VA halts all competitive sourcing studies pending ruling

The Veterans Affairs Department has halted all public-private job competitions over concerns that the program could violate federal law, putting one of the biggest competitive sourcing programs in government on hold.

VA's decision, prompted by an April 28 ruling from the department's general counsel, freezes a competitive sourcing program that aimed to compete 28,000 VA jobs by the end of 2004, and roughly 55,000 jobs at the department over the next five years. VA officials believe they will need congressional approval to restart almost all of the competitions affected by the freeze. The competitions were slated for the Veterans Health Administration.

"We have in fact put a moratorium on all of our competitive sourcing activities as it relates to the Veterans Health Administration," said Dennis Duffy, VA's principal deputy assistant secretary for policy and planning, on Wednesday. "We are working with the administration, with the [Office of Management and Budget] on providing some kind of legislative remedy, on looking for language that will permit us to proceed."

VA has not announced any new job competitions over the past few months.

The matter centers on a statute, Section 8110 of Title 38 of the U.S. Code, which prevents VA from conducting cost comparisons on VHA jobs unless Congress provides specific funding for the competitions, which has not occurred to date. VA officials originally believed this statute would not apply to competitions held using its "Tier 2," process, a variation on the normal job competition process governed by OMB Circular A-76.

But in the April 28 ruling, obtained by GovExec.com, the VA general counsel decided that the statute covers all job competitions at the VHA, and prevents the agency from using its employees to work on job competitions without specific appropriations. Since job competitions cannot be staged without some employee involvement, the VA had no choice but to halt its competitions, Duffy said.

"The concern is . . . the prohibition on using VHA staff," he said. "When we hold a study on food service, for example, we need to be able to utilize managers and people engaged in food service operations to help us put together the [performance work statement]," he said.

As a result, VA offices across the country have put job competitions on hold. "We have not started any other studies," said Pam McGuire, director of logistics at the VA campus in Murfreesboro, Tenn., who staged a job competition on VA laundry operations before the April 28 ruling was issued.

The Bush administration is planning to ask Congress for authority to tap into VHA budget accounts to pay for job competitions, according to Duffy. "I think what we're looking to do is to simply ask for an amendment to an appropriations bill that would permit us to use such sums as would be necessary from those accounts to do the cost comparisons," said Duffy. "We're cautiously optimistic we'll get relief sooner rather than later."

The administration could request authority through a supplemental appropriations bill, or through the fiscal 2004 budget process, according to Duffy. Congress routinely granted such authority in the 1990's, he added. But some legislators, including Rep. Lane Evans, D-Ill., the ranking member on the House Veterans Affairs Committee, might resist efforts to use VHA funds to pay for competitive sourcing.

"Congressman Evans would be adamantly opposed to any change to the existing statute that bars the administration from using already severely limited veterans' health care funds for its unproven pet project," said James Holley, Democratic staff director for the committee. "Veterans must come first."

The American Federation of Government Employees, the largest federal employee union, would also oppose the administration's request. "It is outrageous that they would attempt to divert money from veterans' health care to pay off high-priced privatization consultants to conduct wasteful privatization studies," said Linda Bennett, a lobbyist with the union.

The VA plans to devote all savings generated by competitive sourcing to veterans' health care programs, according to Duffy. The department estimates that job competitions could yield $1.3 billion in savings over five years, according to a May 14 letter to Evans from then-OMB Director Mitch Daniels.

Some job competitions could still go forward despite the April 28 ruling, according to Duffy. The ruling does not apply to employees in VA's canteen service, which provides cafeteria services to veterans on an outpatient basis. The VA is planning to start a job competition involving 1,500 canteen employees later this year, according to Duffy. The department could also explore holding competitions involving employees of the Veterans Benefits Administration and National Cemetery Administration, Duffy said.

VA had planned only to hold competitions involving VHA employees. The VHA has almost 190,000 jobs that are commercial in nature and eligible for competitive sourcing.

The VHA finished job competitions on a few laundry centers before April 28, including the competition run by McGuire, which involved 34 VA employees at four laundries in Tennessee, Kentucky, and West Virginia. Duffy said he believes the ruling does not impact completed studies, although VA officials have not made a final decision on the matter.

Officials at VA headquarters are still working on procedures to speed competitive sourcing once the program is resumed. The VA's competitive sourcing office is working on a how-to guide for holding studies using the "Tier 2" process, and has been studying OMB's new A-76 circular, according to Duffy.