Researchers say few jobs are lost to competitive sourcing

A new study concludes that few federal employees have lost their jobs because of competitive sourcing, contrary to widespread belief among federal labor unions.

The report, by the University of Maryland's Center for Public Policy and Private Enterprise, is the widest-ranging study on the impact of competitive sourcing initiatives on federal employees to date. It examined almost 1,200 competitions between the private sector and federal employees at the Defense Department during the past 10 years.

The study found that only 5 percent of the 65,151 civilian employees whose work was put up for competition lost their jobs as a result. The report, funded by the IBM Center for the Business of Government, noted that instead of being laid off, federal workers whose work was outsourced opted for early retirement or found other jobs within the government.

"The actual number of people left out on the street is very, very small," said Stan Soloway, president of the Professional Services Council, which represents companies that bid on government contracts. Even if employees face a reduction in force, they usually have the right of first refusal on jobs with contractors, priority placement for other federal jobs and the option to voluntarily retire, he said.

Union representatives immediately questioned the report's implications. "As part of any competition, there's a reduction in force … it's built into the process," said Mary Lynch, vice president of the American Federation of Government Employees' National Homeland Security Council. One issue that's overlooked, she said, is that federal employees are often forced to scramble for different jobs when a private contractor wins a competition and they frequently land positions that don't match their expertise or in positions of less seniority.

"You end up having a less experienced workforce, which is very detrimental to the continued ability of an agency to function effectively," said Lynch. The competition process, she added, is "devastating and demoralizing" for federal workers.

Jacques Gansler, co-author of the report with William Lucyshyn, said job losses are just part of living in the real world. "Why should these people have a guaranteed job and the same job forever, even if the technology changes?" That doesn't strike me as in the national interest." Gansler, who served as the Defense Department's acquisition chief during the Clinton administration, added that one reason the public perceives such a large number of job losses caused by competitive sourcing is because "the people who object are much more vocal than the ones who don't."

Gansler did agree, however, that even if federal employees win competitions and keep their jobs, the process can breed low morale. The authors recommended agency managers implement "soft-landing" programs, which provide severance pay, help workers find new jobs and improve perceptions of fairness surrounding the competitions. But they encouraged agencies to continue to hold competitions for jobs, saying that the improvement in performance and savings exceeds the costs incurred in the process.

The report included Defense Department data showing the percentage of competitions won by federal employees has risen steadily during the past few years -- a fact private contractors have cited in arguing that competitions are biased against them. By 2003, the report noted, federal employees were twice as likely to win a competition as were private contractors.

"Any time either side is winning 85 percent to 90 percent of competitions, you've got a problem," said Soloway of PSC.

Unions contend that even when federal workers won contracts, they face pay reductions and demotions. "In the long run, federal employees are still losers when they win," said Frank Carelli, director of government employees for the International Association of Machinists and Aerospace Workers, a member of the AFL-CIO. In order to compete with the private sector bidders, federal workers "have to take either a reduction in force, or in some cases a reduction in pay," he said.

Chris Jahn, president of the Contract Services Association, which represents government contractors, said in a news release, "This report confirms what industry has been saying all along - jobs are not the issue. Providing the best value to the taxpayer is the issue. The Federal employee unions oppose competitive sourcing - so they've latched onto the 'everyone is going to lose their job scare tactic."

John Threlkeld, legislative representative for the American Federation of Government Employees, called the data in the study "seriously flawed" in a news release. He also noted Gansler's role in privatizing federal jobs during the Clinton administration, when he was undersecretary for acquisition, technology and logistics for the Defense Department, suggesting that Gansler was biased towards favoring outsourcing.