OMB, Defense put a lid on Army contractor workforce study

The Army has stopped collecting labor information from its contractors in response to concerns from the Defense Department and the Office of Management and Budget. The Army project required contractors to report basic labor data, including how much contractor employees get paid, how many hours they work and who their actual customers are within the Army. While agencies have long had such information about civil servants, no agency before the Army had attempted to collect basic labor data from contractors. In a June 21 memorandum e-mailed to department commands, Kenneth Oscar, the Army's acting acquisition chief, said the agency will place an "indefinite stay" on the final rule for the project--effectively stopping the project--because OMB and the Pentagon concluded the effort violated federal rulemaking procedures. "OMB requested that the Department of Defense withdraw the final rule…because they found that the final rule differed significantly from that announced in the interim rule without adequate public notice as required under the Paperwork Reduction Act," said Oscar. The Army rule also ran into opposition from Deidre Lee, director of Defense procurement, who in a June 5 memorandum asked the Army to stop including the reporting requirement in new contracts, according to Oscar. In her memo, Lee wrote that the Army had not done a cost-benefit analysis showing how the reporting requirement would affect contractors. "It is premature to approve use of this clause, even on a temporary basis, until we better understand its projected utility, its cost and administrative impact on contractors," she said. Oscar said the Army would benefit from data that have already been collected, which the department plans to use in budgeting and workforce planning decisions. "I am assured that significant benefit will accrue to the Army for the extensive effort that went into the reporting of well over $9 billion in fiscal year 2000-2001 contract actions by over 1,200 contractors under difficult circumstances," he said. While the Army project is now suspended, Congress is working to reinstate it, according to a congressional source. The House Subcommittee on Military Readiness will place language reviving the project in the current Defense Authorization Act, the source said. Subcommittee Chairman Curt Weldon, R-Penn., and ranking member Solomon Ortiz, D-Texas, endorsed the Army project in a Feb. 28 letter to the Pentagon. Critics of the Army project, which include several contractor associations, applauded OMB and the Pentagon for withdrawing the Army rule. "The immediate process foul we saw from day one was that this was a massively different [final] rule than what came out in the interim rule," said Stan Soloway, president of the Professional Services Council. The Aerospace Industries Association and contractors, including Raytheon and DynCorp, lobbied the Pentagon to revoke the rule, which they claim is excessively burdensome. The final rule differed from the interim rule because it also covered contracts for commercial items, which are channeled through Part 12 of the Federal Acquisition Regulation, Oscar said Tuesday. The Army added this clause to the final rule to capture more data, he said. "The Army did it for completeness. We wanted to cover all contracts," he said. The Army could simply withdraw the section of the rule involving commercial items but will stay the entire rule because of the Pentagon's objections, said Oscar. "There were other things we didn't do quite properly," said Oscar. "Deidre Lee said, 'Withdraw the rule and do it correctly.' " Project supporters blasted OMB and the Pentagon for halting the Army effort. The Army project promised to provide unprecedented information on the contractor workforce, including whether Uncle Sam is getting a good deal from contractors, said National Academy of Public Administration fellow Herbert Jasper. "I think it is very important that the kind of information that the Army project was seeking be collected, and while I don't want to attribute any base motives, one would question why anybody in the Defense Department would not support that effort," he said. Jasper endorsed the project in a May 24 memorandum to OMB he wrote as part of NAPA's Presidential Transition Project. Dan Guttman, a fellow with the Johns Hopkins School of Government, criticized OMB and the Defense Department for stopping the Army project without public comment. "The hidden ball trick doesn't cut it when you are hiding a [contractor] workforce many times larger than the federal workforce," he said of OMB's action. "If Dr. Oscar is suggesting the data is terribly valuable, let's get the data out there. It looks like this project is working." The Army has collected enough data to see if the project's methodology for tracking the contractor workforce is a success, said Oscar. "We have gained the ability to complete this experiment and see if this was a better approach," he said. "We may or may not go out again with a new rule."
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