Agriculture employees win job competition through cost adjustments

Agriculture Department employees won a recent competition at a Beltsville, Md., facility even though their offer of $57.4 million was $2 million higher than the private sector bid, according to documents obtained by Government Executive under the Freedom of Information Act.

The in-house team was able to win the competition because the offers were adjusted to include the cost of converting the work to the private sector. This added $4 million to the contractor's bid, pushing it above the in-house offer.

The Office of Management and Budget requires agencies to adjust offers according to a formula that adds 10 percent of in-house personnel costs, or $10 million, to the offer of the team that is not performing the work. In this case, because the work was being performed in-house, the conversion differential was added to the contractor's bid.

The Beltsville Agricultural Research Center announced the results of the competition, which was for facility operation and maintenance support services, last December.

John Threlkeld, legislative representative for the American Federation of Government Employees, said the conversion differential is essential to measure the true value of an outside bid. "The [differential] simply requires the contractor to at least promise to generate savings sufficient to offset the significant costs of conducting the privatization review," he said. He added that the differential probably understates those costs.

"It safeguards taxpayer interests against politically driven efforts to privatize work for no savings or even at a loss," he said.

OMB's revised circular on job competitions makes a similar point: "The conversion differential precludes conversions based on marginal estimated savings, and captures nonquantifiable costs related to a conversion, such as disruption and decreased productivity," it states.

The agency documents provide an inside look at the cost comparison process of A-76 competitions, in which federal workers compete with private contractors for jobs. Personnel costs were by far the largest cost for the in-house team. They constituted $42 million out of the total cost of $57 million.

Stan Soloway, president of the Professional Services Council in Arlington, Va., questioned the ability of in-house teams to accurately measure their costs. "Agencies don't have financial systems that enable us to capture full costs," he said. He said in-house team costs are often underestimated.

Two contractors competed for the facility operation and maintenance support services competition. BARC declined to identify those companies, citing provisions in the 1997 National Defense Authorization Act that protect trade secrets and other confidential documents, and only included the proposal from one contractor in the cost comparison documents.

When the agency announced the results of job competitions for animal care and facility operation and maintenance support services last December, it said the in-house teams had eliminated 65 positions and generated $6.3 million in savings over the next 5 years. The facility operation and maintenance support services alone will generate $2.7 million in savings over the next 5 years, said a BARC spokesman.

Even though the in-house team won, Vallie Bray, head of American Federation of Government Employees Local 3147, which represents BARC employees, said there were some harmful effects. "A lot of the positions are being downgraded," she said.

"Even when [in-house teams] prevail, the in-house workforces can be hit with significant personnel reductions, which can complicate our ability to continue to provide high-quality services," said Threlkeld.

When the results were announced, an agency spokesman said many of the eliminated positions already were vacant.