Guidelines for financial consolidation draw fire

Recently released final planning guidance for the Bush administration's effort to consolidate agency financial management systems has generated opposition from a labor union and skepticism from congressional overseers.

The union's concerns center on the instructions for agencies that opt to outsource their financial systems to the private sector. Congressional overseers are concerned that the final guidance, while an improvement over previous editions, lacks clarity.

The effort is part of the Office of Management and Budget's broader lines of business project to streamline IT systems. The final guidelines for financial management systems came out last week.

The American Federation of Government Employees called the guidelines anti-competitive and said they violate 2003 revisions to Circular A-76, the rule book agencies use when they open federal jobs to bids from the private sector.

Agencies that want to change or upgrade their financial management systems now must, with limited exceptions, either move to an agency-run shared service provider or to a qualified private sector provider.

OMB selected four federal agencies as financial management service providers in February 2005. To select a private sector provider in lieu of one of the federal options, agencies must put the companies through a competitive process.

Under last week's final rules, agencies must use Circular A-76 to govern that competitive process when the work is performed by more than 10 full-time federal employees. In situations with fewer than 10 full-time employees, agencies must still conduct a public-private competition, but they do not have to adhere to A-76 rules. OMB can grant exceptions to these requirements.

Union officials said the guidance will allow contractors to take work away from federal employees without conducting fair public-private competitions.

John Threlkeld, legislative representative for the American Federation of Government Employees, said the guidance contradicts OMB's public-private competition rules by failing to require that agencies follow Circular A-76 for activities involving 10 or fewer full-time employees.

"Are agencies going to make up public-private competition as they go along? That's not responsible," Threlkeld said.

Under the new rules, if agencies do get permission from OMB, they can waive the competition requirements and conduct direct conversions of federal jobs to the private sector, Threlkeld said.

An OMB official who asked to remain anonymous said AFGE is misinterpreting the guidance by stating that it is encouraging "agencies to give work to contractors without any public-private competition." The opposite is stated in the guidance, the official said. The agency-run shared service centers will be able to compete effectively with the private sector and historically, federal employees have won the majority of A-76 competitions, the official added.

"Why should each agency build their own system?" the official asked.

A spokeswoman for the House Government Reform Subcommittee on Government Efficiency and Financial Management said the guidelines remain unclear in some areas, including those involving private sector options. Instead of declaring that A-76 rules apply in every situation, the guidelines leave OMB a little bit of leeway, said Tabetha Mueller, the spokeswoman.

"The thing that concerns us is the lack of clarity," Mueller said. "To create a stable marketplace they need stable rules."

For instance, Mueller said, the guidelines fail to address how disputes over interagency contracts will be arbitrated. The question and answer section of the guidance states that issue will be resolved in future versions.

No hearings are planned at this time, but there is a possibility that if Congress were to reconvene after the November elections in a lame-duck session that the subcommittee would schedule a hearing, Mueller said.

Governmentwide migration to financial management service providers is scheduled to be complete by 2015 and OMB officials have said consolidating financial management and human resources systems will save $5 billion over 10 years.

While OMB has estimated that a similar approach with IT infrastructure could save the government between $18 billion and $29 billion over 10 years, a governmentwide task force assigned to review the opportunity recommended the adoption of uniform governmentwide standards, rather than the creation of more shared service centers.

Karen Evans, OMB's administrator of e-government and technology, said Thursday that the task force's recommendations represent a natural progression of analysis and every line of business will have a unique type of solution or recommendation.

"There are some things that easily lend themselves to shared service centers and there are some things that don't," Evans said. "We were very clear to the task forces … what is the best way for the government to be able to move forward, to meet the outcome we're intending?"