Contractor health care measure remains in Defense spending bill

Language prevents Pentagon from granting contractors an advantage in public-private job competitions if they pay less in employee health premiums than the government does.

Language affecting how the Pentagon treats health care plans offered by contractors bidding on federal jobs has survived in the Senate version of the fiscal 2006 Defense appropriations bill.

The version of the Defense bill (H.R. 2863) approved by the Senate Friday includes a provision that would prevent Pentagon officials from granting contractors an "advantage" in public-private job competitions if they cut costs by scaling back on health insurance benefits for employees. Last year's spending measure contained similar language.

Specifically, the 2006 provision would stop the Pentagon from giving an advantage to companies that fail to offer a health insurance plan altogether or contribute less toward health insurance premiums than the Defense Department contributes for civilian employees.

In a policy statement issued in late September, the Bush administration expressed strong opposition to the measure, saying it "would unnecessarily subject private sector bidders to intrusive data requirements concerning the provision of health benefits to their employees." The administration stopped short of a veto threat, however.

"While well-intentioned, this provision ultimately undermines the efficiencies in private health plans and provides another disincentive for the private sector to participate in DoD's competitions," the Office of Management and Budget stated. "Further, by discouraging private sector interest in competitive sourcing, this provision places at risk significant savings--estimated to be $6 billion from fiscal 2001 to fiscal 2006--generated by the competitive sourcing initiative."

The Senate-approved bill extends several other competitive sourcing provisions enacted in the fiscal 2005 Defense appropriations bill. Those provisions force the Pentagon to let in-house employees form teams to defend themselves any time more than 10 jobs are at stake in a public-private contest. The language also affords the in-house teams the lower of a 10 percent or $10 million cost advantage in competitions.

The Senate approved the bill Friday by a vote of 97-0, and the House passed the measure in June. It now heads to House-Senate negotiations, where the Bush administration in past appropriations rounds has succeeded in eliminating some language considered detrimental to competitive sourcing.

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