Contractors contend spending bill would stifle competition

Government contractors are expressing outrage at a provision in the fiscal 2005 Defense appropriations bill they say harms small businesses when competing for Pentagon work.

Supporters of the language, which was included in the $417.5 billion defense bill passed by both chambers Thursday, say it could help level the playing field for federal employees in public-private job competitions. Opponents contend the provision could hamper the Pentagon's efforts to streamline so-called "competitive sourcing."

"For a Congress that claims it is for small business, I simply cannot understand why it continues to approve language that will reduce opportunities for small, minority and women-owned business to compete for and win competitive sourcing contracts," Chris Jahn, president of the Contract Services Association of America, said in a statement. Jahn said the provision would kill the Pentagon's streamlined competition process, considered a vehicle for small firms to obtain A-76 contracts.

The bill would extend provisions on outsourcing Pentagon civilian personnel jobs that would require the department to allow in-house federal employees to form teams and compete when more than 10 jobs are at stake in a public-private contest. It also would add provisions that private contractors contend would make competing with the government more difficult.

The fiscal 2005 spending bill would penalize private-sector bidders that offer health insurance benefits to their employees. The language bars a private-sector bidder from gaining a competitive advantage by not offering a healthcare plan, or contributing less for employee health care than the amount paid by the Defense Department for employee health care.

"This provision singles out one benefit element and ignores the reality of the total compensation packages commonly offered in the private sector, including a wide range of health, matching retirement, bonus/incentive, professional and personal development and other benefits," a CSA statement said. "It also undermines and ignores unique and innovative health benefits plans, particularly those that are provided by the small business community."

Similar competitive sourcing restrictions were included in the House version of the fiscal 2005 defense authorization bill -- language that the White House strongly opposes.

In a June Statement of Administration Policy on the proposed authorizing language, the White House raised the possibility of a veto if the bill contains limitations on opening Pentagon projects to outside competition, including mandates that department employees compete for work performed by contractors. But in its formal response to the spending bill, the White House did not raise the issue.

An OMB report released in May found that studies of more than 650 commercial activities completed in fiscal 2003 and several competitions completed in the first quarter of fiscal 2004 are expected to yield $1.1 billion in savings over the next three to five years.