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The Office of Management and Budget's recently confirmed federal procurement chief is rethinking his predecessor's decision to bar agencies from outsourcing even small numbers of jobs without giving in-house employees a chance to defend the positions.

Transfers of work to the private sector without a public-private competition, known as "direct conversions," may be appropriate if an agency decides a certain "business line" is not central to its mission, said David Safavian, head of OMB's Office of Federal Procurement Policy, in an interview with Government Executive.

Under former OFPP administrator Angela Styles' May 2003 revisions to the competitive sourcing rules in Circular A-76, agencies cannot undertake direct conversions unless they obtain OMB's permission.

Internal discussions about repealing the ban are just getting under way and no decisions have been made, Safavian emphasized. "We're in the embryonic stages of the analysis," he said.

Safavian praised the May 2003 version of the circular for facilitating faster competitions, but said he plans to review several other areas of the revised document to make sure it "is doing what it set out to do, which is [to] provide a relatively nimble and agile process." These include its guidelines on calculating overhead rates charged to in-house teams.

The Center for Naval Analyses, a federally funded research center, is studying the standard 12 percent overhead rate to assess how it holds up against comparable rates in and definitions used by the private sector, Safavian said. The center may propose alternate methods of calculating overhead, he said, and OFPP will look carefully at the researchers' findings to decide if any clarifications or changes to Circular A-76 are necessary to "treat all sides fairly."

John Threlkeld, a lobbyist for the American Federation of Government Employees, said the Center for Naval Analyses study is late in coming, and shouldn't be used as a guide in reconsidering the rate. The Defense Department inspector general and the RAND Corp., a think tank with headquarters in Santa Monica, Calif., have studied the rate and found it to be arbitrary.

Cathy Garman, senior vice president of public policy at the Contract Services Association, an industry group, said she would welcome a review of the rate, and is pleased that Safavian is reconsidering direct conversions. Small businesses are at a disadvantage, she said, when they are forced to compete against in-house teams for fewer than 10 jobs.

But Threlkeld said direct conversions amount to "theft, pure and simple," and said that a repeal of the circular language prohibiting them would earn AFGE's "strong opposition." Conversions are a "way for the administration to award contractor cronies with sole-sourced contracts," he argued.

"There may be a whole lot of reasons to reconsider [direct conversions]," said former procurement administrator Styles, who left OMB in September 2003 to become a partner at Miller & Chevalier, a Washington law firm that specializes in contract law. But she added that she thinks her decision to prohibit the practice made sense at the time because it helped avoid "wholesale movement to the private sector without thought."

Agencies generally used direct conversions for outsourcing fewer than 10 full-time positions. But OFPP didn't have a good grasp on how frequently agencies performed direct conversions, and couldn't make agencies prove they saved money through the practice, Styles said. Concerns arose that agencies were breaking tasks performed by 50 or 60 people apart into smaller chunks so that they could complete direct conversions, she added.

The decision to halt conversions also proved politically savvy, Styles said. From the federal employees' perspective, there was "nothing competitive" about the practice, she said, and from an intellectual standpoint, the practice is inconsistent with the spirit of the "competitive sourcing" management initiative. Unions argued that federal employees deserved a chance to compete for jobs on a level playing field.

"We backed them in a corner and said 'All right, you get to compete,' " Styles said. "The more you weaken that, the more you strengthen their arguments," she added. "At the end of the day, you get Republicans that are sympathetic to [the] unions."

If OFPP were to reinstate the practice, agencies would likely be required to present a business case analysis or some other type of justification or explanation, Safavian said. A return to direct conversions could hurt public relations, he said, but "I think part of it is going to be, if we do it, how we do it."

Inadequate communications and failure to reach out to the "right people at the right time" has hindered the competitive sourcing initiative in the past, Safavian said. He added that he hopes to improve communications and initiate an "ongoing dialogue" with interested parties, including unions.

"I think we have been ... painted as looking only to reduce head count," Safavian said. "If we wanted to reduce head count, we could reduce head count in a lot easier ways than competitive sourcing; let's be candid."

Agencies do need to work on "soft landings" for the federal employees who are in danger of losing their jobs because of competitive sourcing, Safavian said. OFPP will encourage agencies to start planning soft landing packages, which could include transfers to other federal jobs, early retirements or buyouts, at the beginning of job contests.

OMB and the Office of Personnel Management will work together to reach a goal of signing off on voluntary early retirement authority and voluntary separation incentive payment plans "at the earliest point at which approval can be provided and, ideally, within 20 days after an agency seeks authority and provides the necessary documentation," Safavian said. A quick turnaround would help "remove a great deal of uncertainty" for affected employees, he added.

But Threlkeld said the administration would be better off "rectifying the fundamental inequities in the privatization process that are unfairly depriving hard-working federal employees of their jobs and livelihoods."