OMB, unions debate costs of competitive sourcing

A federal labor leader charged this week that the Bush administration is attempting to underreport the costs of running public-private job competitions, but an Office of Management and Budget official said the criticism was "misplaced."

Under the fiscal 2004 omnibus appropriations act signed in late January, federal agencies must compile annual reports to Congress detailing competitive sourcing activities. These reports must include a breakdown of the expenses incurred in letting contractors bid on federal jobs, and any savings reaped as a result of the contests.

OMB, which is responsible for gathering and reviewing the reports, instructed agencies to misstate the actual costs of public-private competitions, charged Colleen Kelley, president of the National Treasury Employees Union. Reporting guidelines in a Feb. 26, 2004 memorandum distributed by OMB Deputy Director for Management Clay Johnson ask agencies to omit certain key competitive sourcing costs, Kelley said.

Agencies following these guidelines will end up submitting "completely skewed" reports to lawmakers, Kelley argued. For instance, OMB officials instructed agencies to omit "costs of in-house staff that may have spent time on the competition during regular working hours."

By excluding this information, agencies would significantly underestimate competitive sourcing expenses, Kelley said. "These and similar problems get in the way of an accurate accounting of the true cost of sending government work to the private sector," she said.

But an OMB official said the Feb. 26 instructions comply with the "express language" of the appropriations act. The law requires agencies to report "the incremental cost directly attributable to conducting the competitions . . . including costs attributable to paying outside consultants and contractors."

The White House is asking agencies to include in reports "actual, out-of-pocket" expenses "that would not be incurred but for the conduct of the competition," the OMB official said. Salaries of career employees with primary job responsibilities unrelated to competitive sourcing do not qualify as expenses "directly attributable" to the management initiative, the official noted.

The OMB guidance does instruct agencies to record overtime wages of career employees working extra hours to assist in job competitions. "Similarly, agencies must include costs for contractor support, travel and training directly attributed to the conduct of the competitions," the OMB official said.

Many career federal employees have taken substantial chunks of time out of their regular work days to help run job competitions, Kelley said. In many cases, agencies direct employees to work nearly full-time for months on statements about the nature of work to be put up for bid, she said. Agency employees then spend time putting together a bid to keep the work in-house, she said.

Kelley acknowledged that she only has anecdotal evidence and has not gathered statistics on how many hours career employees spend on competitions. But based on conversations with union members, she said she is confident that the hours are significant. "That's what [OMB] should be tracking," she said.

Even if the law requests reports on expenses "directly attributable" to job competitions, OMB officials could have asked for more information if they were truly interested in documenting the costs of competitive sourcing, Kelley added. "I'm sure the law gives them a minimum of what they have to do," she said.

In some areas, the OMB guidelines do ask agencies for data not explicitly required in the omnibus act. For instance, "while not called for by the consolidated appropriations act, agencies will report their fixed costs associated with competitive sourcing efforts," the administration official said.

Johnson has said that he welcomes the reporting requirements. The statistics submitted by agencies will help OMB in its efforts to establish a database of competitive sourcing statistics. Administration officials hope to complete the database by May.

If the statistics collected confirm that the costs of competitive sourcing outweigh savings generated, then the administration will still proceed with the management initiative, Johnson said last week at a conference hosted by the Performance Institute, an Arlington, Va.-based think tank. OMB would then look for ways to cut the costs of running contests, he said. "If we're spending too much [on competitions], let's be smarter . . . something has to change."

The database will help OMB better analyze progress on the competitive sourcing initiative and identify areas for improvements. "Let's have an informed, responsible, adult dialogue about competitive sourcing," Johnson said.

But federal employee union representatives said they have little faith that OMB's database will contain objective, accurate information. "We expect that OMB will use this so-called database to cook the books in favor of outsourcing, rather than to write the books to reflect what actually happens," said John Threlkeld, a lobbyist for the American Federation of Government Employees.

NTEU and AFGE are calling for"independent, third-party audits" of competitive sourcing activities added to reporting procedures.

The OMB official declined to say if the administration would support this proposal. "We expect and look forward to rigorous evaluation of our competitive sourcing efforts," the official said.

Under the Feb. 26 guidelines, agencies must submit their first competitive sourcing reports to OMB by March 31, 2004. These reports will cover contests in fiscal 2003 and plans for fiscal 2004. The administration will review the reports and compile the information into a consolidated report for lawmakers.