Proposed acquisition policy favors contractors, critics say

An interagency council is considering a change to federal procurement rules that critics say would give contractors preferential treatment over federal employees.

In the next few months, members of the Federal Acquisition Regulation council will weigh feedback on a proposal to allow agencies to reimburse contractors for three types of moving-related expenses on a lump-sum basis. The contractors would receive a total payment, regardless of how much they actually spent on relocations.

Industry groups supporting the policy change argue that private sector businesses routinely cover employees' relocation costs on a lump-sum basis. The practice helps companies run more efficiently, they claim.

Union officials contend the proposed policy change favors contractors over federal employees and allows contractors to overcharge the government. Officials at the Defense Inspector General's Office and Defense Contract Audit Agency say that under the suggested policy, agencies could end up spending millions of additional taxpayer dollars helping contractors relocate.

Current acquisition rules let agencies cover up to $5,000 of a contract employee's "miscellaneous" relocation expenses on a lump-sum basis. These expenses include fees to hook up household appliances, automobile registration fees and utility deposits.

The Civilian Agency Acquisition and Defense Acquisition Regulations councils in December 2003 suggested adding three other types of moving expenses to the lump-sum reimbursement list: the cost of travel to a new location, the cost of temporary lodging and the cost of finding a home. This policy change would likely "reduce the accounting and administrative burden of the relocation cost principle on contractors and lead to faster relocations," the councils explained in a December 2003 Federal Register notice.

The councils collected input on the recommended FAR change and are ready to begin analyzing comments received in response to the December notice, a General Services Administration policy adviser said Friday.

"Costs to the government are not expected to increase significantly as a result of this revision," the Federal Register announcement stated. "While individual receipts are not required with a lump-sum approach, contractors would still have to demonstrate that amounts paid are reasonable and appropriate for the circumstances of each relocating employee."

But in written responses to the proposal, DCAA and the Defense inspector general said agencies could have difficulty assessing whether lump-sum reimbursements are "reasonable." The proposed policy change would force government auditors, contracting officials and attorneys to "subject millions of dollars to a subjective test of reasonableness," said Patricia Brannin, Defense's assistant inspector general for audit policy and oversight.

"Using a broad criterion such as the general reasonableness principle in the FAR will lead to differences of opinion among government officials and even more so between the government and contractors," noted Robert DiMucci, assistant director for policy and plans at DCAA. "These differences of opinion will result in increased disputes, which will increase the effort required by contractors, auditors, contracting officers and the courts to settle these disputes."

Industry advocates said the proposed policy change would simply bring the government up to speed with the private sector. "These changes are in keeping with current commercial business practice," said Kay Burd, a consultant at Runzheimer International, a company specializing in relocations, in comments supporting the suggested FAR revision.

But DiMucci and Brannin said the acquisition councils lack adequate proof that lump sum reimbursements for relocation are in fact standard practice in the private sector. Angela Styles, former head of procurement at the Office of Management and Budget, said Friday that she shares similar concerns. She added that the proposed policy change, as presented in the Federal Register notice, is not well thought out.

For instance, current rules limit lump-sum reimbursements of contractors' miscellaneous moving expenses to $5,000. But the proposed changes place no cap on how much agencies could grant contractors in the three additional categories. "If you read this from a lawyer's perspective, you don't want something that open ended," Styles said.

In addition, the acquisition councils do not appear to have carefully considered the equity implications of the proposed policy, Styles said. The council has to ensure that federal employees receive fair treatment. "I don't think that issue has been dealt with either," she said.

"This proposal would make federal employees second-class citizens vis-a-vis their contractor counterparts, with respect to relocation expenses," said American Federation of Government Employees public policy director Jacqueline Simon. "Not having to justify costly relocation expense bills…may indeed improve the morale of contractor employees, but it should collectively reduce the morale of taxpayers who will have to foot these bills in a time of major budget deficits."