Easing the 'Ow' in Outsourcing

Companies Strive to Allay Fears of Change

Paul Cofoni

Paul Cofoni

Even now, 10 years later, Paul Cofoni remembers how it felt to be outsourced.

In 1991, Cofoni was vice president of information technology services for General Dynamics Corp.'s East Coast business units when he learned that he and about 3,000 co-workers were going to be outsourced to Computer Sciences Corp.

There was a lot of fear, he said. "We were losing control of our own destiny, moving to another company we didn't know about," Cofoni said. "It's hard to distinguish it from being a personal judgment about the work you've done [rather than] a decision about the future."

Cofoni's attitude changed, however, when he realized his mission had changed. Although he was doing for CSC what he had done for General Dynamics, he no longer served in a support function. Cofoni had become part of CSC's core business.

The difference, he said, was that CSC officials didn't just tell him he was important, they acted like he was important. And now Cofoni, who in February was named president of CSC's federal sector, said being outsourced was the best thing that ever happened to him.

"It was a really quick transition," he said. "They really empowered me, [and] they got me involved in the growth of the core of the business. I was learning new things, and I had access to the very highest levels of the company very early."

Cofoni's apprehensions about outsourcing are similar to those of government employees who now face the prospect of having their jobs outsourced to companies such as CSC.

In the broadest sense, outsourcing is the transfer of specific functions or jobs to an outside business, such as CSC picking up many IT responsibilities for General Dynamics 10 years ago.

The Bush administration is expected to push hard for transferring many government IT functions to the private sector. Research firm Federal Sources Inc., McLean, Va., is estimating outsourcing will grow 30 percent in fiscal 2002 to about $6 billion.

But outsourcing in government also is controversial and contentious, with many questioning whether it is achieving its goals of improving services and saving money. Not surprisingly, many of those who question outsourcing are the civil servants who suddenly find themselves thrown into the commercial world.

"We oppose outsourcing for all kinds of reasons," said Jacqueline Simon, public policy director of the American Federation of Government Employees. She said, for example, that contractors make a profit on what had been government activities, yet they are not subject to the same oversight and control faced by federal agencies and their employees.

"The government would never pay an IT professional $200,000, but a contractor wouldn't hesitate to do that ? and bill the government for it," Simon said. "Agencies have been starved when it comes to paying the federal work force, but they've had carte blanche when it comes to paying contractors. If the government is willing to pay it through a contractor, they should be willing to pay it in-house."

Stan Soloway, president of the Professional Services Council in Arlington, Va. ? and a member of the Commercial Activities Panel formed by Comptroller General David Walker to examine government outsourcing policies ? gnashes his teeth at union opposition to outsourcing.

"One of the biggest problems of this whole debate is this posturing of good vs. evil, life vs. death," Soloway said. "If you want to outsource, it's not because you want to get rid of your work force. It's because you want to focus on your core competency. It's about seeking efficiencies ... that are not otherwise available to government."

Soloway said the debate over outsourcing is about politics as much as economics, and federal employees have not always been treated respectfully.

"If I were them, I would feel assaulted because of the way it's [been] presented to me," he said. As part of the procurement strategy, there has to be a hold-harmless clause so that government workers do not become unemployed or suffer serious economic hardship as a result of outsourcing, Soloway said.

Richard Klimoski, a professor of industrial and organizational psychology at George Mason University in Fairfax, Va., said there may be some difference in motivation for those who work in the public sector as opposed to private industry, which can explain some of the resistance.

"Individuals ... develop a sense of relationship, a psychological contract" with their employers, Klimoski said. "They think they have an understanding of their obligations to the firm, and the firm's obligations to them."

But if those who work for the government were attracted in part by a sense of public service, and they get outsourced, "not only is the contract changed ... their sense of self has to change, over and above the normal change. All of a sudden, you're being asked to take on a new persona. There are new rules, new expectations, [and] probably beyond all that, you feel violated," he said.

Yolanda Taylor worked for the government for 16 years at Fort Hood, Texas, becoming a target devices servicer leader.

Then the military conducted an A-76 competition, a faceoff between government employees and contractors bidding on doing their work. The employees lost, and the contractors took over.

"We were given two options," Taylor said. "There were those in a position to accept voluntary incentive programs, such as voluntary early retirement, for instance. Then there was the right of first refusal ? the contractor will offer a job if he has one available."

For those not offered a job, there was the RIF: reduction in force. Taylor found herself having to choose between remaining a federal employee in a clerical job at the base or going to work for the contractor.

"I made a personal decision that I cannot afford to work for a contractor," Taylor said, explaining that several of her former co-workers who did transfer wound up getting caught in a contractor's bankruptcy. "I've got tenure, and I've got an investment in the federal [pension] system. ... I don't work for the federal government to get rich; it's something I enjoy doing."

Because of resistance from employees such as Taylor and government employee unions, prospective outsourcing contracts frequently include "soft landing" provisions, said Ray Bjorklund, vice president of consulting services at Federal Sources.

One example is the Navy-Marine Corps Intranet contract, awarded last year to Electronic Data Systems Corp. of Plano, Texas, which required the company and its myriad subcontractors to make plans to ease the transition of government employees facing relocation to the private sector.

Outsourced government workers who joined EDS received a 15 percent pay raise, three years' guaranteed employment and a bonus plan, said Al Edmonds, president of EDS Federal. So far, only 185 government employees have been affected by NMCI, Edmonds said. Many of them went to other Navy jobs, but 34 workers have come to EDS. Up to 1,800 more government employees are likely to face similar choices over the course of the eight-year project.

Another example of using soft landings is the upcoming Groundbreaker contract that will be awarded by the National Security Agency. The 10-year, $5 billion program is out for bid now. The request for proposal includes a requirement that the bidders ? Cofoni's CSC, AT&T Corp. of New York and OAO Corp. of Greenbelt, Md. ? include in their proposals plans for transitioning government workers into the contractor's organization.

NSA has already tested the waters of outsourcing. In April 1998, the agency awarded the five-year, $20 million Breakthrough outsourcing contract to CSC. Breakthrough provides for the daily operations and maintenance of NSA's computer systems, among other services.

In another example of a federal outsourcing project handled by CSC, company officials said more than 200 government employees and about 250 individual contractors working for the Army moved to CSC over the first six months of the $680 million Logistics Modernization contract after the December 1999 award. About 10 of the government employees have since left CSC, but everybody else has stayed, company officials said.

Cofoni said he wasn't surprised so many remained at CSC. Over the past decade, about 20,000 of the company's 68,000 employees were added from other firms that outsourced functions to CSC. About 92 percent of employees picked up through outsourcing projects remain with the company, he said.

The company is taking extensive steps to communicate with the government workers, Cofoni said. He said in "every outsourcing I've been involved with, I have found myself in front of large groups of employees talking about how it will feel, talking about my personal experience."

Cofoni said the discussion has to "get beyond compensation: How are you treated? Are your ideas [considered] important? Are you given authority to do the work?" Those are key elements in convincing federal employees they can be happy in the private sector, he said.

As for dedication to the ideal of public service, that's not something workers have to give up by moving to a contractor, he said.

"The service you're delivering is still the same. After all, the end recipient is either the U.S. military or the U.S. citizen," Cofoni said. "You're just doing it through another company. And there are contractors in the federal government [with] a lot of employees who have the same strong feelings. ... They're very patriotic."

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