The Bush administration fell far short of a plan to open more than 26,000 jobs to public-private competition in fiscal 2006, actually announcing contests that covered fewer than 10,000 positions, according to figures released Thursday by the Office of Management and Budget.
In its annual report on competitive sourcing, OMB said business case and cost-benefit analyses were partially responsible for the drop. Paul Denett, OMB's procurement policy chief, said resistance from Congress also limited agencies' ability to compete work.
Among the limits that Congress has enacted are requirements that agencies not give private sector bidders credit for spending less on employee health benefits, restrictions on the use of "best value" comparisons that take into account performance as well as cost criteria and a ban on using competitive sourcing in rural development and farm loan programs. In a discussion with reporters, Denett called the best value restriction "a travesty," saying it takes a powerful tool out of managers' hands.
But Denett downplayed the difference in the planned and actual 2006 competition figures. "I'm not overly concerned if the actual number that gets done winds up being a little higher or lower. I'm more concerned that the ones that get done are the ones that have the highest likelihood of payoff," he said.
In April 2006, OMB said 26,591 full-time equivalent positions would be listed for public-private competition in fiscal 2006, but the administration reported that only 9,691 positions were covered in 86 new competitions.
Agencies are slated to open 17,944 jobs to private sector bids through new competitions to be announced in fiscal 2007.
In discussing the administration's track record for competitive sourcing, the rules for which were changed in 2003 through revisions to OMB's Circular A-76, Denett stressed that the government has found significant savings from the process.
OMB estimated that the 183 competitions that wrapped up during fiscal 2006 covered 6,678 jobs, for a projected savings of $1.3 billion over 10 years. The in-house federal employee team won 87 percent of those jobs.
Federal employees have won 83 percent of all jobs placed up for competition since 2003. OMB estimated that the savings from those competitions will reach $6.9 billion over 10 years.
Denett stressed that agencies have been successful in most cases in providing soft landings -- early retirement, buyouts, placements in another job at the same or a different agency, or consideration for hiring by the successful private sector bidder. Defense Department competitions have resulted in layoffs in 2.3 percent of civilian positions put up for competition, according to OMB. Denett said the governmentwide layoff rate was not available.
The most popular areas for public-private competition have been maintenance and property management, information technology and logistics, OMB reported.
Some in industry have grown frustrated with the in-house win rate and Congress' intervention in the process. OMB found for 53 percent of jobs placed up for competition between fiscal 2004 and fiscal 2006, there were two or more private sector bids; 30 percent of the jobs under competition during that period received only one company bid, and 17 percent had no bids to counter in-house proposals.
"Conceptually, competition is a great thing," said Stan Soloway, president of the Professional Services Council of Arlington, Va., of the administration's efforts to boost competitive sourcing. But, he said, "implementation has been spotty and poor. Politics has been an issue, and it's really too bad because it's depriving agencies and the customers of those agencies of true competition," he said.
Federal employee unions also have been unhappy with competitive sourcing, but for very different reasons. In a response to the new report, Colleen Kelley, president of the National Treasury Employees Union, disputed agencies' claims of savings. For example, she said, the report attributed $35 million in savings to an Internal Revenue Service contractor that has missed multiple deadlines.
Kelley also noted that in calculating the cost of running a competition, OMB does not include planning that takes place before it is formally announced, or litigation costs. According to the report, agencies count out-of-pocket expenses like additional contractors required by the competition, but not time spent by employees who would otherwise be used for other work.