Outsourcing conundrum

The new administration is beating the drums for contracting out more government jobs, like many of its predecessors have done. But progress has been slow, and it's questionable whether contracting out really saves money since vendors are in it to make a profit and agencies have to hire extra staff to monitor contracts.

Office of Management and Budget Deputy Director Sean O'Keefe, in a March 9 memo, ordered agencies, in accordance with OMB Circular A-76, to offer for competition at least 5 percent of government jobs that are considered commercial in nature. That comes to 42,500 federal jobs. The deadline for accomplishing this is October 2002.

O'Keefe's memo gives agencies two options for meeting the 5 percent target: direct conversions, in which jobs are converted to the private sector without competition, and public/private competitions.

The purpose of such "competition" is ostensibly to save taxpayers money. But if you give agencies the option to simply convert government jobs to contractor jobs, where's the savings? No job should be contracted out unless a fair and competitive process demonstrates that the government will save money by doing so.

Because A-76 competitions are time-consuming and costly, some agencies are directly converting jobs to the private sector. O'Keefe says agencies shouldn't disregard A-76 competitions when attempting to meet the 5 percent target, but he appears to be turning a blind eye to this practice. "There is no bias toward privatization or outsourcing," O'Keefe said. The 5 percent mandate "is an attempt to get agencies to think about different ways of delivering their services." Yeah, right!

For as long as I can remember, agencies have struggled to comply with the contracting provisions of OMB Circular A-76. By now, you'd think that all government jobs that were "commercial" in nature would have been contracted out if it would save money.

But instead, new administrations issue new rules and requirements that confuse the hell out of government administrators. The decision about whether it's more cost-effective to perform a particular task in-house or contract it out should have been made a long time ago. How long must this go on? And you have to wonder: If all private firms work to earn a profit, how can it cost less to contract out government work?

The Bush administration is drafting legislation that will help agencies account for the full cost of their programs through performance budgeting. However, many agencies can't account for the overhead, support and nondirect costs associated with their programs, which makes it difficult for managers to assess program performance.

For agencies with inadequate accounting systems, the A-76 exercise is a joke. I wish the Bush administration would simply acknowledge that and stop the charade. But don't expect that to happen any time soon. n

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at miltzall@starpower.net.