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Washington, D.C.—The latest Office of Management and Budget (OMB) report on federal contracting claims implausible savings, failing to account for substantial losses in dollars, morale and performance, said the leader of the nation’s largest independent union of federal employees.

The reality of this administration’s failed contracting out initiative is one of irresponsible outsourcing of inherently government functions, cost overruns, poor performance and mismanagement, said President Colleen M. Kelley of the National Treasury Employees Union (NTEU).

“It does not take a CPA to see that the mathematics here are fundamentally flawed,” said the NTEU leader. “Very little has been done to validate agency cost savings numbers and this report fails to take into account substantial costs from staff time spent on competitions to loss of experienced employees and declining morale of employees whose jobs are being put on the auction block.”

In fact, the NTEU president noted, OMB acknowledges that past savings estimates have been wrong. OMB had projected $2.8 billion in savings from competitions run during FY 03-07. That figure has now been revised to $1.9 billion, which is nearly 33 percent less than OMB’s original projections.

NTEU cited fundamental problems with the report’s methodology including:

• None of the costs incurred prior to a public announcement of a competition are included when figuring the total costs of a competition. OMB states that most competitions are completed within 13 months of public announcements.

However, in many competitions, agencies spend months if not years preparing for the announcement, but OMB does not count this work toward the overall cost. In addition, staff time and costs incurred working on the competition are not included.

• Savings calculations are based on a simplistic and flawed formula. NTEU questions the use of a figure of $100,000 per full-time employee (FTE). For example, most IRS competitions involve lower-graded positions, with salary and benefits that fall well below OMB’s average figure.

• None of the litigation costs are included. Legal fees add substantially to overall costs, yet are not counted.

• There is little to no post-completion accountability and cost-overruns are not taken into account. The IRS files work, for example, ran into more than a year of delays before the contractor was ready to fully take over the work.

“Work that is contracted out is gone for good, regardless of whether the contractor is performing up to standard,” said Kelley. “In NTEU’s experience, there is always a loss of quality and service and there is no mechanism in place to bring the work back in-house, or to re-compete the work.”

• In 48 percent of competitions held between 2004 and 2007, contractors showed minimal interest in even bidding on the work. “This administration has long been committed to contracting out simply for the sake of contracting out,” said Kelley. “This report shows that in nearly half of competitions in the past three years, one or fewer companies were even interested in doing the work.”

• The report fails to address the tax compliance of contractors.

In periodic audits and related investigations, the Government Accountability Office (GAO) reported that thousands of federal contractors had substantial amounts of unpaid federal taxes. GAO said about 27,000 Department of Defense contractors, 33,000 civilian agency contractors, and 3,800 General Services Administration contractors owed about $3 billion, $3.3 billion, and $1.4 billion in unpaid taxes, respectively.

Kelley renewed her call for the enactment of legislation aimed at preventing the award of government contracts to private companies that fail to meet their federal tax obligations.

“OMB should be required to ‘show its work’ so its claims of cost savings could be fairly evaluated,” said the NTEU leader.

“NTEU is committed to continuing our work in Congress to ensure a fair and level playing field for federal employees and put in place reasonable and fair restrictions on competitions,” said Kelley.