Privatizing Investigators: An Esop Fable

EXECUTIVE MEMO

Privatizing Investigators: An Esop Fable

hat do you do with a federal office that slims its workforce, improves the quality of its product and stops running a deficit? Reward the employees who made it happen? Not if your organization has already been targeted for privatization by the National Performance Review.

Despite recent improvements in the performance of the Office of Personnel Management's Office of Federal Investigations, the office is slated to be privatized under an employee stock ownership plan (ESOP).

"We could be such an incredible model for how government can do more with less," says an Office of Federal Investigations employee. "We should be trotted around the country with the Vice President as part of his dog and pony show on reinventing government. Instead, we're the poster child for privatization."

On March 7, OPM notified Congress of its intention to award a 2-year, sole-source contract to the ESOP to conduct investigations now being done by OPM. The deal could be completed by mid-July. Of the approximately 730 employees in the investigations office, 690 have offers to join the ESOP. The others are expected to stay at OPM to manage and oversee the contract with the ESOP.

The office currently conducts about 40 percent of all federal background checks, including those at the Treasury and Energy departments, which are often sensitive. Sen. Paul Simon, D-Ill., and other lawmakers have expressed concerns about privatizing what they see as an inherently governmental function. "While [Simon] thinks we should be trying to save resources, the important thing is that these be done right," says Dan Esrick, an aide to the Senator.

When OPM contracted out some investigations work to four private firms in the 1980s to deal with a huge backlog of cases, the results were nearly disastrous, according to an internal report of that endeavor. Records were falsified in some cases; investigators were often unqualified and at times operated in violation of the Privacy Act.

Richard Ferris, acting associate director for investigations at OPM, says the contract with the new ESOP will prevent such problems in the future. ESOP employees will carry credentials giving them access to the same law enforcement records federal investigators now have, he says.

Simon has proposed blocking the privatization for two years while Congress considers the issue more closely. But he has won little support for the idea. "Not enough people are aware of this and frankly a lot of people just think this should be in the private sector," says Esrick. "You've got Republicans who tend to favor privatization and the fact that this is an administration proposal. You're up against both sides."

Most employees are ready to move ahead with the ESOP, says Ferris. "There is a small group that would like to see it stopped. That group has gotten much smaller as time has gone by. Other employees have complained about the delay. I would say the majority of employees are somewhere in the middle, most leaning toward moving on."