Transparency Trap

Requiring incoming contractors to retain incumbent workers could compromise service.

Imagine you've just been hired to manage the Washington Nationals. Your contract is contingent on your ball club making it to the World Series. But the team's owner says you have to take the field with essentially the same players you inherited-despite their losing record. Sound absurd? Of course, but it isn't far from reality, considering an administration proposal that would deny government contractors the right to select their own workforce, while still holding them accountable for their performance.

The Labor Department proposal would require a company that wins an ongoing government services contract to offer the incumbent's wage-grade employees first right of refusal on jobs for which they are "qualified"-a threshold achieved merely because they previously performed the work. The rule does purport to allow the incoming contractor to weed out poor performers, but either by design or naíveté, it would require the outgoing company or contracting agency to provide formal employee performance evaluations. Both are legally and managerially dubious propositions.

Set aside the fact that neither the government nor the incoming contractor should rely on evaluations from a company whose personnel selection and management could be key reasons it lost the contract. Employee privacy and individual and corporate liability are even bigger issues. Such information almost never is shared between companies, let alone by government officials who cannot, and should not, be involved in corporate hiring decisions. The rule presumes fault and responsibility for performance rests with management, not with the employees working on the contract. And despite a team's performance history, it assumes excellence can be achieved by fielding the same players.

There is no evidence that companies routinely oust incumbent workers when they take over a contract from another firm. It is in a company's best interest to retain as many workers as possible to avoid the risks, costs and time associated with hiring and training new ones. And laws, such as the 1965 Service Contract Act, exist to ensure companies engage in fair labor practices. But workforce changes sometimes are necessary to deliver the performance the incoming company contractually committed to and taxpayers expect. Indeed, at the best firms in the services industry, some of the most important work is selecting their workforce.

The proposal not only is counterintuitive, but also raises obvious questions Labor seems to have ignored. How can a company be held accountable for results when it is not allowed to select its own workforce? How does requiring the retention of employees without regard to the quality of their work serve the taxpayers' interests? Why would the government settle for mediocrity, or worse, rather than enable excellence? And perhaps most basic, when did employment under a government contract become an entitlement?

As a standing executive order, the rule likely will not be scrapped in its entirety. Therefore, the challenge is to find a way to implement it without creating illogical, imbalanced and legally questionable rules. It is possible to establish a mechanism that gives companies reasonable flexibility in selecting their workforces, while also ensuring fair treatment of incumbent employees. Such steps might include requiring fair consideration for employment and making modest adjustments to the Service Contract Act to eliminate any unintended effects.

While Labor has not demonstrated interest in such a balanced approach, the public comment period is under way, and the department has the opportunity to take action. If it fails to do so, every company supporting the government, as well as every Cabinet secretary and agency official who is accountable under the president's performance and accountability agenda, should be deeply disturbed. After all, if government contractors lack the ability to select the right people and thus provide the highest level of service, they are not the only ones who would suffer. The effects would be felt across government. And, as always, the ultimate losers would be the taxpayers.

Stan Soloway is president and chief executive officer of the Professional Services Council. He served as deputy undersecretary of Defense during the Clinton administration.