Senators rip plan to raise contractors' per diems

A proposed rule to lift restrictions on contractors' relocation and travel expenses would be unfair to federal employees and could drive up costs to the government, a group of senators said in a recent letter to the Office of Management and Budget.

Last May 20, the acquisition councils for civilian agencies and the Defense Department announced a proposed rule that would free contractor personnel from the maximum per diem rates under which federal employees operate. Instead, contractors would be allowed to bill "reasonable" costs for lodging, meals and incidental expenses.

In a letter to Deirdre Lee, head of OMB's Office of Federal Procurement Policy, Sens. Paul Sarbanes, D-Md., Charles Robb, D-Va., John Warner, R-Va., Barbara Mikulski, D-Md., and Daniel Akaka, D-Hawaii, said per diem limits for contractors should remain the same as those for federal employees.

"We believe it is unfair to hold federal employees and government contractors to different standards. Both federal employees and government contractors do invaluable work on behalf of our nation, and it is essential that we treat both groups in a fair and evenhanded manner," the letter said.

The lawmakers were urged to voice their concerns by the American Federation of Government Employees, which has campaigned against the rule. According to AFGE, finalization on the proposal is imminent.

Contractors want the restrictions removed because hotels often won't give them the discounted rate that federal employees get and because of the paperwork involved in reporting travel expenses. The proposed rule also suggests that removing contractors' per diem limits would reduce some government administrative costs.

If cost savings can be realized, then per diem limits should also be lifted for federal employees, the senators said. But without any evidence of cost savings, they argued, the contractor limits should not be removed.

In fact, the Defense Contract Audit Agency estimated that the proposed rule would cost the government $130 million annually in contractor relocation reimbursements. And in a report last April, the General Accounting Office found that contractors at the Department of Energy did not stick to travel-reduction goals set by the agency.

"DOE has set targets for its contractors to achieve but has not enforced them or ensured that its overall contractor travel cost-savings target was met. For its part, DOE contractors were aware of the targets, but many contractors did not translate this into an overall strategy or plan to achieve lower travel costs," said the report (RCED-99-107). AFGE fears that the same problems GAO identified at DOE would occur governmentwide if the new rule is approved. "The arguments that have been put forward for cost savings are just not credible," an AFGE lobbyist said. AFGE estimates that the new rule would cost $380 million annually.

AFGE President Bobby Harnage has also asked Office of Personnel Management Director Janice Lachance to use her influence to get OMB to withdraw the rule. In a letter to Lachance, Harnage wrote: "Federal employees would understandably interpret implementation of these rule changes as pointless punches below the belt and further evidence of a pro-contractor bias."