Legislation would change how agencies buy support services

The White House will propose far-reaching legislation that would redesign how most agencies provide support services to their programs and would give federal managers complete information on the cost of their operations, the Office of Management and Budget announced last week. The legislation could put federal administrative, IT, and human resources jobs across government at risk for possible outsourcing, according to federal officials. Under the legislation, agency programs would be charged for all the support services and capital assets they use, as well as for any future hazardous waste cleanup they might need, according to an OMB fact sheet on the proposal. Under current law, such overhead costs are budgeted separately and not linked to agency programs, meaning that most program managers have little knowledge of what their operations actually cost. The Bush proposal would fund programs for the full cost of their operations, so agencies would no longer receive separate congressional appropriations for overhead and capital assets. To track how agencies buy support services, the legislation would create revolving funds at each major department that program managers would use to buy support services, capital assets and waste cleanup, according to an administration official familiar with the plan. Managers could buy support services from the government or the private sector through the revolving fund, the official said. "Doing it this way gives you greater accountability and a better understanding of what services are costing and what you're paying for them," said the Bush official, who added that the legislation is still being developed. Besides providing a way to track how agencies buy support services, the revolving funds could eventually allow agencies to compete against one another to provide support and administrative services, according to another government official who is familiar with the plan. "It provides a framework to incentivize competition," said the official. Bush officials have long said that full cost information is crucial to OMB's competitive sourcing program and performance budgeting initiative. Once managers can see the overhead costs that feed into their programs, they can shop around for better deals on administrative and other support services in the private sector, according to Sean O'Keefe, deputy director of OMB. "This should provide managers with a much more accurate picture of what it costs to administer programs and operations, and promote greater competition between the government and the private sector in conducting activities that are commercial in nature," said O'Keefe in June testimony before Congress. OMB describes the legislation as a "companion proposal" to a measure in the Managerial Flexibility Act that would charge agencies the full employer share of certain pension and retiree health benefits. Together, the two proposals would make agencies track the full cost of operating their programs. But funding agencies through programs alone would require Congress to give up some prerogatives and would entail unprecedented cooperation between congressional committees, according to several experts. "I don't think Congress is aware of any of this," said the government official. "It really lets managers manage, and presumes some decrease in congressional micromanaging." Getting committees with jurisdiction over programs to work together is in itself a tall order, according to Donald Kettl, a scholar with the University of Wisconsin. "The budget's current structure and process is largely a product of congressional jurisdictions," said Kettl. "In many cases, multiple committees share jurisdiction for programs, so program-based accounting would require an uncommon--and perhaps unlikely--degree of congressional collaboration." But the Bush administration official said he is confident the White House can convince Congress of the proposal's merits. "We think this makes good business sense, and believe we'll be able to make the case to Congress as to why this is the right way to proceed," he said.