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Washington, D.C.—There are meaningful ways to improve the federal government’s contracting process, the leader of the nation’s largest independent union of federal workers said today, but revisions proposed by the administration to that process fall short. The government’s reckless proposals are a missed opportunity that does little more than eliminate the rights of front line employees and stacks competitions in favor of the private sector.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU) made those remarks as the union submitted lengthy comments to the Office of Management and Budget (OMB) in response to OMB’s proposal for substantial revisions in its Circular A-76, which governs most federal contracting practices.

“The proposed revisions make it clear that the administration’s objective is to privatize, with or without competition, more than 850,000 federal jobs,” President Kelley said, adding that “the administration has missed an opportunity to provide clarification, to ensure fairness, and demand accountability from contractors.” The union leader urged the administration “to shift the focus of sourcing policies back to improving the delivery of government services to the taxpayers.”

President Kelley said the proposal is harmful not just to federal workers, but to American taxpayers who will wind up paying more than is necessary to get the job done and who will have less ability to monitor how their tax dollars are spent.

As clear evidence of the administration’s real intent, the NTEU president pointed to a move that would dramatically increase the number of federal jobs eligible for competition by the private sector.

Under current law, there are about 850,000 federal jobs defined by agencies as potentially commercial in nature. But under the proposed revisions, the administration wants to establish a new baseline for federal work that starts with the supposition that all federal work is commercial in nature—and thus subject to privatization—unless an agency can justify, in writing, its conclusion that the jobs are inherently governmental.

Not only would this sweeping change in government policy have potentially devastating effects on the federal workforce, Kelley said, it would severely diminish the ability of the federal government to perform the work the public expects and needs.

“There should be great concern, both in Congress and among members of the public, about private contractor access to information the American people have a right to believe will be safeguarded by their government, including tax and financial information,” she said.

Kelley was particularly critical of the “unrealistic time constraints” contained in the proposed A-76 revisions for agencies to conduct public-private competitions. Under the proposal, if the competition is not concluded within 12 months, the jobs will be contracted out without competition. “These proposed rules emphasize speed in privatizing federal jobs at the expense of quality and cost savings,” she said.

In its comments, NTEU again urged accountability and oversight of contractors, guaranteed opportunities for federal workers to compete in defense of their jobs, and appeal rights for federal employees and NTEU to challenge faulty contract awards.

As the largest independent federal union, NTEU represents more than 150,000 employees in 28 agencies and departments.

Background On OMB’s Privatization Initiative—Circular A-76

In pursuit of its goal of shifting as much government work to the private sector as possible, including the jobs of more than 850,000 federal employees, the Bush administration is proposing massive changes in the rules used to determine whether government jobs should be privatized. Those longstanding rules are contained in a document issued by the Office of Management and Budget (OMB), and known as Circular A-76.

The administration currently is forcing federal agencies to comply with a separate OMB directive containing arbitrary quotas aimed at opening up 425,000 federal jobs to the private sector. Now, the proposed revisions of A-76 make it clear that the real objective is to privatize—with or without competition—up to 850,000 federal jobs, and ultimately a majority of the federal workforce.

That would be an enormously costly mistake for America’s taxpayers, leading to the selection of unaccountable private contractors who promise more than they are capable of delivering, and more than is needed to get the job done. And even as the proposed revisions cost taxpayers more money, they would lead to a systematic dismantling of the federal government’s long-term ability to do the important work the public wants and deserves.

At present, under the Federal Activities Inventory Reform (FAIR) Act, federal agencies are required to submit annual lists of functions that are considered “commercial in nature,” and thus potentially subject to bid by private contractors. In enacting FAIR, Congress was clear in its mandate that inherently governmental work should continue to be performed by members of the federal workforce.

One element of the proposed changes defines the administration’s goal: a sweeping revision of federal procurement policy under which all activities performed by federal employees would be considered “commercial in nature,” and thus subject to being contracted to the private sector, unless federal agencies provide a written justification for their conclusion that the jobs are inherently governmental.

What’s more, the proposed new A-76 sets an unrealistic 12-month time constraint for agencies to determine whether contracting out is the best option, this emphasizes speed in privatizing federal jobs at the expense of quality and costs. The “penalty” in the proposed revision for missing a deadline is to award a contract without competition. This completely flies in the face of the administration’s purported rationale that the competition is what brings innovation and efficiency.

The proposal gives agency contracting officers even more discretion to make contract awards to contractors based on political favoritism, rather than based on what is best for the nation’s taxpayers. And it contains none of the taxpayer-friendly provisions NTEU has long advocated—including full accountability and oversight of contractors, guaranteed opportunities that federal employees will be able to compete in defense of their jobs before they are privatized, and appeal rights for federal employees and their representatives to challenge faulty contract awards.

Here is a look at a few aspects of the administration’s proposed revision of A-76.

Commercial vs. Inherently Governmental

OMB barely acknowledged that there are some federal government functions that, in the best interests of the taxpayers, must be performed by the federal government. The revised circular contains troubling provisions that would risk putting inherently government functions in the hands of unaccountable private sector companies by seeking to define inherently governmental functions as only those requiring the exercise of “substantial official” discretion—a requirement not found in present law. OMB has no authority to alter this statutory definition.

Exemptions That Keep Federal Employees Out Of The Competitive Process

The revised circular would broaden the current circular’s exemptions from the competitive process, allowing agencies greater flexibility to convert work directly to the private sector without competition. Moreover, under the new rules, studies conducted under A-76 examining any potential usefulness to taxpayers of contracting government work will have to be concluded within 12 months. Those competitions not concluded in the 12-month timeframe would be short-circuited, with the work directly converted to the private sector. This opens to the door to millions of taxpayer dollars being handed over to private contractors without any evidence that they can perform the work better and cheaper for the taxpayers than the federal government can.

Stacking The Deck In Favor Of Private Contractors

The proposed A-76 revision is full of provisions designed to favor private sector contractors. One of the most outrageous provisions deals with steps that an agency must take when no private bidder comes forward with a response to a solicitation. The administration’s presumption, as outlined in the new A-76 rules, is that the agency misstepped in its solicitation—and now needs to talk with private sector companies about how it could revise the solicitation so that the private sector will bid on the work. That effectively gives the private sector the right to design the solicitation it wants to bid on.

Here’s another example: when a contract with a private sector company is terminated, but the work still has to get done, the administration’s proposed revisions expressly prohibit federal employees from performing the work while and until another private sector service provider is selected.

And another: the new Circular A-76 would rig cost comparisons so that contractors would win. For instance, the cost of a performance bond, if required, is not included in the private contractor’s bid. Nor are the costs of any required security clearances, or such conversion costs as may be involved in securing an environmental baseline study.

Perhaps most amazingly, the proposed A-76 revisions require the federal agency to include in its bid the one-time costs incurred when the government transfers work to the private sector. That, clearly, is a contractor cost and should be included in the contractor’s bid only, not that of the agency.

Circumscribed Federal Employee Rights

Federal employee rights following a decision to contract work out to the private sector would be unfairly and unreasonably limited under the revised circular. The employees’ role in the competitive process would be seriously limited or, in the case of the administrative appeals process, entirely eliminated. In addition, the soft landing provisions contained in the current circular would be unfairly circumscribed.

Tracking Contractor Performance

The proposed A-76 revisions make not even a single change to improve the oversight of contractors. There is no requirement for agencies to publish inventories of work by the contractor workforce; no requirement to track whether the contracting is saving money; no requirement to examine the quality and efficiency levels of contractors; and no requirement to bring the work back in-house when a contractor isn’t living up to its end of its bargain with the government. At the very least, taxpayers and federal employees deserve the same level of transparency and accountability from contractors as there is of the federal workforce, where costs, timeframes, quality of service and much more are under constant scrutiny and are well known and understood by both federal agencies and the public.

Implementation Of Revised Process

By proposing that the revised circular govern all solicitations issued after January 1, 2003, OMB has failed to provide the public sufficient opportunity to consider fully these drastic changes and has not built in enough time to modify the revised circular in response to any concerns raised by the public. This disregard for meaningful consideration of public input makes clear that the administration cares more about privatizing the federal workforce than delivering high quality services to the taxpayers.

NTEU Position

The federal government already cannot attract and retain the quality employees it wants and needs; this unwise plan will only make worse that crisis in public service.

The proposed changes to A-76 must be revised to ensure full accountability from contractors, to prevent work from being privatized without competition, to better involve employees in the development, selection and administration of plans to carry out government activities, and to provide federal employees the opportunity to challenge an adverse procurement decision in a meaningful fashion. The proposal, in its present form, does little more than eliminate the rights of front line employees in favor of the private sector.

Modifying the definition of inherently governmental work also means information that the American people have a right to believe will be safeguarded by their government, such as tax information, is likely to be available to the private sector. This should be of great concern to the taxpaying public.

The administration needs to shift the focus of government sourcing policies back to its principal objective—improving the delivery of government services to the public. The proposed revisions of Circular A-76 not only don’t do that, they are a giant step in the wrong direction for the country.