Union sues Bush administration over new job competition rules

The National Treasury Employees Union is suing the Bush administration over new rules for putting federal jobs up for competition with private firms, alleging the revised Office of Management and Budget Circular A-76 violates federal law.

The union filed suit in U.S. district court Thursday challenging portions of the new circular involving "inherently governmental" work, which under the 1998 Federal Activities Inventory Reform (FAIR) Act must be performed by federal employees. In a 13-page complaint, the union alleged the circular violates the FAIR Act by narrowing the definition of "inherently governmental."

OMB's efforts have "illegally trumped Congress," said Colleen Kelley, president of NTEU. "If OMB is putting out an administrative directive, it should be in accord with the statutory definition of 'inherently governmental.' "

Administration officials would not comment specifically on NTEU's lawsuit, but said the new circular is legal. "OMB is confident that the A-76 circular and the competitive sourcing initiative is well within and consistent with the law," said Trent Duffy, an OMB spokesman. He added that the lawsuit should not interfere with OMB's competitive sourcing initiative, which aims to put 425,000 federal jobs up for competition with private firms. "The intention is to move forward with this initiative," said Duffy.

The lawsuit does not challenge any of the new competition procedures included in the circular. "It's a relatively specific challenge to only one part of A-76," said Rand Allen, an attorney with the firm Wiley, Rein & Fielding. It is not intended to disrupt job competitions that are already underway, according to Kelley.

But if the lawsuit succeeds, it could change how agencies classify "inherently governmental" work and invalidate job competitions involving workers who lost their "inherently governmental" status as a result of the new definition, Kelley said.

"If this definition results in jobs being reclassified inappropriately, and some [competitive sourcing] study begins, than yes, we would be asking that that study be rolled back," she said. "That could happen."

Kelley added that the new definition is intended to force agencies to classify jobs as commercial in nature, making them eligible for outsourcing.

In a speech to federal employees on Thursday, Office of Federal Procurement Policy Administrator Angela Styles said OMB planned to step up oversight of agency FAIR Act lists. While agencies classified 850,000 federal jobs as commercial in 2000, they exempted 500,000 of these jobs from possible competition by invoking a clause known as "Reason Code A," according to Styles.

"It is hard to meet our governmentwide goals when 500,000 of those jobs are in 'Reason Code A,' which means they are exempt from competition," she said at a competitive sourcing conference held at the Interior Department. "I think you will also find us, in the coming years...asking questions about certain categories of people in agencies that are in 'Reason Code A.'"

The new circular narrows the definition of "inherently governmental" work in two ways, NTEU said in its lawsuit. First, to qualify as "inherently governmental" under the new circular, an employee must exercise "substantial discretion" in government decision- making. Under the FAIR Act, employees only must exercise "discretion" in policymaking to be off-limits for outsourcing.

Secondly, the new circular tightens the definition of "inherently governmental" for revenue collection, a switch that could affect thousands of Internal Revenue Service employees represented by NTEU. Where the FAIR Act mandates that jobs involved in revenue collection be "inherently governmental," the new circular narrows this definition, according to NTEU.

"The revised circular . . . restricts the inherently governmental designation to only those functions that 'establish policies or procedures' for carrying out these tasks," states the lawsuit.

In a Federal Register notice announcing the new A-76, OMB argued that the "inherently governmental" definition was consistent with OMB guidance, known as Office of Procurement Policy Letter 92-1, issued in 1992. "This guidance expressly states that 'inherently governmental' functions necessarily involve the exercise of substantial discretion," said OMB. The budget office did not address whether the definition was consistent with the FAIR Act.

OMB was caught off guard by the lawsuit, which comes after a lengthy revision period in which the budget office listened to union concerns, said Duffy. "It comes as a bit of a surprise given the tremendous amount of outreach and meetings and consultations with NTEU and all the stakeholders involved in this process that have taken place over weeks and months and a year," he said.

Kelley said NTEU had questioned the definition of "inherently governmental" in their comments to the draft circular A-76.

Observers said NTEU could face an uphill battle challenging OMB's rules. For example, the union must show they have legal standing to appeal the circular in federal court, said Dan Guttman, an attorney and fellow with the National Academy of Public Administration.

"It is very difficult for anyone but a contractor to challenge government actions related to contractors," he said. Legal challenges against OMB circulars can also be difficult, because circulars generally do not have the force of law, according to Allen.

"Those are clearly going to be threshold issues that the union's going to have to get over," he said.

Kelley said the union's legal strategy will address these issues. "We believe we do have standing and we can get past that so that the substantive issues we have do get heard," she said. The union has succeeded in lawsuits against the government before, including a December 2002 ruling to win back pay for 185,000 federal employees.

Guttman said the old definition of "inherently governmental" was narrow. Under the old circular, he noted the Agency for International Development could use contractors to supervise contractors performing reconstruction work in Iraq, since contract oversight was considered 'commercial in nature'.

"The underlying problem is that the 'inherently governmental' principle -- whether FAIR Act or A-76 language is preferred -- is unfortunately inadequate to assure that the public retains a workforce with sufficient experience and expertise to supervise and evaluate the contractor workforce," he said.

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