No summer vacation for competitive sourcing

Report on Competitive Sourcing Results Fiscal Year 2004

As lawmakers meet this summer to approve spending bills for fiscal 2006, they will be dealing with a substantial number of House-approved bills that uphold the status quo on competitive sourcing, a policy that encourages agencies to cut costs by putting some jobs up for bid against the private sector.

But opponents of competitive sourcing are promising to act. For each of the past two years, Rep. Chris Van Hollen (D-Md.) has offered an anti-competitive sourcing amendment to the Treasury-Transportation Appropriations bill. The amendment would block federal agencies from using the revised Circular A-76, the Office of Management and Budget's rulebook on competitive sourcing. He will likely offer it again this year, a Van Hollen spokeswoman said.

House appropriators stripped $2 million from the Army Corps of Engineers' budget request for competitive-sourcing studies, even though the agency is preparing to release a request for proposals to compete all U.S.-based information technology support jobs.

According to recently released figures from OMB, every dollar spent on competitive sourcing in fiscal 2004 will produce $20 in savings during the next five years. IT jobs were the second most-competed jobs in fiscal 2004, OMB's latest analysis shows.

Union officials disputed the savings that OMB officials cite. "Time will tell if that kind of money is saved, and I believe it will not be," said Colleen Kelley, president of the National Treasury Employees Union.

"Hundreds and sometimes thousands of federal employees are immediately and adversely impacted by the decision to conduct a competitive-sourcing study," Kelley said. "The figures OMB demands from the agencies in no way reflect the true costs."

John Threlkeld, the American Federation of Government Employees' Capitol Hill lobbyist, dismissed the agency's findings. "If only OMB devoted as much time to ensuring agencies accurately track the costs of conducting privatization reviews as it does trumpeting wholly projected and completely unverified savings estimates."

OMB officials, meanwhile, are preparing to expand competitive sourcing. They have issued new guidance and promised greater oversight of agencies' competitive-sourcing initiatives. In a memo issued last month, OMB instructs agencies that, with the exception of contracting officers, no job should automatically be exempt from competitive sourcing. An exemption should be granted for a job only if its loss to the private sector would result in substantial risk to the agency's ability to accomplish its mission, the OMB memo states.

To expand their oversight of competitive sourcing, OMB officials will ask agencies to inform them about competitions in which no companies participate, said David Safavian, administrator of the Office of Federal Procurement Policy.

Paradoxically, while competitive-sourcing foes portray the policy as a threat to the federal workforce, OMB officials worry that job competitions suffer from anemic industry participation.

"Our biggest challenge right now is to make sure that the private sector maintains an interest in this process," Safavian said, noting that in fiscal 2004, government teams won 91 percent of all competitive-sourcing bids.

OMB's analysis shows that competitions involving two or more private-sector bidders generated about $10,000 more in savings per full-time equivalent employee than competitions with only one or no private-sector bidders.

"You never know whether we have a benchmark level of service or a benchmark cost until you've competed it against the private sector," Safavian said. n

Saving dollars

A recently released Office of Management and Budget report on competitive-sourcing activities during fiscal 2004 states that:

n Agencies held 217 competitions involving 12,573 full-time equivalent employees (FTEs).

n For every FTE studied, the government will save $22,000 per year. That amounts to a savings of $1.4 billion in five years.

n Agencies will achieve those savings through workforce realignments, process re-engineering, technology investments, operational consolidations and other efficiencies, according to the report.