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Several lawmakers are continuing to raise objections to a provision in the 2005 Defense Authorization Act that requires the Pentagon to consider health insurance costs in job competitions. The act says the department cannot give an advantage to contractors that reduce costs by offering less comprehensive health coverage than that which is available to federal employees.

Almost two dozen members of Congress sent a letter to Defense Secretary Donald Rumsfeld earlier this month saying they will oppose Pentagon efforts to delay the provision's implementation. Defense officials sent a letter to the Office of Management and Budget in November that said the provision was difficult to apply and "may skew competition in favor of in-house performance." It asked for the provision to be repealed or grandfathered so that it would not affect competitions already underway.

Last week, at a hearing of the House Appropriations Subcommittee on Defense, Rep. Martin Olav Sabo, D-Minn., asked Rumsfeld whether the department was enforcing the provision. The secretary said he did not know and he would get back in touch with Sabo, which he has not yet done. The provision became law when President Bush signed it in October.

In an interview Wednesday, Sabo, one of the leading advocates for the health insurance provision, called the Pentagon's arguments against the law "phony." The federal government should not be adding to the 43 million uninsured Americans through its contracting-out efforts, he said.

"If we're going to save money by having contract employees who don't have health insurance, that is tragic. That should not be the policy of the federal government," he said.

The Pentagon, however, maintains that the provision is difficult to implement. "We wouldn't normally ask for details on pay and benefits packages," said Joe Sikes, Defense's director of competitive sourcing and privatization. Pentagon lawyers are still trying to decide what exactly the law requires and how it applies to ongoing competitions, he said.

Sikes said he is concerned that the new requirement will cause contractors to drop out of competitions because they think the provision puts them at a disadvantage. "[Contractors'] immediate reaction was, 'To hell with it, I'm not going to waste bid and proposal money on something that I can't win,' " he said. Small businesses will have a particularly tough time, he added, because they are less likely to be able to afford increased costs.

OMB recently downgraded the Pentagon's competitive sourcing rating from green to yellow because planned competitions were canceled. Sikes said the cancellations were largely related to changes in the OMB's job competition rules, and not to the health care provision.

Much of the health provision controversy circles around its effects. Contractors and the Pentagon say it will cause more competitions to go to in-house teams--which already have won 90 percent of recent competitions--and that it will disadvantage small businesses. The provision's supporters say it will prevent contractors from winning by what they consider to be unfair means.

Neither the act's supporters nor detractors are willing to definitively say how--or if--the provision will affect health care coverage. Sikes, who said he does not know whether contractors will change health plans in response to the act, suggested it may even lead to worse health care by complicating contractors' health plans.

Stan Soloway, president of the Professional Services Council in Arlington, Va., which represents contractors, said there is no evidence that contractors tend to provide insufficient health insurance. "[The provision is] a tool being used by those who oppose any kind of outsourcing," he said.

One problem, he added, is that the provision applies only to health insurance and does not address other benefits such as training and professional development, which may be more valuable to some employees.

John Threlkeld, legislative representative for the American Federation of Government Employees, is a strong advocate of the provision. AFGE worked with the members of Congress on their letter to Rumsfeld.

"We think in the long run it's going to lead to better sourcing decisions. They're going to be making decisions based on what's best for service as opposed to what's worst for employees," he said.

The National Treasury Employees Union also supports the provision. Colleen M. Kelley, the union's president, said: "NTEU strongly supports adequate health care for all working Americans and opposes efforts by the private sector contractors seeking federal work to 'underbid' federal employees by not providing comprehensive health insurance."

COMMENTS

• If the bidding were fair and accurate, private contractors could easily underbid DOD anyway. They could do it even if their workers had the very same health care costs. What it really gets down to is the bidding of apples against apples. DOD agencies often give themselves an advantage by writing job descriptions in such a way as to make it difficult for outside contractors to bid. DOD test labs are very good at this. For instance: a large number of some item in DOD stock may need to be recertified every few years. But, technologies change very often and many contractors wouldn't have the same ancient testing equipment that is reflected in old Mil Specifications. They usually have up to date equipment with better test protocols. But, DOD goes out for the bid exactly as the old specification is written instead of updating it. DOD labs tend to have the old test equipment and that allows them to bid full compliance. DOD labs are also known for bending the truth regarding the capabilities. Private contractors could also underbid DOD if the DOD agency had to be more accurate in recovering all of the costs. Many of the DOD extras are paid for by other funding sources and are not counted as related costs when they bid. Private contractors have to make enough to pay for all related facilities and personnel. When you consider the amount of underproductive workers and excessive layers of management in DOD, it seems odd that they can competitively bid at all. Robert M. Posted February 25, 2005 8:06 PM
• This is ridiculous! It's a no-brainer that contractors can underbid federal equivalent positions when they're not providing their employees with comparable benefits. I thought the whole point of this was to see if jobs could be done more economically through outsourcing. However, for it to be fair, the bids should be comparable. Is Congress looking for an avenue to justify cutting Federal employee benefits? Stephanie Smith Posted February 25, 2005 10:32 AM
• This argument simply illustrates that DoD is trying to get rid of the civil service benefits and pay that is dictated by Congress through the outsourcing program (fancy political name for busting current employment contracts -written or assumed). And do not trust these guys this is the same reason for pay for performance - sounds good but is not. taxpayer Posted February 25, 2005 9:25 AM