobs declared exempt, while federal employees filed 283 challenges and appeals of commercial classifications. Of the 428 challenges and appeals, only 23, just 5.4 percent, were successful.

"We are, as an association, struggling over what to do about the FAIR inventories," said Olga Grkavac, executive vice president of the Information Technology Association of America in Arlington, Va. The ITAA represents 26,000 direct and affiliate companies in the U.S. IT industry.

When the inventories of commercial activities were released in 2000, ITAA put together a task force to go over the list and prepare challenges, Grkavac said. The association filed challenges with 13 of the 24 agencies, but only one small challenge in an Agriculture Department agency was upheld.

This year, the association has decided not to bother. "We're somewhat disillusioned with FAIR," Grkavac said.

Labor interests agree that the FAIR Act has not cut a wholesale swath through federal employee ranks, though they believe that's a good thing.

"The contracting community wanted Godzilla, and they got Barney," said Wiley Pearson, a defense policy analyst with the American Federation of Government Employees, which has 200,000 federal members. "The Barney aspect is no agency is obligated to compete anything. All they have to do is provide a list. As far as we're concerned, FAIR could have been much worse. It's basically an administrative drill."

Chris Jahn, legislative director for Sen. Craig Thomas, R-Wyo., the original sponsor of the FAIR Act, assigned some of the blame for the FAIR Act's less than vigorous outcome to the Clinton administration.

"We do believe the act is clear in its intent, [but] there was a reluctance by the previous administration to aggressively implement it, given their close relationship with federal employee labor unions," Jahn said.

Although Thomas introduced legislation last year to strengthen the FAIR Act, he's going to hold off re-introducing the legislation to give the Bush administration some time to implement the law.

"They're still organizing," Jahn said about the new administration officials, "so we're going to give them the benefit of the doubt."

As part of the effort to encourage outsourcing, Davis' subcommittee also will examine the public-private competition process, established by the Office of Management and Budget's Circular A-76. This calls for businesses and federal employees to compete against each other for the nongovernmental work now being carried out by agencies.

The federal employees frequently form a "most efficient organization" as its competitive entity. The A-76 process is most commonly used in the Defense Department, and can take two to four years to complete.

The A-76 process "in our view, does not work well for either contractors or federal employees," Marin said.A new business study is calling on the Defense Department to outsource more of its operations, including information technology and communications tasks.

The "Tail-to-Tooth Commission" report, sponsored by Washington-based Business Executives for National Security, examined ways the Pentagon can transform its business practices and save billions of dollars.

Among other recommendations, the report called for expanded use of alternative approaches to acquisition, such as the Navy-Marine Corps Intranet project, which turned the entire IT function over to prime contractor Electronic Data Systems Corp.

The study said the Pentagon could save up to $30 billion annually by adopting modern business practices, such as outsourcing.

The three-year commission, which released its findings Feb. 22, consisted of corporate leaders, former members of Congress, former defense secretaries from both Republican and Democrat administrations and retired military leaders.

The group also recommended revising the A-76 process for determining whether a government operation should be performed in-house or by the private sector.

"The Pentagon planned to use the A-76 process as a key tool for achieving savings in its most recent reform effort, identifying more than 227,000 positions for study," the study said. "But the A-76 process is cumbersome and slow."

The process is seen as flawed by the government and by businesses, the study found. The military services are not reaching outsourcing goals. Many projects were canceled before the A-76 process was completed. Other competitions won by private-sector competitors were reversed by political pressure, the study stated.

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