STATEMENT BY
WILLIAM DOUGAN
PRESIDENT,
NATIONAL FEDERATION OF FEDERAL EMPLOYEES
INTERNATIONAL ASSN OF MACHINISTS & AEROSPACE WORKERS
AFL-CIO
BEFORE
THE
SUBCOMITTEE
ON OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE
UNITED
STATES SENATE
CONCERNING
NOW
AND THEN: AN UPDATE ON THE BUSH ADMINISTRATION’S COMPETITIVE SOURCING
INITIATIVE
Introduction
On behalf of the Forest Service Council, which represents
approximately 20,000 dedicated public servants committed to the professional
and ethical management of the
The Forest Service Council wholeheartedly supports this initiative’s stated goal of increasing the efficiency and effectiveness of public institutions. The goal is not at issue here; the question is whether or not the initiative is achieving that goal. There are concerns about the costs of implementation of the competitive sourcing initiative in the Forest Service. In addition, there are profound concerns about the effectiveness of the A-76 tool in reducing the costs of performing specific work activities and, more seriously, about the potential of the process to erode the capability of the agency to perform critical mission work.
While there are many aspects of the competitive sourcing initiative that demand examination, today the Forest Service Council will limit its written testimony to the following:
1. An examination of the way the mission of the Forest Service drives the way it conducts its business, and the changes to this way of doing business that A-76 rules require,
2. An examination of potential outcomes and consequences of the Forest Service’s competitive sourcing activities,
3. An analysis of flaws in the implementation of the competitive sourcing initiative by the Forest Service and by the Office of Management and Budget,
4. An analysis of the extent to which A-76 procedures and the competitive sourcing initiative bring competitive forces to bear on agencies to effect positive change, and
5. A discussion related to the engagement of Congress to effect positive change in the Office of Management and Budget’s flawed implementation of The President’s Management Agenda.
The Organization of the
The Forest Service is the lead Federal agency in land and
resource management, responsible for managing the
Because of the small size of the Ranger Districts, and the variety of tasks that are required, Forest Service employees are called upon to perform a variety of duties. For example, one Forest Service employee staffs the District’s front desk and performs public affairs work, but is also a certified archeological surveyor and assists in archeological inventory work, and is also trained and certified to work on the fire line in the event of wildfire. As a consequence of its use of multi-skill employees to fulfill multiple roles, the agency provides full-time employment in these rural areas. The local economies of many rural communities depend upon this way of doing business.
One of the most critical functions of the Forest Service is fire protection. Not only are National Forest lands threatened when a wildfire occurs, but local communities and rural dwellings in the rural/urban interface are also often at risk. The geographically disperse structure of the Forest Service is highly advantageous for the rapid and effective response to wildfires. Many Forest Service employees who “normally” perform other work, such as maintenance or forestry work, are highly skilled firefighters as well, and provide the front-line expertise of the agency’s fire militia. Because of the geographic dispersion of Forest Service Ranger Districts, these employees can be deployed quickly during the early stages of a fire when control is critical.
As a result of its expertise in responding to fire emergencies, the Forest Service has taken on significant Homeland Security responsibilities as well. To manage resources rapidly and effectively in responding to wildfires, the Forest Service has become the expert federal agency in utilizing a very sophisticated Incident Command System. The Incident Command System is based on a military model. Incident Command System personnel perform the command, operations, planning, logistics, and finance/administration management activities required for a coordinated response to any emergency incident.
Forest Service Incident Command System teams can be
mobilized and fully operational within two to four hours. Whether the nation is responding to a natural
disaster or to a terrorist attack, it is the Forest Service’s responsibility to get there first, set up camp, and get
things running. In many cases, command
is subsequently transferred to FEMA or to the military; however, this may be a
week or more after the initial response.
Clearly, the hours and days following a natural disaster such as a
hurricane are crucial.
For example, Forest Service Incident Command System teams
coordinated the search and recovery mission after the space shuttle
The A-76 Process
There is no denying that competition in the free market drives down costs. The competitive sourcing initiative, however, is somewhat misnamed in that it does not represent such a free-market competition. Rather, it represents the use by government agencies of a bureaucratic analysis to attempt to completely describe some work, to develop a new government organization to perform the work, to calculate the cost of performing the work, to determine the relative technical merits of ways of performing the work, and finally, to determine if a private firm will be awarded a contract for work currently performed by the government workforce. This is a different matter altogether than the competition between Dick’s Auto Body and Dan’s Garage in the free market.
The procedures listed above are codified in the Office of Management and Budget’s A-76 circular. The A-76 circular is the only tool the Forest Service may use to comply with the competitive sourcing initiative. When used properly, the A-76 competition process results in an impartial cost comparison to determine whether government work will be contracted out or performed in house. If A-76 calculations predict that outsourcing would be expected to generate savings, the agency is bound by this finding to outsource the work.
The Forest Service is currently conducting A-76 studies on over 3,700 positions involving various maintenance activities, information technology activities, and all work functions at the agency’s Civilian Conservation Centers. Agency plans are to continue with A-76 studies at a similar pace over the next several years. Thus, the question of the correctness of the Office of Management and Budget’s “one size fits all” premise regarding the A-76 process is a crucial one for the very survival of the agency as a viable institution with the ability to carry out its mission.
Does One Size Fit All?
The A-76 process was developed for large, centralized facilities (e.g. military installations) whose organization is driven by work function. It is designed for cost comparisons involving simple, well-defined work for which a complete, quantitative description of the work can be made in the form of a Performance Work Statement. This is a reasonable task when employees are assigned to single work functions and the work can be readily quantified. For example, there are numerous consultants currently pocketing substantial sums of taxpayer’s money to describe to Federal personnel how to develop a Performance Work Statement for cutting the grass, or for preparing food. Unfortunately, the vast majority of the 850,000 Federal employees eligible for competitive sourcing study perform work that is substantially more complex and varied than that.
Completely describing and quantifying complex and varied work is a daunting task, and any work that is left out of the Performance Work Statement biases the A-76 result toward outsourcing. In a variety of situations (complex work, multi-function employees, small offices), there are very serious challenges in conducting A-76 studies, as well as making subsequent staffing decisions.
As described above, the geographic-driven organization of
the Forest Service has led to the staffing of small offices with
multi-functional employees, precisely the sort of situation that is problematic
for the A-76 process. To quote an April,
2003
Effects of the Initiative on Emergency Response to Fire and Other Incidents. Incident Command System teams are staffed on a collateral duty basis with Forest Service employees from a variety of program areas. Team members perform other work until they are mobilized in response to an emergency, thereby maximizing both the efficient use of personnel and effectiveness in responding to wildfire and other critical incidents. In addition to Incident Command System command staffing, the agency may also call up thousands of employees with specialized training, skills, and experience to man the front fire lines. Again, this work is on a collateral basis for the employees involved.
Most of the Forest Service studies are being performed under Streamlined or Express A-76 rules. Under these rules, the Forest Service may not “compete” such an organization, which has been optimized to meet agency requirements by decades of experience, but rather must “bundle” its work functions to match service packages that are available in the private sector. In other words, because no contractor currently provides both maintenance and fire suppression, the Forest Service is forced by A-76 rules to consider these activities separately. Currently, the “other work” (e.g. maintenance work) performed by many Incident Command System team members and fire militia personnel is under A-76 study. A-76 requires that this situation be handled as follows: if an employee spends half of his/her time on fire suppression and half on maintenance work, then half of the position is included in the maintenance A-76 study. If the agency employs 2,000 such multi-functional employees, then 1,000 positions must be included in the maintenance A-76 study.
Clearly, by dissecting out individual work activities, A-76 fails to consider the efficiencies associated with the Forest Service’s collateral approach. More significantly, the Forest Service has not adequately determined how it will handle the potential outcome of such studies. Forest Service “guidance” to the field units conducting these studies states, “Fire collateral duties should be excluded from all Streamlined and Express studies. If a study concludes that a function should be performed externally and management believes that fire support is a collateral expectation of this organization, management has the option to directly convert the fire responsibility and add it to the Request for Proposal.” Thus, if A-76 calculations require that the above hypothetical 1,000 maintenance positions be outsourced, the Forest Service runs the risk of having all 2,000 employees outsourced.
Cost and Returns. Because of the geographic dispersion of the agency, the costs of implementing the competitive sourcing initiative in the Forest Service have been enormous. The Forest Service estimate of $10 million includes the cost of activities at the national level, but the agency has pushed the bulk of the work onto its field units. In the field, the diversion of resources to support the initiative is huge. Although the agency has not tracked these costs, and so a genuine accounting will never be done, it is likely that the true cost is closer to $100 million than $10 million.
Recall that many Forest Service employees perform multiple roles, or collateral duties, and that the A-76 process is not designed for this situation. To comply with the initiative, the Forest Service is considering work that a given employee may perform only 5% of the time. In one research facility, for example, machinists and electronics technicians perform research support work, and most building maintenance work is already contracted out. However, these personnel also occasionally take care of certain maintenance work on a collateral basis. Although these maintenance activities involve only 5-20% of their time, this 5-20% is being studied, and A-76 may require that it be contracted out. If this occurs, these personnel will still be required for research support, but the Forest Service will have to pay contractors to perform the minor and/or emergency repairs that they previously handled on a collateral basis. If the “in-house organization” retains the work, A-76 imposes a substantial paperwork burden to document that actual ongoing costs are in line with the A-76 estimated costs. Either outcome will have a negative cost effect. Because small facilities and substantial use of collateral duties is the norm for the Forest Service, such outcomes will be common.
Economic
Effects on Rural Communities. Because of the Forest Service’s use of
multi-skill employees to perform multiple duties, Forest Service employees are
able to meet diverse work requirements in isolated areas and at the same time
be full-time, productive citizens in these areas. The economies of many rural communities depend
on Forest Service employees. Forest Service
employees participate in and support a wide variety of community programs and
services. Local school districts receive
a monetary allocation for each child of a federal employee in their district. But the A-76 process is based strictly on
work functions. Under this model, help
may be shipped into the area on a task-by-task basis. Because as much as half of the work on many
National Forests is already contracted, we know what the effect will be. In general, contractors bring their own
people in from out of the area. One
contract workforce may stay 3 months for a soils inventory project; a second
may stay for a year or two for a watershed restoration project. But they don’t come to stay, and they don’t
make the same kind of community contributions as do the permanent Forest
Service employees. If these Forest
Service employees are forced to leave these rural communities because their
jobs are contracted out, the economic effects in places like
Human Capital Effects
Regarding the Forest Service’s criteria for land management decisions, the first Chief of the Forest Service, Gifford Pinchot, stated, “all the land is to be devoted to its most productive use for the permanent good of the whole people, and not for the temporary benefit of individuals or companies… Where conflicting interests must be reconciled the question will always be decided from the standpoint of the greatest good of the greatest number in the long run.” This remains the agency’s goal today. Quantitatively capturing this type of work in a Performance Work Statement is clearly a much more daunting, if not impossible, task than would be the case for cutting the grass. And yet, personnel intimately involved in such decisions are currently eligible for outsourcing under the Forest Service’s implementation of the competitive sourcing initiative.
The Forest Service uses decentralized authority to provide the flexibility needed to meet the particular needs of different localities. Because of the unique requirements of the diverse lands managed by the Forest Service, the District Ranger is empowered to make many important decisions. He/she depends on professional longevity and experience in a given geographic area in making these decisions. The criticality of the human capital involved in such work is captured very well in this analysis by a forester in the field: “For example, well-intentioned foresters during the early part of the 20th century applied the clear-cut method to Douglas-fir and to high elevation Englemann spruce stands in many areas. While the clear-cut regeneration system is compatible with the more mesic West Coast Douglas-fir and spruce (areas where many of the early foresters gained their initial experience), it is not compatible with these forest cover types in the arid regions of the interior West. Many of the clear cuts made during this early era of forest management are still poorly stocked and stand as highly visible testaments to the need for "local" experience...”
Here, too, we see that one size doesn’t fit all. The human capital needed to properly manage the 192 million acres for which the Forest Service is responsible is not obtainable off the shelf, but requires specific knowledge and familiarity with diverse lands.
The failure of the A-76 process to consider large-scale collateral duties also stands to seriously deplete the agency’s human capital needed to carry out crucial aspects of its mission, specifically the emergency response of Incident Command System teams and the fire militia to wildfires and other critical incidents. Employees go through extensive training to become certified for these collateral duties, and a vast reservoir of experienced personnel is available to respond to critical incidents at a moment’s notice. The people are truly the resource. However, the intense pressure of the competitive sourcing initiative is such that the Forest Service did not perform any analysis pertaining to the impact of its current studies on these collateral capabilities. To give just one example of the possible repercussions, serious concerns have surfaced that critical Incident Command System communications skills may be lost as a result of the current A-76 information technology study. The possible arbitrary loss of fire suppression personnel is especially troubling in that 70% of Forest Service fire suppression expenditures are already for contracted resources and the agency lacks sufficient contract oversight capacity to provide adequate oversight even at this level. It is worth noting that the entire Federal salary budget represents only about 2% of the total budget; therefore, any incremental cost savings realized by current Forest Service A-76 studies would have a miniscule effect on the deficit in any event. Given the devastation caused by wildfires and current concerns with Homeland Security, the costs associated with the erosion of Forest Service’s capability to respond to these events have the potential to dwarf any theoretical projected savings as calculated by A-76 for the information technology and maintenance work currently under study.
As we have seen, the Forest Service consists in substantial part of widely dispersed small offices that make extensive use of collateral duties. The Office of Management and Budget’s circular A-76 does not take these realities into account. Because of this, A-76 is a poor tool to use for Forest Service outsourcing decisions. One size does not fit all. However, the devastating effect of the initiative on Forest Service operations is not only attributable to problems with the A-76 tool. The size of the quotas for positions that must be studied is a large factor.
The greatest previous use of A-76 occurred in the late 1980s, at which time 2% of the federal workforce was studied over several years. The Office of Management and Budget’s current quotas represent a roughly ten-fold increase in the previously greatest use of the process. The magnitude of this increase alone makes competitive sourcing a radical initiative.
We have seen no evidence that considered research and sound analysis of past activities was performed to determine what activities should be studied. Likewise, there has been no substantive consideration that the Forest Service competitive sourcing program is consistent with the mission of the agency. Rather, the entire program is driven by arbitrary quotas.
The Forest Service has asserted in many memoranda to the field that its competitive sourcing quotas have been mandated by the Office of Management and Budget. The Office of Management and Budget officials have indicated that there are currently no quotas in place. It is astounding that no one is held accountable for establishing and enforcing the driving force of a program of such a size, and with such far-reaching implications. We respectfully request that the Subcommittee investigate on whose authority these quotas stand.
The Flawed Implementation of Competitive Sourcing by
the
The Forest Service’s flawed implementation of the competitive sourcing initiative is a consequence of its failure to fully implement The President’s Management Agenda of which the competitive sourcing initiative is but a single part. The first initiative of The President’s Management Agenda is the strategic management of human capital. In its explanation of this initiative, The Agenda states, “Much of the downsizing [of the past] was put in motion without sufficient planning for its effects on the agencies’ performance capacities.” This initiative requires that agencies first determine their core competencies, and subsequently decide whether to build internal capacity or contract out for the requisite services.
The Forest Service failed to determine its core competencies prior to embarking upon its outsourcing studies. Because of this failure, the agency’s competitive sourcing activities are truly arbitrary. In draft after draft, the work targeted for future outsourcing study has changed time after time. The frantic nature of these “decisions” is a natural consequence of the absence of a logical, consistent framework within which such decisions may be rationally made. For example, regarding the agency’s fire suppression capabilities, Deputy Chief Thomas Mills said, “Fire has so many tentacles out in the rest of the organization that we keep bumping up against it. So one answer might be let’s just study that and we’ll settle it (GovExec, July 5, 2003).” It seems to us that a better approach might be for the agency to comply with The President’s Management Agenda and address the mission criticality of this capability.
To summarize, the strategic management of human capital initiative is specifically designed to prevent poorly planned or arbitrary downsizing. The Forest Service did not comply with this initiative before embarking upon its competitive sourcing adventure. Conceptually, this is a simple two-step process not unlike that with which Forest Service smokejumpers are familiar. Step 1, strap on parachute. Step 2, jump out of plane. It is important not to skip step 1.
The selective enforcement by the Office of Management and Budget of The President’s Management Agenda second initiative, competitive sourcing, and its apparently disinterest in the critical first initiative, strategic management of human capital initiative, is a matter of great interest. Taken together, these two initiatives provide a rational basis for encouraging both the maintenance of agency capabilities and appropriate competitive sourcing activities. By ignoring the first initiative while pushing the second, the Office of Management and Budget is encouraging flawed implementations of the competitive sourcing initiative that are contrary to the procedures and spirit of The President’s Management Agenda. We would be very interested in the Office of Management and Budget’s explanation of why they are so strictly enforcing and stridently advocating the President’s second initiative of competitive sourcing, but ignoring the first initiative pertaining to strategic management of human capital, and ask that the Subcommittee vigorously explore this question.
It is worth noting that land management activities are defined as inherently governmental in certain agencies, such as the Department of Defense. Because of the great public interest and the need to shield land management decisions from the substantial political pressures associated with them, we believe this is an approach that has great merit, and we ask the Subcommittee to consider it.
The Limitations of the A-76 Process
Based on our experience with the competitive sourcing initiative in the Forest Service, we offer the following general observations and perspectives for consideration by the Subcommittee. These comments are more general and theoretical than the fact-based discussion that precedes it.
Failure of A-76 to Model Free-Market Competition. The premise behind the competitive sourcing initiative is that, as in the free market, competition drives down costs. If the same job is cheaper at Dan’s Garage than it is at Dick’s Auto Body, then Dan will get more work. Ultimately, if Dick is unable to compete, he will be out of business.
In the free market, authority and accountability reside in the same individual: the owner. Because the owner has the authority, he has the power to effect change in his/her organization. Because the owner is accountable, he/she has the motive to effect change in response to competitive forces. A fundamental question before the Subcommittee, then, is whether or not the competitive sourcing process effectively subjects agency decision-makers to pressures akin to competitive market forces, thereby increasing operational efficiencies.
The winner in an A-76 competition is not necessarily the workforce that does the job better. Rather, the winner is the organization that prevails in the bureaucratic A-76 process. For example, the professional expertise of the forester quoted earlier in this report is clear. However, under A-76, this forester will not be competing with other foresters, with the best forester winning the competition. Rather, in the first step of the full A-76 process, such professionals will participate in writing a Performance Work Statement (a contractual document) to quantify the measurable performance outcomes of all the work they perform. Subsequent steps in the process (development and staffing of the Most Efficient Organization, development of the in-house cost estimate, independent reviews, technical feasibility determinations, etc.) take place without the involvement of our forester. Appeals and litigation by the contractor (the Federal workforce does not have these rights) are likely to follow if substantial work is at issue. Ultimately, our forester and his colleagues will or will not be replaced by a contractor.
This process clearly puts our forester under very substantial pressure. But although the competitive sourcing process in essence holds the workforce accountable for organizational failures, the workforce lacks the authority to effect organizational change. Not only is this profoundly unfair, but it is also unproductive in that it applies no pressure to agency personnel with the authority to effect change in the organization. In fact, by virtue of their supervisory duties, agency managers are coded as inherently governmental and therefore exempt from having their work contracted out. Whether the organization’s failings are attributable to structural defects or to personnel problems, the authority to address these failings resides in agency management, who are unaffected by the initiative.
It is also noteworthy that after a contract is awarded, subsequent contract modifications are made by a noncompetitive process. Such contract changes are common, driven by omissions or underestimations during the solicitation, or by changing agency needs. The fact that such changes are not subject to competition goes a long way toward explaining such occurrences as the $2.69 self-locking nut the Defense Department bought from its contractor for $2,185.50.
Thus, the A-76 process fails miserably to model the effect of competitive forces to bring about positive change in the free market. The situation is analogous to firing the players on a losing sports team and keeping the coach responsible for building and managing the losing program.
Failure of A-76 to Provide Required Services. Dan’s garage is both a service provider subject to competitive forces, and also a customer purchasing needed goods and services. Our free enterprise system allows Dan to purchase the products and services he needs in order to provide the best service at the lowest price to his customers. Likewise, Federal agencies play the role of customer, in that they must purchase services from a contractor or from an in-house workforce. In terms of efficiency, it doesn’t matter from which, as long as the service available is the service needed.
Based on a century of experience, the Forest Service has determined that it needs a pool of highly trained employees to respond to fires and other emergencies, and that for the sake of efficiency it needs these employees to perform other work (e.g. maintenance work) when there are no fires. In the open market, the customer purchases what is needed. As is discussed above (see Effects of the Initiative on Emergency Response to Fire and Other Incidents), because fire suppression and maintenance is not available commercially as a “bundle,” the relevant A-76 rules require that the maintenance work function be considered in isolation, potentially eroding fire suppression capabilities. Thus, A-76 does not allow the agency to buy what it needs, but rather forces the agency to purchase what is available.
The A-76 “bundling” requirement stands free enterprise on its head: the seller, not the customer, is always right, and the customer is forced to go along. Imagine trying to run a business with such a constraint. Clearly, this “bundling” requirement is not consistent with the free enterprise system that A-76 purports to emulate, and is likely to cause losses of efficiency and erosion of capability in any agency that must “rebundle” its work to conform to A-76. In such a case, the agency is discarding what is needed (the existing workforce) to purchase what is less desirable, but commercially available. Although we have no specific information with regard to the extent to which other agencies may be experiencing analogous difficulties with A-76, this is certainly an issue that deserves consideration.
Uncertainty
in A-76 Projected Savings Calculations. The above analysis does not address the
effectiveness of the A-76 process in bringing about positive change even in the
short term, on a study-by-study basis.
Above, we assumed that relatively inefficient organizations were
unerringly replaced by more efficient ones by the process. This assumption is very questionable. The A-76 process is a very complex
bureaucratic process with many opportunities for error. One such example is provided by the recent
revelation that the work of 650 employees at the
Much more problematic, and virtually impossible to detect, are errors of omission in the Performance Work Statement. Any omission whatsoever in this description of the work (any activity, quantity, quality, complexity, etc.) results in a lower bid by the private sector player. Contractors do not bid on the work that needs doing; they bid on the Performance Work Statement. Further, under contract law, any ambiguity in the Performance Work Statement is resolved against the author. Thus, competitive forces require that contractors bid on the less costly interpretation of any ambiguity. If the work is contracted out, these Performance Work Statement omissions and ambiguities lead to increases in the scope of the contract and corresponding increases in the cost of the contract. Interestingly, Jacques Gansler and other advocates of the competitive sourcing initiative do not include contract scope adjustments in their calculations of “savings (GovExec, July 11, 2003).” In so doing, they make the implicit assumption that the Performance Work Statements at the time of contract award were perfect. To the analytical mind, this betrays an obvious bias.
Studies purporting to show cost savings are highly suspect. A detailed GAO analysis concludes, “DOD’s reported savings figures are incomplete and inaccurate (GAO/GGD-90-58).” This report states, “According to the Office of Management and Budget, annual A-76 savings for fiscal year 1988 totaled over $133 million.” The report goes on to detail a number of problems with such projected cost estimates, among them, “The overall cost of the program, including doing the studies, has been estimated by the Deputy Assistant Secretary of Defense for Installations at between $150 million and $300 million per year. None of these costs, such as those incurred in doing the studies, are considered in estimating savings.” Any businessperson who spends $2.25 to earn $1.33 would soon end up living in a box. The rules of a bureaucracy are very different from those of the free market, and so a bureaucrat can always hide or ignore costs and tout the “cost savings” of a pet project. Because of the absence of natural consequences, such bureaucratic claims should be scrutinized carefully.
While this is an older report, it is clear that the flawed methodology it discussed has not substantively improved in the intervening years; more recently, Barry Holman, Director of Defense Capabilities and Management, reported similar problems in “developing and maintaining reliable estimates of projected savings expected from competitions (GAO-02-498T).” Now, as in 1990, Congress has expressed concerns about the cost of the program. Now, as in 1990, these costs have not been tracked. The situation has been succinctly put as follows, “GAO cannot prove or disprove that the results of federal agencies' A-76 decisions have been beneficial and cost-effective (GAO/T-GGD-95-131).” We respectfully suggest that it is time to brush the dust off of old GAO/GGD-90-58, examine “cost savings” claims in light of its findings, and take a good look at how its recommendations could improve the A-76 program.
This is not to deny that in some cases A-76 studies may have generated cost savings. However, it is well known that “past performance does not guarantee future results.” The context of the competitive sourcing initiative in which current A-76 studies are being performed is quite different from that of previously performed studies. Other factors must be considered in any legitimate discussion about how future studies will turn out. First, the bulk of past experience with A-76 is with the Department of Defense, which has decades of experience with the complex A-76 process. The current initiative imposes the process on agencies with no experience or infrastructure. Second, as is discussed below (see Effects of Quotas and Centralized Control), with the proper exercise of management discretion, the only work that was considered by earlier A-76 studies was work that would likely have generated savings. But this discretion has been replaced by arbitrary quotas of an unprecedented magnitude in the current initiative. Third, earlier studies were not subject to tight timelines that many experts consider to be unreasonable.
Implications of the New A-76 Process. The recent implementation of the new A-76 circular introduces even greater uncertainty into an already highly troubling situation. The new circular A-76 is a radical departure from established procedures, and has never been tested. Thus, studies purporting to show cost savings are not relevant to ongoing or anticipated A-76 competitions. Far more significant is the indisputable fact that the Office of Management and Budget has implemented government-wide an experimental procedure that has never been tested. Applying an untested process to competitions on a heretofore unimagined scale runs the risk of producing flawed results on an enormous scale; results that the American people will have to endure for many years to come. Given the potential far-reaching ramifications, we believe a more conservative approach is warranted. The new circular should be tested in a Demonstration Project before it is implemented government-wide.
Effects of Quotas and Centralized Control
Although the A-76 process, like any bureaucratic process, has its flaws and limitations, the problem with the competitive sourcing initiative does not reside solely in the A-76 process itself. A-76 is nothing more than a tool that has its uses; however, because A-76 outcomes are binding on the agency, it is a tool that should be used in an informed way. A very fundamental problem with the competitive sourcing initiative is that its huge quotas have forced the ill-advised use of this tool in situations for which it is not appropriate. This problem is exacerbated by the lack of experience of many agencies with the complex A-76 process.
The decision to enter into the A-76 process should be a carefully considered strategic decision taking into account the requirements of the agency and the limitations of the process. The decision-maker should possess an intimate knowledge of the work function(s) and the organization for which the outsourcing is being considered. It is only by the proper exercise of management discretion at the appropriate level that factors other than strictly cost (quality, agency human capital needs, technical A-76 barriers, etc.) may be taken into account.
As is discussed above, the imposition the A-76 process on agencies fails to exert competitive forces on decision-makers, that is, it fails to hold poor managers accountable. Likewise, the use of arbitrary quotas removes the authority of effective managers to manage. The current initiative replaces local and informed human judgments with bureaucratic processes and quotas from a centralized authority. Experience shows that inflexible centralized control is a recipe for failure.
At least in the Forest Service, the manner in which this initiative is being implemented is causing agency outsourcing “strategy” to be driven by quotas and sourcing “decisions” to be determined by an A-76 process that does not meet agency needs and is being administered by inexperienced and ill-trained personnel. To bring about positive change in the management of government business, a program that holds decision-makers accountable is required.
Potential Congressional Oversight of
The Senate and House Interior Appropriations Subcommittees have reported out that the Interior competitive sourcing programs, including that of the Forest Service, should be halted until they can be evaluated. Such a measure recently passed the full House. Among the concerns cited in the House and Senate Reports were the “massive scale, seemingly arbitrary targets, and considerable costs associated with the initiative,” as well as the “seeming absence of consideration of previous competitive sourcing experiences.” The House Report notes, “This massive initiative appears to be on such a fast track that the Congress and the public are neither able to participate nor understand the costs and implications of the decisions being made.”
This issue is neither ideological nor is it based in a principled opposition to The President’s Management Agenda. In fact, as is discussed above, more complete compliance with The President’s Management Agenda has the potential to correct many of the excesses of the current program. This is not a partisan issue; rather, it is the considered bipartisan opinion of the Senate and House Interior Appropriations Subcommittees that the flawed implementation of the initiative is a matter that must be addressed. The attack on The President’s Management Agenda comes not from those who seek a moratorium and thoughtful analysis on competitive sourcing activities, but rather from Office of Management and Budget bureaucrats whose implementation of The Agenda is contrary to its stated goals and procedures.
However, there are those who would cast this action in simplistic ideological terms. For example, in reference to this and other recent actions, Grover Norquist recently wrote to Congressional leaders that “the President’s plan to subject federal workers to competition has come under attack from liberal lawmakers on Capital Hill.” Norquist’s opposition to a thoughtful approach is consistent with his stated goal “to reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub (http://www.atr.org/atrnews/052501npr.html).”
Those of us interested in good, efficient government find it easy to dismiss attacks from such radical sources. More troubling, because of her position at the Office of Management and Budget, are statements by Angela Styles. For example, at a conference sponsored by the IBM Endowment for the Business of Government she stated, “People are going to try and pick these off one by one. And we’re going to fight every one of them. And we’re going to fight them hard because this is a matter of principle (GovExec, June 24, 2003).” Styles has on numerous occasions cited in support of the competitive sourcing initiative such simple tasks as cutting grass as examples of work that might be performed better by private firms. As the above discussion of the Forest Service Competitive Sourcing Program makes clear, it is disingenuous of Styles to characterize the initiative in such simple terms. Of the 850,000 Federal employees whose work is targeted by the initiative, very few perform such simple tasks. Because of such statements, and because of the apparent conflict of interest posed by her previous job litigating for contract firms in A-76 disputes, it is perhaps understandable that our nation’s public servants wonder for exactly what principle Styles is going to fight.
The result of Congressional involvement in the competitive sourcing initiative during last year’s appropriations process was Section 647 of Division J, Public Law No. 108-7, which states, “none of the funds made available in this Act may be used by an agency of the executive branch to establish, apply, or enforce any numerical goal, target, or quota for subjecting the employees of the executive agency to public-private competitions or for converting such employees or the work performed by such employees to private contractor performance under the Office of Management and Budget Circular A-76 or any other administrative regulation, directive, or policy unless the goal, target, or quota is based on considered research and sound analysis of past activities and is consistent with the stated mission of the executive agency.” Further, House Report 108-010 states, “the conferees want to emphasize the strong opposition in both chambers to the establishment of arbitrary goals, targets, and quotas. If any goals, targets, or quotas are established following "considered research and sound analysis" under the terms of this provision, the conferees direct the Office of Management and Budget to provide a report to the Committees on Appropriations no later than 30 days following the announcement of those goals, targets, or quotas, specifically detailing the research and sound analysis that was used in reaching the decision.”
The Office of Management and Budget’s response to this language was essentially to ignore it and proceed with competitive sourcing business as usual. Contrary to what may have been told to the media or to Congress, at the Forest Service arbitrary quotas remain firmly in place. A quota transmitted verbally behind closed doors is just as effective as is one transmitted by official memorandum. Such a betrayal of trust demands a strong Congressional response, or else simple surrender. Given the potential for disastrous, far-reaching, and lasting consequences such as are described above, we respectfully submit that it is the responsibility of Congress to intervene with a moratorium on this initiative until it may be debated by Congress and the American people on its merits. Toward this end, we urge the Subcommittee to remain energetically engaged in this issue, and to require more substantive responses from Styles and the Office of Management and Budget regarding the facts discussed above and any similar specific effects the competitive sourcing initiative is having on other agencies.
While there are those who voice complaints about Congressional involvement in this matter, we would refer these individuals to The President’s Management Agenda. On page six of this document is stated, “Congress can help in a number of important ways, among them [by] using its oversight powers to insist that agencies fix their problems.” Clearly, the manner in which the Forest Service has implemented the competitive sourcing initiative constitutes a very serious problem. We thank you for your interest in this issue, and offer any assistance we might be to you in your inquiries.