Lawmaker proposes outsourcing with a twist

What if federal workers could be outsourced but keep their health and pension benefits? It's a possibility under one Republican lawmaker's proposal to improve the privatization process. Rep. Tom Davis, R-Va., is advancing two controversial new alternatives to the public-private competition process governed by Office of Management and Budget Circular A-76: the so-called bid-to-goal process and the creation of "transition benefit corporations." These methods promise the benefits of competition--improved performance at a lower cost--without demoralizing federal employees, according to Davis. "I enter this process with no preconceived notions other than the firm belief that current processes, such as A-76, are broken," said Davis last week. "The time has come to look at alternatives." Davis, who is chairman of the House Government Reform Subcommittee on Technology and Procurement Policy, plans to explore alternatives to A-76 at a hearing in June, said Melissa Wojciak, staff director of the subcommittee, at the Federal Acquisition Conference last week. One alternative, the bid-to-goal process, gives in-house employees the chance to streamline their operations without facing direct competition from the private sector. Like an A-76 competition, bid-to-goal begins with the creation of a performance work statement. Contractors and the in-house group then submit bids to fulfill the performance requirements at the lowest cost. But even if a bid from a private sector firm is low, the in-house team gets the first chance to meet the performance standards at the lowest cost. If the in-house team is unable to meet this performance threshold, the work is outsourced to the private sector, according to Davis spokesman David Marin. Marin cited a sewage facility in San Diego as an example of a successful use of the bid-to-goal method. In that case, the in-house group met performance requirements each year during a six-year contract. San Diego structured the contract to terminate after three years if the in-house group could not meet performance standards, with work going to the lowest bidder in the private sector. Davis would favor giving the in-house team less time to meet performance requirements, according to Marin. "Davis believes performance termination should be in the one-year time frame," said Marin. The Navy is considering using bid-to-goal to improve the performance of 500 plant maintenance positions at a depot in Jacksonville, Fla. The bid-to-goal method has potential merit, according to Wiley Pearson, defense policy analyst with the American Federation of Government Employees. "It's something that interests us," he said. "It allows federal employees to rely on innovation and creativity." The president of a leading contractor association disagreed. "The bottom line is that performance is driven by competition," said Stan Soloway, president of the Professional Services Council. "In a bid-to-goal situation, where you set out the requirement and the government is allowed to keep work in-house, it denies the government the opportunity to get the creativity and leverage of the competitive environment." Davis will also explore the use of transition benefit corporations, or TBCs, which were developed by contract lawyers Stephen Sorett and Roger Feldman. The TBC model hinges on a provision in the Federal Acquisition Regulation (FAR) that allows agencies to bypass A-76 rules and directly privatize work. Unlike A-76 procedures, the TBC model would also allow outsourced employees to retain their federal health and pension benefits. Like bid-to-goal and the normal A-76 process, the TBC method begins with the creation of a performance work statement. This statement becomes a contract between the agency and the TBC, a non-profit organization that acts as a fiduciary representative for outsourced employees, working with the Office of Personnel Management. The TBC also coordinates work to fulfill the performance work statement, which could be performed by outsourced workers or a combination of these employees and private sector workers. Outsourced workers would keep their federal benefits as long as they remained with the TBC. "The TBC would have a contractual arrangement with the Office of Personnel Management to assure that the [employees'] retirement, health, and life insurance benefits are funded and remain intact," wrote Sorett in a paper on the TBC model. Under the TBC model, agencies would also be able to rely on TBC employees if an emergency surge in workload took place. The TBC model is a promising alternative to A-76, according to Allan Burman, president of Jefferson Solutions and former administrator of the Office of Federal Procurement Policy. "It's a way to help [outsourced workers] maintain their retirement benefits," he said. "We ought to be encouraging people to look at creative ways to make sure [federal employees] aren't disadvantaged by the [outsourcing] process." But the TBC model also strikes some A-76 experts as too good to be true. "I think it is too clever by half for it to really work," said Robert Agresta, vice president at Star Mountain Inc., a Virginia-based consulting firm. AFGE is wary of plans that offer federal workers such soft landings, according to Pearson. "Any time you get into a case of talking about soft landings, they're avoiding the central issue, which is should you even be contracting out a particular activity?" he said. "You shouldn't sugarcoat contracting out." Davis envisions using the TBC model in cases involving highly skilled federal workers who would be in demand in the private sector, according to Marin. "TBC lends itself well to programs that are 'strategically sourced' now…meaning higher-level professional employees that would be in demand in the private sector like DoD labs," said Marin. Sorett believes the model can eventually replace A-76 altogether. He argues it allows all outsourced workers to keep their benefits and their jobs, a better scenario than in-house teams that win A-76 competitions face right now. "[Federal] employees take their chances in trying to win an A-76 competition. But if they win, a third of them won't be around," said Sorett, citing data from the General Accounting Office that shows in-house teams that win A-76 competitions typically cut a third of their workforce to be competitive. "In all humility, I think this is the solution," he said of the TBC method. Sorett is currently advising the departments of Energy and Defense on use of the method.