Administration decries 'insourcing' measure

Federal employee unions have turned the tables on the Bush administration by pushing legislative provisions requiring the Defense Department to bring a certain portion of contractor work back in-house.

Last summer, the administration backed away from a goal of opening 425,000 federal jobs to private competition. That target for competitive sourcing had engendered loud criticism from unions, blasting it as an "arbitrary" privatization quota.

In language strikingly similar, the White House is now threatening a veto of the fiscal 2005 Defense authorization bill if the final version contains a union-backed provision requiring the Pentagon to let federal employees compete for a percentage of jobs now filled by contractors.

Such a provision made it into the authorization bill the House approved on Thursday. Sens. Edward Kennedy, D-Mass., and Saxby Chambliss, R-Ga., are expected to offer an amendment containing similar language during Senate deliberations.

"We would also strongly oppose any amendment that significantly limits Defense's flexibility on competitive sourcing, such as by mandating that the department's employees compete for a certain percentage of work currently performed by contractors," administration officials wrote in a policy statement released Wednesday.

The House language, offered by Reps. James Langevin, D-R.I., and Jim Cooper, D-Tenn., and passed as an amendment by the House Armed Services Committee last week, would require Defense to set up a pilot program allowing Pentagon employees to compete against contractors for new projects and some existing work. This test would last for two fiscal years, and could be halted for "compelling" national security reasons.

Under the House measure, Defense would in fiscal 2005 and 2006 need to let federal employees bid on a number of contractor jobs equivalent to 10 percent of the federal jobs vulnerable to outsourcing over the same period. Competitions involving work now performed by small businesses, private-sector employees belonging to labor unions, or specialists in certain fields, including architecture and medical services, would not count toward these quotas.

The House language would also force the Pentagon to accept federal employee bids on 10 percent of the total value of new projects initiated in each of the two years, and would require Defense-"to the extent possible"-to give federal workers opportunities to win back any jobs they have lost to contractors since 1980.

Similar language is contained within the amendment that Kennedy and Chambliss are thinking of introducing when Senate debates on the authorization bill resume.

These "arbitrary quotas" could end up hurting Defense's military efforts, administration officials said in their policy statement. The reverse quotas would "undermine the department's ability to redirect [personnel] to military activities, likely require the redeployment of uniformed personnel from critical in-theatre operations to non-core support activities, increase operating costs and sacrifice billions of dollars in potential cost savings," officials argued in the statement.

The House language would force the Pentagon's hand in competing work that is performed efficiently, said Joe Sikes, director of competitive sourcing and privatization at Defense. Contractors already must compete with one another at regular intervals in order to retain work, he said.

The proposed quotas would essentially require the Pentagon to consider bringing work back in-house "in places where there is no [federal] workforce to do it," Sikes noted. This could result in a significant waste of resources, he said.

"It could drive you to do some really strange competitions," Sikes said.

The Pentagon supports the idea of bringing certain jobs back in-house, but already does so when opportunities arise, Sikes argued. "I wouldn't preclude the possibility that there's a government option to perform new work," he added.

"To mandate a percentage doesn't make sense," said Cathy Garman, vice president for public policy at the Contract Services Association, an Arlington, Va.,-based group with more than 300 member companies. "It's kind of ironic that the very people who have always opposed goals are now [trying to] impose goals," she noted.

But John Threlkeld, a lobbyist for the American Federation of Government Employees, said he believes the Pentagon does not take advantage of opportunities to use the federal workforce. "Eventually, a failure to use discretion reasonably becomes an abuse of that discretion, and it must be corrected."

AFGE is not particularly concerned by the administration's veto threat, Threlkeld added. "The president has not vetoed a bill since he took office in 2001," he said. "I doubt that he would veto a defense bill in a time of war because it allows, on a handful of occasions, federal employees to compete against big defense contractors."

Senators will resume deliberations on the authorization bill when they return June 1 from the Memorial Day break.

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