6 outlooks for competitive sourcing

Competitive sourcing has only recently become a concern of federal workers, despite its Eisenhower-era roots. To explain the phenomenon, experts cite Bush administration officials who have put competitive sourcing high on the President's Management Agenda.

Although Clinton administration officials started the competitive sourcing trend, Bush administration officials have taken it to

new levels, said Stan Soloway, president of the Professional Services Council, a group that represents professional and technical services companies. Explanations vary. Some cite Bush's pro-business agenda, while others see competitive sourcing as a necessity in a tight-budget era. Still others view it as an innovation in management.

Competitive sourcing requires agency officials, including those in information technology services, to reorganize, shed employees and compete against private-sector bidders to keep jobs in-house.

Will competitive sourcing gain momentum or will it fizzle in a few years, if not sooner? Here are six predictions about its future, compiled from interviews with federal, labor and industry officials.

1. Bush wins, competitive sourcing goes on

Ask a government official if a second-term Bush administration would pull back from competitive sourcing, and the answer is a resounding "no."

In May 2003, White House officials revised the Office of Management and Budget's Circular A-76, a handbook that sets the rules for competitive sourcing. One result has been a growth in the scale of A-76 competitions.

A recent example is the Army Corps of Engineers, whose entire information management function in all 50 states is now up for bid.

A study conducted by OMB officials cites analyses completed in fiscal 2003 that show a potential $1.1 billion savings from competitive sourcing during the next three to five years.

That's just the tip of the iceberg, some officials have said. Who could say no to more savings, they would add, especially with a $475 billion projected shortfall next fiscal year?

2. Kerry wins, competitive sourcing goes slack

In a speech last April, Democratic presidential candidate John Kerry made a campaign promise to cut the government contractor workforce by 100,000 jobs, a vow that campaign officials said was an implicit criticism of competitive sourcing.

"The policy has become an end in and of itself that in the long run will cost taxpayers more money, not less," Kerry's campaign officials said in a statement. "That is why he is proposing to cut the number of contractors."

Union officials, who generally make little secret of their disdain for President Bush, have applauded Kerry's promise.

"We think that's a good idea," Jacque Simon, public policy director of the American Federation of Government Employees (AFGE), said of the pledge. Competitive sourcing is a reversible political policy, she added.

3. Kerry wins, competitive sourcing continues

"You can't put the [A-76] genie back in the bottle," said Robert Atkinson, vice president of the Progressive Policy Institute, an offshoot of the Democratic Leadership Council. Atkinson is a member of the policy team advising the Kerry campaign on government reform.

Bush's cost-savings approach has been "pretty much a single note, and that's competitive sourcing," he said. But Kerry would shift the cost-savings drive away from competitive sourcing, he said.

The question is whether such middle-of-the road rhetoric from a presidential candidate could stand up to the heat of a tight budget, an aging federal workforce, and technology and skill gaps.

Olga Grkavac, executive vice president of the Information Technology Association of America's Enterprise Solutions Division, thinks it might not. "When they get into office, everything is more complex."

4. Unions continue to stew as job losses mount

Federal union employees are openly hostile to competitive sourcing, despite a record that shows employees winning 89 percent of competitive sourcing bids.

Employees say they suffer job losses no matter which side wins. "For any bid to win, it pretty much has to come in at least 20 [percent] to 30 percent below the current staffing levels," said Colleen Kelley, president of the National Treasury Employees Union, which represents 150,000 employees in 30 federal agencies.

Apart from the unions' "Solidarity Forever" rhetoric, employees may have few options for opposing competitive sourcing, some legal experts said.

In the early 1990s, a string of decisions by the Supreme Court and the Federal Labor Relations Authority removed competitive sourcing from the purview of collective bargaining negotiations, said Charles Hobbie, deputy general counsel for AFGE, the largest federal employee union.

Still, the attention-getting value of employee protests against competitive sourcing should not be dismissed. And the ability of federal unions to fight competitive sourcing could even be strengthened under legislation that is awaiting congressional approval.

5. Lawsuits mount as job losses continue

An amendment to the Senate Defense Authorization bill would allow union officials to file protests with the Government Accountability Office on behalf of individual federal employees. Under current law, only company officials can protest A-76 outcomes based on allegations of procedural fouls.

Supporters of the measure say it has a good chance of becoming law. Similar language is included in the House version of the authorization bill.

Federal officials under pressure to compete jobs are "making mistakes, some of them innocent, some of them not so innocent," said John Threlkeld, Capitol Hill lobbyist for AFGE. Gaining GAO protest power would "increase our chances for retaining the work."

But industry officials regard the expanded protest privileges as potentially disastrous. "You will see protests filed left and right that completely bottle up the process," Soloway said. Individual private-sector employees don't have GAO protest privileges, he added. If expanded protest privileges become law, companies will no longer compete to win A-76 contracts, he said.

6. Companies give up on A-76 bids

Company officials said competitive sourcing is expensive for them. Putting together such bids costs 50 percent to 70 percent more than other bids, Soloway said. For this and other reasons, corporate interest is dwindling, he added. "The process is so lacking in credibility that, with the exception of very large procurements, the routine A-76s are actually drawing fewer and fewer bidders."

Industry officials think the A-76 process favors federal employees. The government's success rate at keeping work in-house shows it is an unfair process, said Chris Jahn, president of the Contract Services Association of America, a group representing the government services contracting industry.

In fiscal 2003, federal employees won 89 percent of all A-76 bids; in fiscal 2002, 75 percent. "If either side wins that often, it tells me that the deck is stacked," Jahn said.

Other pending legislation in the House and Senate authorization bills for the Defense Department would prohibit A-76 awards to DOD contractors whose contributions to employee health insurance premiums were smaller than the government's.

Soloway's group is opposed to the measure. "Benefits packages are fairly complicated," he said. "There are broad menus of options. This bill acts as if everything is vanilla."

Another provision in both congressional chambers' DOD bills would create additional roadblocks by requiring public/private competitions for all new work, even if a federal workforce does not exist, Soloway said. The provisions "would likely kill competitive sourcing" at DOD, he added.

Bush administration officials have threatened lawmakers with a veto of the Defense Authorization bill should the conference committee adopt the restrictions. But the warning could become moot if Kerry is elected in November.