The Office of Management and Budget Tuesday altered a key formula federal agencies use when comparing the cost of keeping jobs in-house versus outsourcing them. Agencies should assume federal pay raises of 4.4 percent next year and 3.9 percent for the four years after that in those calculations, OMB said.
Before outsourcing federal jobs, agencies must estimate how much it would cost to keep the jobs in-house. The agency then compares the in-house estimate with contractor bids to decide whether to privatize operations.
The amendment to OMB Circular A-76, which governs the process agencies must follow when they consider outsourcing jobs, appeared in the March 30 Federal Register. The amendment took effect immediately for all cost comparisons in process in which the government's in-house cost estimate has not been publicly revealed.
The A-76 amendment issued Tuesday updates the pay raise assumptions to reflect the raises provided for in the President's fiscal 2000 budget. The budget provided for a 4.4 percent federal employee and military pay raise effective in January 2000, followed by a 3.9 percent raise each year from 2001 to 2004.
The amendment also updates the inflation factors agencies use to determine the government's in-house supply and equipment costs. New figures for projected retirement costs for federal employees also were included.
Agencies are increasingly looking at privatization as a way to reduce costs. The Defense Department is conducting outsourcing studies on a massive scale. More than 225,000 DoD employees face the prospect of having their jobs outsourced or eliminated as a result of A-76 competitions over the next five years.
Though President Clinton proposed a 4.4 percent pay raise for 2000, the Senate has approved a 4.8 percent raise for military personnel and endorsed a resolution that calls for an equivalent raise for civilians.
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