Feds see drop in jobs defended against contractors in 2005

Federal employees retained 90 percent of jobs placed up for competition with contractors under the Bush administration's competitive sourcing initiative in 2004, but only 60 percent in 2005, according to a soon-to-be-released report by the Office of Management and Budget.

The stark difference between the figures for the two years is widely attributed to the Federal Aviation Administration's February 2005 decision to award about 2,500 flight service jobs to a private sector bidder. OMB has not released the data behind the 2005 calculation, but observers agreed FAA's unusually large competition shifted the overall win rate last year.

The administration plans to release a report on fiscal 2005 competitive sourcing activities within the next two weeks, as well as a report on best value contracting, in which an agency factors quality as well as cost into the award decision, said Alex Conant, an OMB spokesman. But some results of the competitive sourcing report are being discussed in advance of its release.

OMB published limited data on 2005 competitive sourcing in February, when it announced that agencies completed 181 competitions last year involving nearly 10,000 full-time equivalent positions. The agency said it expected resulting improvements in efficiency to yield at least $3.1 billion in savings or avoided costs over the next five to 10 years.

The administration projected savings from the more than 1,000 competitions completed from 2003 to 2005 to reach $5.6 billion, and said one-time out-of-pocket expenses for those competitions were just more than $210 million. These figures amount to a $27 return for every dollar spent, said Rob Burton, acting administrator of OMB's Office of Federal Procurement Policy.

Some critics of competitive sourcing say these numbers are not reliable, though, and do not take into account the full costs associated with running the competitions.

John Threlkeld, a lobbyist for the American Federation of Government Employees, which has fought several of the competitions, said out-of-pocket expenses do not capture the cost of time spent by federal employees in running the contests.

He highlighted testimony given in July 2003 by David Walker, the Government Accountability Office's comptroller general, before a Senate government oversight subcommittee.

"[The Defense Department] and OMB estimate that historical savings from competitive competitions have ranged from 20 to 30 percent no matter who wins," Walker testified. "However, we can't express an opinion as to whether or not that 20 to 30 percent range is reasonable, because the cost accounting systems are just not of a state that we can form an opinion on it."

Threlkeld also questioned OMB's calculation of avoided personnel costs and overhead rates, and said the numbers don't capture indirect costs from impacts on productivity and morale during the competition process. He characterized best value competitions as unfair to federal employees, saying they effectively allow agencies to change their decision criteria mid-stream without giving all parties the chance to respond.

Chris Jahn, president of the Contract Services Association, said he finds the 2005 numbers from OMB promising. "It confirms what we've been saying for some time -- that competitive sourcing is good for the taxpayer," he said. "At a time of significant federal deficits, savings in the billions are nothing to sneeze at."

But Jahn questioned the majority of awards still going to in-house teams, arguing that Congress has "stacked the deck" with provisions favoring federal employee bids. He said he looks forward to seeing data in the full report on how many private sector bidders the competitions attracted, on average, noting that industry has shown less interest in recent years in bidding on contracts where the statistical chances of winning are slim.

Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based industry group, said the number of contracts won by public and private sector bidders is a more useful statistic than the number of jobs won, because it reflects the overall level of competition. He said his group's research indicates about 90 percent of awards go to in-house teams. "The more competition you have, the better it is for the taxpayer," he said.