IRS to close distribution centers in Virginia, California

The Internal Revenue Service has decided against outsourcing distribution jobs, but is scaling back on the number of federal employees performing the work.

In a job competition for 550 full-time equivalent distribution positions, in-house workers submitted a proposal to improve efficiency by closing two of three distribution centers, IRS officials told employees Wednesday. The in-house team won the public-private contest, conducted under the Bush administration's competitive sourcing program, but at a cost of about 270 jobs.

The in-house team plan entails closing distribution centers in Richmond, Va., and Rancho Cordova, Calif., and eliminating some jobs at the agency's third center in Bloomington, Ill. Workers at the centers fill orders for IRS publications and maintain a stock of the agency's products. The centers handle more than 21,000 orders each year, according to the National Treasury Employees Union, which represents 98,000 IRS employees.

But the in-house team found that the need for IRS paper products is decreasing significantly, said Raymona Stickell, director of the agency's Office of Competitive Sourcing. Work at the centers is expected to decline at a rate of 6 percent a year, she said, as citizens pull documents from the Internet and rely more on computer software packages. There also is less need to use the facilities as warehouses, as more information can be stored electronically, the in-house team found.

Stickell declined to offer an estimate of the savings projected from the proposal.

"The [in-house team was] very creative in looking for opportunities to improve today's operation," Stickell said, adding that staffing cutbacks will not hurt customer service. The in-house team will need to meet detailed service standards; it only proposed the cutbacks after completing extensive market research and studying how other federal agencies handle distribution.

But Colleen Kelley, president of the NTEU, argued that the cutbacks are likely to result in "reduced service to everyone." The closings of the Richmond and Rancho Cordova centers also underscore one of the competitive sourcing initiative's fundamental flaws, according to Kelley. "Even when the work stays where it belongs . . . it often is at a cost just like this one," she noted.

The decision has been a long time in coming, Stickell said. Agency officials began developing the performance work statement for the competitive sourcing study in April 2002 and completed the contest under the Office of Management and Budget's old rules on competitions. OMB updated the rules in May 2003, but by that time, the distribution center contest was well under way, Stickell explained.

IRS officials kept distribution center employees informed about progress on the competitions and notified them of the likelihood that, given changes in workloads, some might lose jobs, Stickell said. The agency set up a "really robust" outplacement program, she said, aimed at helping workers at the centers find alternative jobs in their communities.

IRS officials set up rooms with Internet access to help job search efforts. They also enlisted a Labor Department "rapid response team" whose members helped distribution center employees hone resume writing and interview skills. In addition, the IRS offered early retirement and voluntary separation incentives, with 124 employees taking advantage of a window last winter. There will be more opportunities ahead, Stickell said.

But Kelley said the IRS refused to "use all the programs available to mitigate the impact on employees in Richmond and Rancho Cordova." The union is counseling employees and will ask the Federal Service Impasses Panel to prevent the IRS from acting "with respect to toll-free telephone work in the [distribution centers] in light of recent legislative activity that could, at the least, slow down the administration's effort to contract out the jobs of federal workers."

Once a "public comment" period ends on Sept. 16, the IRS plans to implement the in-house team's proposal. At that time, the agency will share more details on which employees in Bloomington will be affected. By the agency's count, 82 seasonal employees at the Illinois center will lose jobs.

IRS officials expect it will take six months at the most to implement the changes announced Wednesday, meaning the workers will be cut from the IRS payroll by Feb. 5, 2005

The impending cuts don't indicate that the "employees were not doing a good job," Stickell emphasized. "They were meeting the quality levels, they were meeting the service levels . . . it really is [because of] a dramatic change in the workload."