Agencies eye privatizing jobs to meet OMB goal

As agencies seek to meet a Bush administration mandate to put thousands of jobs up for competition with private firms, many are considering simply converting some of their jobs to contract positions without competitions. In a March 9 memo, Office of Management and Budget Deputy Director Sean O'Keefe directed agencies to put up for competition at least 5 percent of positions listed as "commercial in nature" on their Federal Activities Inventory Reform Act job lists in fiscal 2002. The 5 percent threshold includes positions that agencies have exempted from competition, meaning they must compete 42,500 of the roughly 850,000 commercial positions on their FAIR Act lists. Agencies have two options for opening up jobs to the private sector: direct conversions, in which jobs are converted without competition, and public-private competitions. Both are governed by OMB Circular A-76. While the Defense Department has completed hundreds of public-private competitions in the last five years, most civilian agencies have little experience with A-76 studies. And because such studies are time-consuming--Defense Department studies now take an average of 18 months, according to OMB--many civilian agencies are taking a serious look at direct conversions to comply with OMB's requirement. "Full A-76 [cost] comparisons won't work under this time frame. As an alternative, we are considering the options for direct conversion," said an A-76 expert at a civilian agency who asked not to be named. But OMB officials say agencies should be able to complete A-76 studies within the next fiscal year. "We think they can do A-76 studies and get them completed," said a senior OMB official. "Where a direct conversion makes the most sense, agencies ought to use it, but they ought not use it because it's quick or easier." The American Federation of Government Employees also opposes the use of direct conversions to avoid public-private competitions. "I wouldn't be surprised if [agencies] tried to use direct conversions," said Brendan Danaher, policy analyst at AFGE. "We certainly will be monitoring that." The A-76 Supplemental Handbook sets out four ways agencies can directly convert jobs to the private sector without performing cost-comparison studies:
  1. Agencies are allowed to convert a federal activity if it involves 10 or fewer jobs.
  2. If a function involves 11 or more jobs, an agency must place all affected federal workers in comparable jobs before conversion.
  3. Federal activities of any size may be outsourced to contractors who qualify as "preferential procurement sources" under section 8(a) of the 1953 Small Business Act. Preferential procurement sources include Alaska native-owned corporations, Federal Prison Industries, and the workshops administered by the Committee for the Purchase from the Blind and Other Severely Handicapped under the Javits-Wagner-O'Day Act of 1971. In addition, Native American and Native Hawaiian owned-businesses of any size may receive direct conversions under a provision in the 2001 Defense Appropriations Bill.
  4. Agencies may also apply for a waiver from A-76 cost comparison requirements to directly convert jobs.
Few agencies have successfully used the waiver process, according to A-76 experts. In 1999, the Army received a waiver to convert 500 information technology positions to run a new logistics system. This waiver was issued after a lengthy study that found in-house workers would not be able to compete with contractors. The Army's logistics case is an example of where a waiver might be appropriate, said Steve Kelman, former administrator of the Office of Federal Procurement Policy at OMB. "Existing [federal employees] weren't capable of maintaining the new [logistics] system," said Kelman. The wholesale use of waivers would be a poor way of meeting OMB's target, Kelman said. "It's fair to allow [in-house] employees to compete," he said. "To do a waiver just to meet a number target doesn't make that much sense." Converting jobs to small businesses who qualify under Section 8(a) or to tribally owned firms of any size would be a simple way to meet OMB's threshold, according to experts. "I think the Native Indian/Native Alaskan option is a very viable one," said Steven Else, director of Public-Private Enterprise of Alexandria, Va. "It's a totally legitimate and easy way to outsource something directly." The National Imagery and Mapping Agency is considering converting 600 IT positions to a tribally-owned contractor. This method has drawn strong opposition from AFGE. "This direct conversion process is federal service contracting in its essence: a corporate welfare boondoggle," said AFGE President Bobby Harnage at a briefing before the Subcommittee on Readiness of the House Armed Services Committee last month. Converting activities with 10 or fewer positions could be a more feasible method, experts say. "I imagine that anywhere [agencies] could use the 10 or under rule, that's where they would go," said Robert Agresta, vice president of Star Mountain Inc., a consulting firm advising some civilian agencies on how to meet OMB's threshold. If agencies convert activities with 11 or more jobs, they could shift federal workers to comparable jobs where shortages might exist, according to Allan Burman, president of Jefferson Solutions and former administrator of the Office of Federal Procurement Policy. This would be a more strategic way to use direct conversions, Burman and Kelman said. Agencies are including outlines of how they intend to meet OMB's threshold in their annual performance plans, which are due for release April 9. While O'Keefe's memo allows agencies to use direct conversions, OMB will be on the lookout for agencies that use conversions to avoid doing A-76 studies, the official said. "We really want this to be used as a management tool," said the OMB official. "We would like [agencies] to make sensible management decisions." Experts agree that agencies will eventually have to do public-private competitions if the Bush administration persists in its goal of opening half of all commercial positions on FAIR Act lists to competition. "I don't believe agencies could meet that [50 percent] goal through direct conversions," said Burman. "Nor do I think they would want to do that."
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