Several competitive sourcing provisions dropped from Defense bill

House and Senate negotiators removed from a major bill a Senate-passed measure that would have eliminated the price advantage a contractor could gain in a public-private job competition by offering limited retirement benefits.

The House passed the compromise version of the fiscal 2007 Defense Department appropriations bill Tuesday night, and the Senate was expected to approve it Wednesday. The retirement benefit language that ended up getting dropped had been supported by federal employee unions and fought by contractor groups.

The language, which passed in the original Senate bill after its introduction by Sens. Edward Kennedy, D-Mass., and Orrin Hatch, R-Utah, stipulated that a contractor could not receive a cost comparison advantage for proposing retirement benefits cheaper than the amount used to represent the cost of civilian retirement benefits in the government's bid.

That language referred to cost comparisons conducted as part of a public-private competition under the Office of Management and Budget's Circular A-76 rules. It mirrored a measure that first passed in the fiscal 2005 appropriations bill and that was retained in fiscal 2006. That measure prevented companies from gaining a cost advantage by paying less toward employee health care than the government pays.

Chris Jahn, president of the Contract Services Association, an industry group, has said that companies increasingly are wary of bidding for work in public-private competitions because of the high federal employee win rate, which OMB has reported at 83 percent.

Jahn said the retirement benefit amendment and one targeting a long-running A-76 competition at Walter Reed Army Medical Center "would have put the final nail in the coffin" of the administration's competitive sourcing efforts.

But the American Federation of Government Employees said it would continue to push for the retirement benefit provision. "We look forward to continuing the fight again next year, both in the House and Senate," AFGE President John Gage said.

The conference committee's decision to drop an amendment on Walter Reed backed by Maryland Democratic Sens. Barbara Mikulski and Paul Sarbanes was also a blow to the union, which has fought hard to keep the Army from moving forward with a plan to transfer work performed by about 350 federal employees to Cape Canaveral, Fla.-based IAP Worldwide Services.

That competition was launched almost seven years ago, and has been subject to numerous protests by each side. In presenting her amendment, Mikulski stressed that she did not oppose all outsourcing, but considered the Walter Reed process particularly flawed.

Garrison Commander Col. Peter Garibaldi recently requested funding for additional personnel to help keep the facility sufficiently staffed during the transition to private operation.

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