[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT HEARING TO REVIEW THE FINDINGS OF THE COMMERCIAL ACTIVITIES
PANEL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 27, 2002
__________
Serial No. 107-185
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
83-959 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania THOMAS H. ALLEN, Maine
DAVE WELDON, Florida JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia ------
JOHN J. DUNCAN, Jr., Tennessee BERNARD SANDERS, Vermont
JOHN SULLIVAN, Oklahoma (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Technology and Procurement Policy
THOMAS M. DAVIS, Virginia, Chairman
JO ANN DAVIS, Virginia JIM TURNER, Texas
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
DOUG OSE, California PATSY T. MINK, Hawaii
EDWARD L. SCHROCK, Virginia
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Melissa Wojciak, Staff Director
Victoria Proctor, Professional Staff Member
Mark Stephenson, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on September 27, 2002............................... 1
Statement of:
Styles, Angela, Director, Office of Federal Procurement
Policy, U.S. Office of Management and Budget; Joseph Sikes,
Director of Competitive Sourcing and Privatization, U.S.
Department of Defense; Stan Soloway, president,
Professional Services Council; Colleen Kelley, president,
National Treasury Employees Union; Jacqueline Simon,
director of public policy, American Federation of
Government Employees; and Mark Wagner, on behalf of Mark
Filteau, president, Johnson Controls World Services, Inc... 38
Walker, David M., Comptroller General, U.S. General
Accounting Office.......................................... 9
Letters, statements, etc., submitted for the record by:
Davis, Hon. Tom, a Representative in Congress from the State
of Virginia, prepared statement of......................... 3
Filteau, Mark, president, Johnson Controls World Services,
Inc., prepared statement of................................ 129
Kelley, Colleen, president, National Treasury Employees
Union, prepared statement of............................... 71
Sikes, Joseph, Director of Competitive Sourcing and
Privatization, U.S. Department of Defense, prepared
statement of............................................... 50
Simon, Jacqueline, director of public policy, American
Federation of Government Employees, prepared statement of.. 81
Soloway, Stan, president, Professional Services Council,
prepared statement of...................................... 60
Styles, Angela, Director, Office of Federal Procurement
Policy, U.S. Office of Management and Budget, prepared
statement of............................................... 40
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 7
Walker, David M., Comptroller General, U.S. General
Accounting Office, prepared statement of................... 13
OVERSIGHT HEARING TO REVIEW THE FINDINGS OF THE COMMERCIAL ACTIVITIES
PANEL
----------
FRIDAY, SEPTEMBER 27, 2002
House of Representatives,
Subcommittee on Technology and Procurement Policy,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:36 p.m., in
room 2154, Rayburn House Office Building, Hon. Thomas M. Davis
(chairman of the subcommittee) presiding.
Present: Representatives Davis and Turner.
Staff present: Melissa Wojciak, staff director; George
Rogers, Uyen Dinh, and John Brosnan, counsels; Victoria Proctor
and Teddy Kidd, professional staff members; Ryan Voccola,
intern; Mark Stephenson, minority professional staff member;
and Jean Gosa, minority assistant clerk.
Mr. Davis. Good afternoon. I want to welcome everyone to
the subcommittee's oversight hearing on outsourcing. Today,
we're going to examine the results and recommendations of the
Commercial Activities Panel that were published in its final
report, Improving the Sourcing Decisions of the Government.
We have rescheduled this hearing numerous times to
accommodate the schedules of our very important members and
witnesses, so I'd like to extend my thanks to all the
participants for being here today and for your patience.
For almost 50 years, the executive branch has promoted the
purchase of commercially available goods and service from the
private sector. This policy was formalized by the Office of
Management and Budget Circular A-76, which provides agencies
guidance for conducting public-private cost comparisons. In
fact, the 1983 revised A-76 handbook states that it has been
and continues to be the general policy of the government to
rely on commercial sources to supply the products and services
the government needs.
But in recent years A-76 has come under fire from all
sides. Federal employees are inadequately trained to write
performance work statements or to perform the necessary cost
comparisons. Moreover, the A-76 process is lengthy and often
demoralizes--it's demoralizing to the employees whose jobs are
being competed. In addition, contractors are concerned that the
cost comparisons are unfair, since the public and private
sector's accounting systems are not comparable.
Congress recognizes that the A-76 process is flawed.
Therefore, we passed the Floyd D. Spence National Defense
Authorization Act for 2001, Public Law 106-398, which mandated
that the General Accounting Office convene a panel of experts
to study the policies and procedures governing the transfer of
the Federal Government's commercial activities from government
to contractor performance. The legislation required that
members of the panel represent the interests of the Federal
Government, Federal labor organizations and private industry.
The Commercial Activities Panel met often over a 12-month
period and conducted three public field hearings. The Panel
unanimously adopted 10 sourcing principles intended to guide
the Federal Government in its sourcing policy. Additionally,
the Panel made three recommendations that were adopted by a
supermajority; but two Federal labor union representatives and
two representatives from academia cast dissenting votes.
The Panel's recommendation includes the implementation of
an integrated competition process in which public-private
competitions would be conducted under the Federal Acquisition
Regulations with some appropriate cost comparisons provided
from A-76, limited changes to circular A-76, and the creation
of high-performing organizations, HPOs, by management and
employees.
The HPO would be exempt for a specified period from
competition for a particular function. It would then enter into
a binding performance agreement for at least 5 years.
I've repeatedly stated that the Federal Government's
ultimate objective in the outsourcing arena would be to pursue
the best value for taxpayers. This principal is the touchstone
of the FAR based-process. Therefore, I'm encouraged that the
Panel's recommendations include the application of a FAR-based
process.
The subcommittee requested that witnesses discuss their
perspectives on the 10 sourcing principles that were
unanimously approved by the Panel; their perspectives on the
Panel's recommendations, including reservations they may have
regarding the program's recommendations; and their views on the
feasibility of implementing the recommendations.
The subcommittee will hear testimony from David M. Walker,
the Comptroller General of the U.S. General Accounting Office
and soon to be a constituent of mine; Angela Styles, the
Director of the Office of Federal Procurement Policy, Office of
Management and Budget; Joe Sikes, the Director for Competing
Sourcing and Privatization, Department of Defense; Stan
Soloway, the President of Professional Services Council;
Colleen Kelley, President, National Treasury Employees Union;
and Jacqueline Simon, the Director of Public Policy, American
Federation of Government Employees.
Mark Filteau, President of Johnson Controls World Services,
had a family emergency and sent Mark Wagner, who will ably
represent him.
I appreciate everybody being here, and let me now yield to
Mr. Turner for any opening comments he may wish to make.
[The prepared statement of Hon. Tom Davis follows:]
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Mr. Turner. Thank you, Mr. Chairman. It's always
interesting to note that we usually gather a pretty good crowd
when we talk about A-76, even on a Friday afternoon; and I
welcome all of our witnesses and participants today.
As we all know, A-76 is--I'll phrase it, not many people
even pay much attention to it outside of Washington. I
certainly would hate to poll my constituents and ask how many
of them have ever heard of A-76, but it is quite a hot topic
for those of us who work in this particular area, and it
would--it seems to me that we need to work very hard to try to
resolve the difficulties that we have had with A-76, and I look
forward today to hearing from the witnesses to talk about the
report issued by the GAO, which will I think provide another
basis for another round of discussions which I hope will be
productive in trying to deal with this very contentious area of
Federal procurement policy.
Thank you, Mr. Chairman.
Mr. Davis. Thank you very much.
[The prepared statement of Hon. Jim Turner follows:]
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Mr. Davis. Mr. Walker, you're our first panel. You know the
policy here.
[Witness sworn.]
Mr. Davis. Thank you. Thanks again for being with us, and
we appreciate your flexibility in meeting our different
schedule needs.
STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL, U.S. GENERAL
ACCOUNTING OFFICE
Mr. Walker. I'm happy to do it, Mr. Chairman, Mr. Turner.
It's a pleasure to be here. I think this is a very important
topic. I know that you've tried and all of us have tried on
several occasions to make this happen, and I'm pleased that it
is happening.
I'm pleased to be here today to participate in this
subcommittee's hearing on the report of the congressionally
mandated Commercial Activities Panel. And, again, it is the
Panel's report. It is not a GAO report. And I think that is
very important. I'm acting in my capacity as the chairman of
the Commercial Activities Panel, but obviously I'm also the
Comptroller General of the United States.
In just the few months since the Panel issued its report in
April, we've begun to see real progress in implementing the
Panel's recommendations, at least as it relates from an
administrative standpoint; and I know that Angela Styles will
then be talking about that.
As you know, the Panel's work was the result of a provision
contained in the fiscal year 2001 Defense Authorization Act,
which called for me, in my capacity as Comptroller General of
the United States, to convene a panel of experts to study and
make recommendations for improving the policies and procedures
governing the transfer of commercial activities for the Federal
Government from government to contractor personnel. The impetus
of the legislation was the growing controversy surrounding
competitions conducted under OMB Circular A-76 to determine
whether the government should obtain commercially available
goods and services from the public or private sectors.
Importantly here, Mr. Chairman and Mr. Turner, I use the
term ``sourcing,'' not outsourcing, because, under our
principles, it could go either way. While there's likely to be
more activity going outside the Federal Government, there are
possibilities that they could come back, and obviously I'll be
happy to answer questions on that.
Controversy surrounding the use of A-76 also occurred at
the time of increasing questions over the role of government
and who was in the best position to provide the needed
services. As I have testified on a number of occasions, given
recent trends and our long-range fiscal challenges, the Federal
Government needs to engage in a fundamental review,
reassessment and reprioritization of what the Federal
Government should do, how the Federal Government should do
business and who should do the Federal Government's business.
Because of the importance of the issues to be addressed, I
chose to chair the Panel rather than to delegate it, which I
was allowed to do under the statute. My view was, unless you
had top-level people from the different groups involved, that
the hope of being able to achieve a consensus on anything was
next to zero, given the nature and the controversy and
complexity associated with this topic.
In establishing the Panel, a number of steps were taken to
ensure representation from all major stakeholders as well as to
ensure a fair and balanced process. To ensure a broad array of
views on the Panel, we used the Federal Register notice to seek
suggestions on the Panel's composition.
Let me note for the record, contrary to assertions by some,
I received no complaints from any Panel member during the
process about the composition of the Panel, no complaints from
any Panel member about the composition of the Panel until after
our report was issued. My view is, if you can't attack the
result, you attack the process, and that's what is happening.
It's the oldest game in town.
Once convened, the Panel as a group took a number of steps
at the outset to guide its deliberations and ensure a full and
balanced consideration of the issues. The first step was the
adoption of a mission statement. The Panel also agreed that all
of its findings and recommendations would require agreement of
at least two-thirds supermajority of the Panel in order to be
adopted. This meant that everything was in play, and you
couldn't end up having factions form that would automatically
result in a stalemate of the process.
The Panel further decided that each member of the Panel
would have an option of having a brief statement included in
the report explaining that member's position on the matters
considered by the Panel. Every member did so, and we also had a
Federal Register notice soliciting input on the issues.
The Panel held 11 meetings over a period of May 2001, to
March 2002, including several field hearings during that period
of time.
As the program began its work, it recognized the need for a
set of principles that would provide a framework for sourcing
decisions. Those principles, as they were debated and fleshed
out, provided an important vehicle for assessing what does or
does not work under the current A-76 process and provided a
framework for identifying needed changes in the process.
The principles, which are outlined on page 7 of my
testimony, 10 in total, were unanimously adopted by the Panel
and included as an integral part of the program's
recommendations. While each principle is important, no single
principle stands alone, and several are interrelated.
Therefore, the Panel adopted the principles and their
accompanying narrative comments as a pack and then used these
principles to assess the government's existing sourcing system
and to develop additional Panel recommendations.
In addition to the principles, the Panel adopted a package
of additional recommendations that it believed would improve
significantly the government's policies and procedures for
making sourcing decisions. As you noted, Mr. Chairman, this was
adopted by a supermajority of the Panel by an 8 to 4 vote.
It is important to emphasize that the Panel decided to
consider and adopt these vital recommendations as a package,
just as we did with the principles, recognizing the diverse
needs represented on the Panel and the give and take required
to reach agreement among a supermajority of the panelists.
As a result, the supermajority of the Panel members
recommended the adoption of three basic items: Conduct public-
private competitions under the framework of an integrated FAR-
based process, make limited changes to the existing A-76
process, and encourage the development of high-performing
organizations.
Many of the panel's recommendations can be accomplished
administratively under current law, and OMB is taking steps to
try to accomplish that. The Panel recommended that our
recommendations be adopted as soon as practicable, some of
which, however, may require legislation, and obviously that is
one of the reasons why we are having this hearing.
Like the guiding principles, the other recommendations that
we made were a result of much discussion and debate and,
frankly, compromise. I was getting input from every Panel
member, including individuals who I knew would vote no in a
good-faith attempt to try to come up with a fair, balanced,
reasoned and reasonable proposal, even if it wasn't going to
make a difference on what the ultimate vote would be. All we
had to have was one of the eight members vote no, and we would
not have these additional recommendations.
In conclusion, I supported the adoption of the set of
principles as well as the package of additional recommendations
contained in the Panel's report. Overall, I believe the
findings and recommendations contained in the Panel's report
represent a reasoned, reasonable, fair and balanced approach to
addressing the important, complex and controversial area of
sourcing policy.
I hope that the Congress and the administration will
continue to consider and act on this report and its
recommendations. I particularly want to encourage the Congress
and the administration to consider the importance of the high-
performing organizations concept. Agencies should not wait
until faced with the challenge of public-private competitions
to seek efficiencies to retain work in-house. It is in the
taxpayers' interest that we try to maximize the performance and
ensure the accountability of all enterprises within government,
whether or not they will ever be subject to sourcing.
The fact of the matter is, is that most government jobs
will never be subject to competitions. As a result, I believe
that the Panel's recommendation pertaining to high-performing
organizations could be an important vehicle for fostering much-
needed attention to how we can enhance the economy, efficiency
and effectiveness of government and improve government's
accountability in way as a complement to, not a substitute for,
always, a competition.
Finally, and most importantly, in considering the Panel's
package of recommendations or any other changes that may be
considered by Congress and the administration, in my view, the
guiding principles which were developed and unanimously agreed
to by the Panel should be the foundation for any further
action.
Let me also add that I appreciate the hard work of my
fellow panelists and their staff who worked in a good-faith
effort over a considerable amount of time in order to deliver
this report.
Mr. Chairman, that--and Mr. Turner, that concludes my
opening statement. I would be happy to answer any questions
that you may have.
Mr. Davis. Thank you, Mr. Walker. I understand you're
willing
to sit here while the others testify, and we can do the
questions all at once.
Mr. Walker. I would be happy to do that, Mr. Chairman.
Mr. Davis. That would be great.
[The prepared statement of Mr. Walker follows:]
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Mr. Davis. If I could have the other witnesses come up, and
before you sit down, just raise your right hand.
Ms. Kelley is not here, right? We'll get her when she gets
in.
[Witnesses sworn.]
Mr. Davis. Thank you very much.
Why don't we start with Ms. Styles and move straight on
down.
Angela, thanks for being with us.
STATEMENTS OF ANGELA STYLES, DIRECTOR, OFFICE OF FEDERAL
PROCUREMENT POLICY, U.S. OFFICE OF MANAGEMENT AND BUDGET;
JOSEPH SIKES, DIRECTOR OF COMPETITIVE SOURCING AND
PRIVATIZATION, U.S. DEPARTMENT OF DEFENSE; STAN SOLOWAY,
PRESIDENT, PROFESSIONAL SERVICES COUNCIL; COLLEEN KELLEY,
PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION; JACQUELINE SIMON,
DIRECTOR OF PUBLIC POLICY, AMERICAN FEDERATION OF GOVERNMENT
EMPLOYEES; AND MARK WAGNER, ON BEHALF OF MARK FILTEAU,
PRESIDENT, JOHNSON CONTROLS WORLD SERVICES, INC.
Ms. Styles. Thank you very much. I really appreciate the
opportunity to be here today to discuss the administration's
competitive sourcing initiative, the final report of the
Commercial Activities Panel and the administration's pending
changes to OMB Circular A-76. In particular, Mr. Chairman, I
want to thank you for your continued interest in these
difficult but very important issues.
First, I think I have to start off by thanking General
Walker and his staff at the GAO. They devoted a tremendous
amount of personal time and effort to this panel into creating
a fair report. We had a healthy and I think productive exchange
of ideas, and I think ultimately, through Mr. Walker's efforts,
we were able to achieve consensus on the 10 principles. I think
that's a truly astounding feat, given the diversity of the
Panel. And while we were not able to achieve consensus on the
ultimate recommendations, I think Mr. Walker went above and
beyond what would normally be expected in these circumstances
to ensure that the views of all Panel members were represented
to the maximum extent possible.
I must also commend Mr. Walker for providing an avenue for
the administration to work and develop lasting relationships
with key players in both industry and the Federal employee
unions. The Panel gave us and the administration a firm
foundation to ensure that there was an open, full and fair
dialog and continue to have one as we move forward with
addressing these many difficult issues.
The issues related to this report, public-private
competition and to the administration's competitive sourcing
initiative are complex, challenging, intellectual and, in many
respects, highly politicized.
Competitive sourcing asks people to make very hard
management choices, choices that affect very real jobs held by
real, dedicated and loyal career civil servants. In many
respects, it comes down, I think, to one simple reality. Very
few people, whether you're working in the private sector or the
public sector, like to work under the pressure of knowing that
their job is on the line if they don't figure out how to do it
more efficiently and effectively. But the fact that public-
private competition and our initiative require hard choices and
a lot of hard work makes it one that can affect fundamental,
real and lasting changes in the way we manage the Federal
Government. And the clincher here from our perspective is that
it's a taxpayer--this initiative strives to focus the Federal
Government on its mission, delivering high-quality services to
our citizens at the lowest possible cost.
We have civilian agencies for what I submit is the first
time taking a very hard look at how they fulfill their mission.
What are their employees doing that is inherently governmental?
What are they doing that's commercial? Is this the right mix
for mission success? They're also asking what private
contractors are doing and whether the agency is managing its
private contractors well, whether public employees could do it
better and cheaper or whether a different private sector
company could do it better. These are fundamental questions but
ones that must be asked if we're going to have any chance of
doing a better job of managing the Federal Government.
Competitive sourcing is about a commitment to better
management. It's a commitment to ensuring that our citizens are
receiving the highest quality service from their government
without regard to whether that job is being done by dedicated
Federal employees or the private sector.
What we care about is competition and the provision of
government service by those best able to do so, be that the
private sector or the government itself. We care about costs,
quality and the availability of service, not who provides it.
The Panel's report is a significant step forward and in
many regards an important guide as this administration moves
forward with overhauling the current process for public-private
competition.
I look forward to continuing to work with this committee
and assessing and making changes to the process.
This concludes my prepared statement, but I look forward to
answering any questions.
Mr. Davis. Thank you, Ms. Styles.
[The prepared statement of Ms. Styles follows:]
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Mr. Davis. Mr. Sikes.
Mr. Sikes. Chairman Davis, Mr. Turner, I'm pleased to be
here today to discuss the results of the Panel, Commercial
Activities Panel, with this subcommittee.
I attended all the Panel meetings as a second chair to
Under Secretary Pete Aldridge and also represented the
Department in the field hearing in San Antonio. I found the
Panel discussions to be open and constructive, with all sides
of a difficult issue being heard.
Frankly, at the beginning of it, I was skeptical that we
would reach meaningful consensus. I believe it is a testament
to Comptroller General Walker that the Panel reached the
conclusions and recommendations that you have before you today.
The Department of Defense fully supports the objectives of
the Panel's recommendations, especially the set of fundamental
principles that were adopted as a framework. Let me emphasize
that these principles were adopted as a framework and not
intended to be applied independently. I've been at a number of
conferences since the Panel's report was issued and find that
the individual principles are often focused on--to support a
specific point of view.
As the report clearly states, the principles are intricate
and extricably linked with one another, and no individual
principle is meant to stand alone.
The current A-76 process is lengthy, complex and
frustrating for everyone. That frustration is an outgrowth of
attempts over time to address legitimate concerns of all
participants, while establishing a level playing field.
The Panel's integrated competition process is a promising
method to improve fairness and reduce the lengthy time
required, and it is clearly consistent with the framework
provided by the principles adopted by the Panel.
The Department is working closely with OMB to help develop
this new process. I think it is important to keep in mind that
the new process will still be a public-private competition and
many of the difficulties inherent in such a competition will
remain. Drafting an accurate work statement, costing the
government proposal will still be challenging, and the
Department is working hard to continue to improve our ability
to do these tasks.
As the Panel report notes, the Department of Defense has by
far the most Federal experience in public-private competitions
and, as recommended, we are working already with other Federal
agencies to show the methodologies that we've developed over a
number of years.
As we work toward this new integrated process, we are also
continuing to review our ongoing competitions and apply lessons
learned from those to improve the ongoing processes. While the
current A-76 competition process is far from perfect, it does
provide a standardized process to determine whether commercial
functions are better performed by DOD employees or by the
private sector. And as difficult as the process can be, the
history of the competitive sourcing program shows that it
consistently generates savings and efficiencies. That is the
power of competition.
My own personal hope for the new process, in addition to
the improvements we expect to see, is that it will at least get
us out of the negative attitude everybody has toward the old
process; and that as much as anything should help speed up
figuring out what the right way to source things in the
Department of Defense are.
I support and look forward to improved public-private
competitive processes as a result of the Panel's findings, and
I stand ready to answer any questions you may have. Thank you,
sir.
Mr. Davis. Thank you very much.
[The prepared statement of Mr. Sikes follows:]
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Mr. Davis. Mr. Soloway.
Mr. Soloway. Thank you, Mr. Chairman, Mr. Turner. I
appreciate the opportunity to testify today.
Let me start by joining the chorus of gratitude for the
Comptroller General. It's true that, without his efforts, the
Panel would not have made as much progress as it did, and he's
to be both congratulated and thanked for his work and his fair
and balanced leadership.
Much has been written and said about the CAP report. In too
many cases, people have drawn the conclusion that the Panel was
hopelessly divided in its views, but such is not the case. As
the Comptroller General has correctly stated, the Panel reached
unanimous agreement on 10 overarching principles that are
balanced and that actually address the major concerns of each
of the stakeholder communities involved.
The logic, common sense and fundamental fairness of these
principles is, I believe, clear to any objective observer. The
principles recognize that competition is the principle driver
of improved efficiency and performance. They recognize the
critical importance of both cost and noncost factors in a SMART
source selection. They recognize that all offerers must be
subject to the same evaluation criteria, the same post-award
performance measurement and the same appeal and protest rights.
They recognize that sourcing is a strategic process that must
take into account a variety of factors including mission
requirements, human capital, budget realities and more.
The principles explicitly state that a public-private
competition must not be mandated merely because both public and
private sectors are able to perform their work, but, rather,
that such decisions must be based on a broader set of criteria.
These principles also represent a stinging rebuke to the
so-called TRAC Act; and, taken as a whole, the message of the
principles is, to paraphrase a slogan of the Federal employee
unions, let them compete in a fair, transparent and strategic
process.
Today, the A-76 process fails to align in almost any way
with these principles, but the Federal Acquisition Regulations,
which are built on the tentative equal rights and equal
responsibility, match up quite well. Thus, the recommendation
of the Panel to eliminate the fatally flawed A-76 and replace
it with an integrated FAR-based process was a logical extension
of the principles to which all panelists agreed.
Unfortunately, since the issuance of the report, too much
of the discussion has been dominated by hyperbole and
uninformed rhetoric. We hear repeatedly the best value, for
instance, is a--the best value accounting is akin to some kind
of unconstrained bazaar. In truth, it is nothing of the sort
but is, rather, a process that affords great flexibility within
the construct of clearly defined and accountable boundaries. It
may not be perfect, after all. Nothing is, but I would suggest
that it is a far sight preferable to the bad old days of low-
balling and cost shootouts and that it is a process available
to virtually all Federal procurements except those conducted
under A-76.
We also hear repeatedly that the FAR-based process is so
new it must be rolled out at a snail's pace. But, as the report
states, the FAR already is the common language of Federal
procurement and already is better understood and more
effectively implemented than A-76. Thus, we start the
implementation of the new process several steps ahead of where
we are today.
We eagerly await OMB's proposed changes to the current
process and hope they will align with the 10 principles agreed
to by the Panel. Time and quality are of the essence, and I
know OMB has been working hard on those changes. It has been 5
months since the Panel's report was delivered, and during those
months we have seen a clear trend in which some government
activities, particularly at DOD, have canceled or significantly
slowed their competition activities. This is partially due to
understandable antipathy toward A-76 and a concurrent hope that
OMB's proposed revisions will create a far more effective means
of conducting these competitions.
There are six basic questions I think regarding the
administration's implementation that need to be considered.
One, does the policy clearly define the government entity
that is submitting a bid? This is a critical and often
overlooked element, but it's essential, since it is the bidder
that must submit a proposal and, if successful, enter into a
binding performance agreement or contract. It is that bidder
who is responsible for performance, and it is that bidder and
only that bidder that can be afforded appeal and protest
rights.
Second, are all bidders, public and private, responding to
the same solicitation and being evaluated on the same criteria?
Third, since GAO and others have made clear that the
government does not know the cost of its own internal
activities, what steps are being taken to ensure that the
government is being held to cost realism standards equal to
those required of the private sector which today is subject to
a much wider array of cost accounting principles, audits and
more?
Does the policy establish clear and appropriate conflict of
interest rules? The GAO has recommended in its most recent
ruling on A-76 cases that the same rules that apply to general
procurements be applied to public-private competitions, and we
would agree.
Five, does the policy create a construct for public
entities to enter into binding performance agreements that, to
the maximum extent possible, mirror a contract?
And, finally, does the policy create a clear and equitable
protest process? Does it define a process of checks and
balances, for instance, for public entities similar to those
faced by companies so as to avoid a universe bogged down by
frivilous protests on every aspect of every procurement?
Only by being able to answer in the affirmative these basic
questions will any implementation achieve the outcomes
envisioned by the Panel's unanimously agreed-to principles. The
bottom line is that the government is the stakeholder that
matters the most, and we have to cut through all of the
parochial rhetoric on all sides and focus only on the
government's best interest.
The Commercial Activities Panel and, indeed, most objective
observers agree that we are at a moment in time when real
change is both possible and essential. The degree to which the
recommendations of the Panel are implemented will have an
enormous impact on the government's interests which are best
served by a competition process that is strategically sound,
fair and transparent. In so doing, the government will be
taking a major step toward optimizing performance and
efficiency on behalf of the American people. The time to act is
now.
Thank you, Mr. Chairman. I'll be happy to answer any
questions.
Mr. Davis. Thank you very much.
[The prepared statement of Mr. Soloway follows:]
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Mr. Davis. Ms. Kelley, thank you for being here.
I'm going to need to swear you in. I've sworn everybody
else in. If you'd just rise with me.
[Witness sworn.]
Mr. Davis. Thank you. Thanks for being with us today.
You're here on time. It's no problem. Just glad to have you
here.
Ms. Kelley. Chairman Davis, Ranking Member Turner, I really
appreciate the opportunity to testify before you today.
Unfortunately, I am here to urge you to reject the package
of changes by the Commercial Activities Panel, as they fail to
improve sourcing policy for Federal employees or for the
taxpayers. The Panel's recommendations should not even begin to
be evaluated until the administration puts the brakes on their
quota-driven outsourcing initiative.
On that subject, I want to thank both you, Chairman Davis,
and you, Congressman Turner, for voting for the Moran-Wolf-
Morella amendment that rejected the administration's approach
to contracting out.
A consistent theme echoed at the Panel hearings was the
need for reliability systems to track the work of government
contractors. The importance of better contractor oversight was
reinforced last summer when the Panel learned that Mellon Bank,
a contractor hired by the IRS, had lost, shredded and removed
70,000 taxpayer checks worth $1.2 billion. Unfortunately, none
of the CAP recommendations would prevent a Mellon-Bank-like
contracting fiasco from happening again.
Despite the lack of oversight of contractors, OMB continues
to force agencies to comply with their arbitrary outsourcing
quotas to open up 425,000 Federal jobs to contractors. OMB
continues to enforce these reckless quotas, even though the
Panel voted unanimously that sourcing policies should, ``avoid
arbitrary FTE or other arbitrary numerical goals.''
To date, the administration still has not articulated its
justification for either the 5 percent, the 10 percent or the
50 percent quotas that they have imposed on agencies. Where is
the data that shows that any quota, that any number for
contracting out Federal employee jobs, with or without
competition, are the right numbers and will lead to savings and
to improved agency performance? Agencies should have the
discretion to determine how best to balance their workloads
with their budgets.
I opposed the final CAP report because of my concerns about
what was missing from the report and because of my concerns
about the risks and the dangers posed by actually implementing
the report's package of recommendations.
For example, in addition to failing to recommend the
implementation of contractor oversight systems, the report does
not ensure Federal employees will be given an opportunity to
prove they can do their jobs more efficiently and at a lower
cost than contractors. Nor does the OMB outsourcing directive.
And the report, again consistent with the OMB outsourcing
quota's directive, ignores the benefits that would be gained by
the taxpayers if Federal employees and their union
representatives had legal standing to protest faulty contract
decisions.
The recommendations to combine a modified FAR part 15 cost
technical tradeoff process, which sounds very complicated, with
a modified A-76 public-private competition process into a new
integrated process while simultaneously forcing agencies to
meet their outsourcing quotas is very, very risky. It's more
complicated than A-76, and it will likely leave taxpayers
picking up the tab to pay contractors for costly services that
they do not need.
Any new government sourcing program or process ought to be
tested on a limited basis, independently reviewed and modified
based on lessons learned. Then if Congress sees the alternative
as superior to A-76, Congress should determine whether or not
it should be authorized governmentwide.
The risks involved in this untested A-76 plus FAR
recommendation are particularly high in light of the
administration's contracting out quotas. The quotas are driving
many agencies to contract out the work to contractors without
first conducting public-private competitions, and some agencies
have hired outside contractors to administer the A-76
competitions since they have this experience.
The only thing OMB has made clear to agencies about
competitive sourcing is that they have to get to 15 percent by
the end of fiscal year 2003 and ultimately get to 50 percent.
Now that OMB is moving ahead to implement one of the CAP's
recommendations, agencies are even more confused on how to meet
the outsourcing quotas. On the one hand, the administration has
told agencies to meet their quotas, either through
privatization without competition or through A-76 competitions.
On the other hand, OMB is saying that A-76 does not work, it
should be put through a shredder, and agencies should now use a
new, untested process. Which one is it?
With or without competitive sourcing, I believe that the
most important action that Congress can take to put some teeth
in the unanimously adopted principles of the Commercial
Activities Panel would be to approve H.R. 721, the TRAC Act.
This would give the taxpayers the accountability that they need
and they expect.
Most importantly, before contracting out any more work,
Congress and the administration should make the necessary
investments in increased agency staffing, resources and better
training. Because when supported with the tools and the
resources that they need to do their jobs, there is no one,
absolutely no one, who can do the work of the Federal
Government better than Federal employees.
Thank you.
Mr. Davis. Thank you very much.
[The prepared statement of Ms. Kelley follows:]
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Mr. Davis. Ms. Simon, thanks for being with us.
Ms. Simon. Thank you.
My name is Jacqueline Simon, and I'm the Public Policy
Director of the----
Mr. Davis. Push the button there. There we go.
Ms. Simon. My name is Jackie Simon, and I'm the Public
Policy Director of the American Federation of Government
Employees. On behalf of the 600,000 Federal employees
represented by AFGE, I thank you, Chairman Davis, for the
opportunity to discuss our concerns about the serious and long-
standing problems in Federal service contracting.
Before I get started, I want to thank both you and
Representative Turner for supporting the Moran-Wolf-Morella
amendment that frees agencies from OMB's privatization quotas.
AFGE National President Harnage asked me to thank you in
particular, Chairman Davis, for your outspoken leadership and
support.
Given that our written statement provides a detailed
critique of the Commercial Activities Panel's report, please
allow me to briefly summarize our views.
The Panel allowed contractors disproportionate
representation. So, naturally, it served up recommendations to
further contractor's interests. The procontractor faction was
unable to make a case for doing away with OMB Circular A-76,
and it failed to make any case at all for replacing it with a
controversial, unproven and subjective FAR-based best value
public-private competition process, which even its advocates
acknowledge may be slower than A-76 and which by all estimates
will result in contracts that are more costly for taxpayers
but, of course, more profitable for contractors.
The Panel's procontractor faction has overplayed the fact
that one part of the CAP report received unanimous support from
the Panel, the principles. But there's much less to this
unanimity than meets the eye. On the one hand, many of the
principles are so bland that they are almost meaningless. On
the other hand, the Panel felt free to either ignore or
contradict the Panel's--its principles and recommendations. But
the Panel is over; and in the real world, the facts are that
the Bush administration has already shown that it will continue
to defy the principles that its representatives on the Panel
endorsed.
For example, Pentagon officials have told the Congress in
no uncertain terms that their objective is to, ``divest,'' all
work they classify as noncore, involving hundreds of thousands
of jobs. Divestiture was defined earlier this year by a DOD
official to mean the, ``transfer of assets to the private
sector and the employees as well.''
At the readiness hearing on the CAP report, the DOD witness
explicitly repudiated the unanimously agreed principle that
ensures Federal employees should have the opportunity to
compete for new work and work that has already been contracted
out.
Another example is high-performing organizations investing
in work force training and encouraging labor management
cooperation in order to improve an agency's delivery of
services. Although the panelists from the Bush administration
voted in favor of the recommendation that included a call for
the establishment of HPOs, don't expect them to see them at any
agency near you any time soon.
OMB's privatization of quotas are another stark example.
Rather than repudiate them per the Panel's principles, OMB
officials are attempting to rationalize them, claiming they're
revising their criteria for success. And of course contractors
assailed Representative Moran for leading the fight to free
agencies from the OMB privatization quotas.
Whatever it might have been, whatever we might want it to
be, the CAP report has become irrelevant. While some clearly
have a stake in burnishing its legacy, it cannot be denied that
the CAP report has not aged very well. OMB is doing what it
wants to do, irrespective of the Panel's principles and
recommendations; DOD is doing what it wants to do, irrespective
of the Panel's principles and recommendations; and contractors
are doing what they want to do, irrespective of the Panel's
principles and recommendations.
And AFGE is going to do what we think is best, continue to
work to ensure that agencies start to track contractor costs,
require public-private competition before work is contracted
out and ensure that Federal employees have chances to compete
for new work and contracted work.
We're pleased, actually, that the focus of our grassroots
efforts on the Senate side have paid off so well. Since they
released the CAP report, we've significantly increased TRAC
cosponsorships and come within one vote of adding a TRAC-like
amendment to the defense authorization bill.
What is relevant, of course, is the OMB rewrite of the
public-private competition process. Although they disagree on
most issues, President Harnage appreciates the willingness of
Administrator Styles to maintain a frank and open dialog, and
we look forward to offering a detailed and well-reasoned
critique whenever OMB's rewrite is made available.
What's also relevant and even more timely are the now
infamous OMB privatization quotas. OMB officials sometimes
insist that the quotas are merely goals, with the implication
that they're not in force, that they just reflect the
administration's wishes. Recently, however, it was brought to
our attention that the OMB privatization quotas are, in fact,
mandatory quotas, not goals.
According to a Coast Guard memo, ``during a governmentwide
conference on competitive sourcing held recently in Washington,
DC, OMB representatives noted that two agencies received force
reductions in FTE during the latest round of budget
submissions. These reductions were directly linked to agency
noncompliance with the President's competitive sourcing
goals.''
If the congressional effort to free agencies from
privatization quotas is successful, OMB officials have
threatened to retaliate by forcing agencies to review for
privatization their entire FAIR Act commercial inventories. As
President Harnage responded, ``those comments are nothing more
than blackmail, a desperate attempt to stave off a bipartisan
effort in Congress to abolish the quotas by threatening to
privatize almost a million Federal employee jobs.''
I would add that the OMB threat shows exactly why the Moran
amendment and the TRAC Act need to be enacted into law as soon
as possible.
Thank you for the opportunity to represent AFGE before your
subcommittee, Chairman Davis. I look forward to attempting to
answer any questions you may have.
Mr. Davis. Jackie, thank you very much.
[The prepared statement of Ms. Simon follows:]
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Mr. Davis. Mr. Wagner, thanks for being with us.
Mr. Wagner. Thank you, Mr. Chairman, Mr. Turner.
Mr. Filteau sends his regrets, and I appreciate the
opportunity to represent him.
The Commercial Activities Panel started with the premise
that, whatever was ultimately recommended, it must support
Federal agency mission objectives, while being fair to all
stakeholders, including government employees, contractors and
the taxpayers.
With this foundation, we unanimously adopted its 10
principles, which embody the concept of fairness by calling for
a clear, transparent process that is consistently applied to
all parties. Fairness is crucial to public-private
competitions. If the process isn't being fair, then the private
sector won't participate. Fairness is also vital when it comes
to the treatment of the government work force, no matter who
wins the competition.
If my company or any other responsible company wins a
public-private competition for a base operations support
contract, we want to hire as many of the existing work force as
possible. There are good workers with a lot to contribute, but
if the public sector employees are dragged through a long
process filled with misinformation and uncertainty, many
workers will find jobs well before the competition is even
decided. It's not in anyone's interest to abuse loyal
government workers.
Similarly, we need a process that encourages the private
sector to compete. Currently, many good government contractors
don't want to spend their scarce bidding proposal resources on
A-76, because, as you mentioned, the process is long, unfair,
uncertain and costly. In my own company, we pass up on many
more A-76 opportunities than we bid, and it's unlikely that
we'll bid more in the future unless the process is changed.
To appreciate how unfair the current A-76 process is,
imagine a nonA-76 procurement in which one special bidder, the
incumbent, gets as many chances as it needs to submit a
technically acceptable proposal. Next, that special bidder
always gets to compete against the best proposal chosen from
among the other bidders, and if the performance level of the
special bidder doesn't match that of the best chosen, then he
gets that proposal change to be brought up to the higher
performance level before any costs are even considered.
Finally, during the cost comparison, the special bidder
gets a 10 percent price advantage. While this may sound
unreasonable, these are the advantages provided to the in-house
team under A-76. It's no wonder that MIOs win half of the
competitions, over half of the competitions.
But back to the guiding principles that were adopted by the
Panel. They led to a logical recommendation which was to shift
it rapidly to a FAR-type process under which all parties
compete under the same set of rules. The FAR embodies a fair
process with clear rules. It has the confidence of government
and industry. And this high level of confidence, combined with
a fair, time-tested process, is the key to encouraging quality
competitive proposals from the private sector.
Shifting to a FAR-based process also addresses several
other key issues. It provides flexibility. You can award based
on best value or on low cost as the need dictates. The FAR
embodies a high degree of accountability for all parties,
public and private alike, with provisions for third-party
audits by agencies like the Defense Contract Audit Agency to
track costs and performance.
A FAR process would allow the public sector to participate
in competitions for work currently performed by contractors as
well as work performed in-house; and since the public sector
would be competing under the same process and would be treated
as a true bidder, they would have the right to protest, just
like a contractor.
Moving to a FAR-based process is neither a radical idea nor
one in which the government lacks experience. The FAR is used
successfully every day by the government to make thousands of
purchase decisions between competitors. We can and should make
it work fairly for competitions involving public sector bids.
In conclusion, the contractor community is not afraid of
competition or accountability. We are subject to intense
competition on FAR-type procurements every day, and we are
subject to routine audits on performance and costs. The
program's recommendation to switch to a FAR-based process
embodies a concept of fairness, accountability, competition, an
approach under which all parties compete under the same set of
time-tested rules.
Thank you, Mr. Chairman and Mr. Turner.
Mr. Davis. Thank you very much.
[The prepared statement of Mr. Filteau follows:]
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Mr. Davis. Let me start with Ms. Kelley and Ms. Simon, just
ask a few questions here. Clearly, a great frustration among
Federal workers is that some of these competitions are just
going outside almost automatically without giving them an
appropriate opportunity.
Those are legitimate concerns that we try to address. My
concern is that we are just not--at the Federal level--and part
of this can be addressed through the civil service system,
making sure that we are recruiting and retaining people
adequately to stay in the Federal work force to keep a work
force that can compete with the private sector, particularly in
the IT area.
This wasn't the case in government 30 years ago. I was a
page up here 30 years ago, you know, when President Kennedy
said, ``Ask not what your country can do for you; ask what you
can do for your country.'' There was a real spirit of coming
into government, working for the government, being a part of
something. I don't detect that same spirit today when I walk
through the halls of some of our agencies, when I talk to kids
that are getting out of college, asking what they are going to
do, that government can effectuate change in the same way and
particularly in the IT section.
You still get that in some of the government regulatory
agencies and some of the legal departments at Justice where
it's still pretty tough to get jobs.
But in some of these IT areas, it seems to me there are
some difficulties in retaining people and even recruiting
people. No. 1 is that the pay differential between the private
sector is very pronounced; and changing that would, in my
opinion, mean revisiting some of the civil service regulations
in terms of how we pay people, what we pay them and not just
raising everybody's pay but maybe making it a little more
select.
Second is training. Who wants to go to a job where you're
not getting trained in being up to date on things that are
going forward? You know, sometimes you'll stay with government,
you'll give it a shot, you'll try to be a part of something
important, but when you're trained for yesterday's jobs and
yesterday's technology and you're not being kept up--and yet,
that is one of the first things that gets cut in government.
This is something we need to work on together. We have
tried honestly through our CERA legislation, through our Tech
Corps, through some of these things to try to get at this, and
maybe we're just getting around it and not working with you
close enough so that we can have an honest discussion over the
best ways we can bring more people into the government. Because
ultimately you can revamp A-76, but if you don't have the in-
house capability and the in-house training, which isn't the
fault of the workers, it's just not going to be competitive,
and for the taxpayers, there's no choice but to send it out.
Frankly, to give taxpayers their best value, it seems to
me, you need to keep a good in-house cadre there, because that
keeps the contractors competitive.
So I think we need to get to that to make this whole
equation work. Otherwise, we can make it FAR-based, we can do
anything we want, and it seems to me you're going to lose
inevitably.
Those are my thoughts going into this, that this is a more
complicated process than just working through A-76, that we
need to look internally at civil service rules, pay rules,
training rules and the like. We've tried to get at it. There's
not a bottomless pit of money that we can put into these, but
there is some additional expenditure of funds that I think can
ultimately save the taxpayers money.
So with that in mind, I'd like to get your reaction to what
I've said from both of you.
Jackie, if you don't feel you want to comment today, we'd
be happy to have you come in and submit something later, but
we're pleased to have you here. You are, as Mr. Walker said, an
important part of this equation. We can't simply outsource
everything and stay competitive and get the government what it
wants, and we want to give you and your workers the tools they
need to be able to compete. Then I think it works for
everybody.
Ultimately, remember this: Our job, my job, is not to help
contractors or unions--it's to get the best value for the
taxpayer dollar and the services we're buying, and we can only
do that if we can have a robust public sector that is trained,
up to date, recruiting the best and brightest, and that's where
we seem to be losing it.
I've talked enough. Let me try to get a reaction from each
of you on that.
Ms. Kelley. Actually, I very much appreciate, Chairman
Davis, your recognizing that this is about so much more than
just a process. All of the things you've said I have written
down because I was going to respond back to you, but you've
covered so many of them----
Because this whole issue of recruiting and retaining the
Federal work force is one--and I know David is sitting next to
me nodding his head, because we've had these conversations many
times.
For me, the issues run a very wide range, many of which
you've touched on. The issues of pay--and I would say that this
competitive sourcing issue and the quotas imposed by OMB are
also a factor that is now out there for those who are looking
to come to the Federal sector and those who are deciding
whether or not to stay, because they are asking themselves the
question if theirs will be one of the 425,000 jobs that the
administration is interested in competitively sourcing outside
of the Federal Government.
On the technology issue, which is I think an area we can
probably all agree on that we see exactly the problems that you
identify. And it is about resources. First of all, the
resources so that the government has the cutting-edge
technology to do its work on, which would then provide the work
force with the cutting-edge technology to maintain those skills
and to be able to stay in competition with the private sector
and the need, I believe, for the government to maintain those
skills. I think it is very risky for the government in any
arena, in any occupation, in any skill, to rely solely on
outside services, rather than maintaining it within the
government to some degree.
I guess the last thing that I would say is NTEU's interest
is in working with you, with Congress on anything that we could
do to help to address this problem. At the moment, the way it
always seems to come down is on the issue of the ability to
pay, whether there are recruiting or retention bonuses or
annual salaries that keep the workers able to stay with the
Federal sector, and that usually comes down to a discussion
around flexibilities that agencies need or have in order to be
able to provide additional compensation to employees.
Over and over again what I see happening is Congress
authorizes flexibilities, whether it's special pay rates or the
ability to pay recruiting, retention, relocation bonuses,
student loan repayments, a lot of really good things are
authorized. What never comes along with that is the
appropriation to give the agencies the resources to do it. Then
the question for them is, if they want to implement it, even
though they agree this is a top priority, they have to take the
resources from somewhere else, and that is--becomes the reason
why very few of these are ever implemented.
So NTEU would welcome the opportunity to figure out how to
not only provide the authorization but the funding to help make
that happen in a way that begins to address the problem that
you so accurately defined.
Mr. Davis. Let me just respond to that in a minute. First
of all, I have opposed the quotas and the goals. I not only
supported the amendment you had offered, I spoke for it. I just
think that's the wrong way to go currently. Now I understand
where the administration comes from. I understand the need to
do that and that's the way to get things moving and the like,
but I think at this point it is so weighted when you go outside
with these. You go to A-76 or whatever, and you lose almost
every time given what we've talked about, not every time, but
it's just very weighted until we make some of these other
changes.
Second, I used to work for a government contractor and I
will tell you this: I was general counsel, I was a Senior Vice
President and we were $1 billion a year company and our most
important asset in that company was our employees who walked
out the door every night. And we did everything we could to
make sure our employees came back the next day because that was
our asset. It wasn't our building. It wasn't our computers. It
was our people. And if our people left the company it went
under. Everybody in the private sector understands that, but
government doesn't seem to appreciate it. And until we can
change the culture where we recognize that our employees are
the way that we can become efficient on behalf of our taxpayers
in an investment, and their training and their recruitment and
their retention is really dollars saved, something the private
sector--we always talk about copying what the private sector is
doing--we're in the same boat. So a lot of your concerns I
understand and I empathize with. Unfortunately, for the short-
term, in terms of, for example, with homeland security and
other areas trying to get things done quickly, we're not up to
snuff. We need to work on doing that. And I think as we do that
some of these other areas that you expressed concern I think
are going to be easier to resolve. But I understand it is kind
of weighted against you as you look at it. At least that's my
opinion.
I appreciate your comments, Jackie, and I didn't mean to
interrupt you.
Ms. Simon. I wanted to take this opportunity to join in the
congratulations to Mr. Walker because AFGE has certainly
appreciated the attention what he calls the human capital
crises has gotten ever since GAO began talking about this
problem. AFGE considers this human capital crisis, however, to
be self inflicted in the Federal Government. It's not something
that we didn't all understand when it was happening. It's the
result of downsizing and contracting out. And as Colleen Kelley
just mentioned, the single most important thing we believe that
the Federal Government could do would be to get rid of the
privatization quotas. At best it sends a mixed message to the
employees the Federal Government would like to recruit or
retain by telling them that they have a 50-50 chance of losing
their job and even less 50-50 chance of having the opportunity
to compete to defend that job.
A couple of things have recently occurred, and I won't even
talk about the homeland security debate. That's certainly been
rather demoralizing for many Federal employees to have their
loyalty and fitness questioned and it's really been
unfortunate. But one step that the Office of Personnel
Management has recently taken to try to make the Federal
Government a more attractive employer is to establish flexible
spending accounts to help Federal employees pay for their
health insurance costs. And while this is a positive
development and a good thing and will probably save some
Federal employees some money, we have recently read in the
press that OPM has already decided that it will contract out
all that work, the work in administering, setting up and
keeping track of those flexible spending accounts. Now the
employees at OPM have the skills and ability. OPM is certainly
set up to do that kind of work. They do that kind of work in
other areas of Federal employee compensation. And the decision
has been made apparently unilaterally not to give the employees
the opportunity to compete for new work, and we hear that all
the time, and in particular, as you mentioned, in the area of
IT, interesting, exciting, challenging new work that would keep
them on the cutting edge of new technology. When new work is
taken on by an agency it's automatically contracted out and the
existing work force is virtually never given an opportunity to
compete to do it or to do it automatically like the contractors
are. And I think that and the quotas are the two biggest
problems facing the Federal work force when it comes to
motivating and making them feel as though they are valued
assets.
Mr. Davis. Again, beefed up Federal work force, a better
trained, prepared, recruited Federal work force may or may not
win the competition but it just sharpens the level of
competition.
Ms. Simon. What is most demoralizing, to be honest, is the
knowledge and repeated experience of being precluded from the
opportunity either to compete in defense of their jobs or to
compete ever for new work.
Mr. Davis. You are talking about the jobs that go out that
don't go through the A-76 in some cases?
Ms. Simon. That's the other thing I was going to hand you
here. We hear a lot of denials that the President's competitive
sourcing agenda is really--is about something other than
competition. I have just as an example the U.S. Department of
Agriculture's plan that it submitted to OMB for how it expects
to comply with those quotas. And it's, you know, page after
page after page of work unit after work unit after work unit, 5
and 10 and 15, 20, 7 and 6 and 4, perfectly innocent Federal
employees doing their jobs. No one is alleging that they aren't
doing their jobs well or efficiently, that they aren't the low
cost, high quality provider, but merely to comply with these
quotas they are going to lose their jobs. And here it is page
after page of a virtual firing squad.
Mr. Davis. For the record, Mr. Turner and I have some
concerns about the quotas. On the other hand, I think we have
to find the right balance. Mr. Walker.
Mr. Walker. If I can, to comment on several----
Mr. Davis. I am off script here.
Mr. Walker. It is free flowing anyway. First, I believe the
administration's current quotas, targets, call it whatever you
want, violates the principles, because they are arbitrary. I
understand that the administration came up with it during the
campaign and I am sure the President and his team feel some
obligation to try to deliver on campaign promises, but it's
fairly clear that there was not a considered, thoughtful
process that resulted in the determination of those
percentages. And I think the key word is arbitrary. At the same
point time it is possible and I would argue appropriate for
this administration and any administration to undertake a
considered review and analysis of functions and activities that
based upon, you know, past practice in the government or based
upon prevailing practice for large enterprises, whether they be
public sector, private sector, not-for-profit sector or based
upon past experience, it makes sense to consider competitive
sourcing.
The one example on FSA, if I can give it, I have got a lot
of experience in the benefits area both in the government as
well as the private sector, and the simple fact of the matter
is this FSA is a plus. I think it will help employees. It will
help them save some money by being able to pay for some things
with pretax dollars rather than after tax dollars. That's a
plus. But I think you'll find if you did an analysis that most
major employers out source this work and it's not something
that's currently being done within the public sector. And it is
not just a matter of whether or not the people have the skill
and the abilities to do it. I don't think there's any doubt
about that. We have a lot of great people in the government,
but it's also the systems. There are many entities out there
that already have systems. They're already running. They've got
many, many different people that they are providing these
services to. And part of the question is do you want to stand
up those kinds of systems and do you have the excess capacity
there that would be available to do that type of work.
So I mean I do think there are clearly circumstances in
which Federal employees have the ability and should have the
opportunity to compete for new work and potentially bring work
back in, but I think it's facts and circumstances. It's not
across the board.
Mr. Soloway. Since we are having a free flow discussion,
just a couple thoughts on what Mr. Walker just said on a very
critical point and I think it's worthy of expanding a little
bit, and that is maybe separating out some of the differences
between a private sector company, whether it's a government
contractor or not, and the way the government views these
issues when we talk about human capital roles and missions, if
you will, in a company. In the private sector, high performing
company--and I think this is what Mr. Walker was referring to,
there is a big separation, an understanding of the separation
between a core competency and a core requirement. A core
requirement is to provide benefits to my employees. It may not
be the competency of my company. That is one of the reasons
that the government does not compete as well for people.
For instance, when information technology workers go to
work for an IT company they are part of the core competency of
that company. They are the fundamental mission of that company.
Therefore, they are likelier to get greater support and
professional development, greater benefits, the kinds of things
that make work quality so important, whereas in the government
by and large information technology positions are support
functions and they never compete well in a resource constrained
environment, be it in the public or private sector, for the
kind of investment dollars you're talking about.
Mr. Davis. But you would admit that the government can do a
better job, particularly in the procurement side, of getting a
little bit more competency within it. I don't disagree with
what you're saying, but we can do a better job.
Mr. Soloway. Absolutely, and I would agree that the
government needs to always retain a residual capability to
understand the supply base, manage and apply the solutions and
so forth. But my point would be that pay and all of those kinds
of benefits level issues are critical and certainly the Federal
work force deserves that support, but that in and of itself
will not solve the recruiting and retention problem.
The last two points I'll make very quickly. We have to be
very careful not to assign the human capital crises to
outsourcing and contracting out because frankly the data
doesn't support that at all relative to employment reductions
in the civilian agencies as compared to contracting out. And I
think the human capital crises is a crises faced not only in
government but in many industry sectors where we simply have an
aging work force.
And the final thing is on the quotas. I would like to be
very clear about this--the so-called quotas. This is one of the
few areas where I disagree with Mr. Walker and it's an area
that many members of the panel are in disagreement on. It was
never specifically discussed or debated on the panel. And there
are those of us who believe that the principle that speaks to
arbitrary quotas and numerical goals actually does not speak to
the administration's plan because I think there is a big
difference between an arbitrary plan that presumes the outcome;
in other words, it presumes you are going to out source, it
presumes you're going to in source by a goal for performance.
And we set performance goals all the time.
So I think it's for the record important to note that the
panel was not unanimous at all in its view that particular
principle was intended as or was in fact a direct criticism of
the administration's goals. That is a matter that has been of
some discussion.
Mr. Walker. If I can, Mr. Chairman, it is fair and accurate
to say that the panel did not explicitly address the
administration's goals, quotas, target, whatever, but I believe
in substance over form and I think substance speaks for itself.
Ms. Styles. I would like to take an opportunity to clarify
what is a tremendous amount of confusion and misrepresentation
about our goals. First, it's an aggregate 15 percent
governmentwide goal. It's not 15 percent at each agency. There
is not a single one of the 26 departments and agencies that
have come in to me with a plan, a reasonable and rational plan
that is something other than 15 percent that represents good
management and a good thing for the agency that I've said, no,
sorry, you are going to have to compete 15 percent. We have
applied our goals for competitive sourcing in a manner to build
infrastructure at the departments and agencies for public-
private competition. I have agencies that over the next couple
of years have said I am going to look at public-private
competition for 7.5 percent for what I have in House and 7.5
percent of what I have contracted out. I have departments and
agencies that are at 10 percent over 3 years. Each and every
plan is tailored specifically for the needs of each and every
agency and their specific circumstances.
On the direct conversion, there have been representations
here that there are agencies out there that are going to
directly convert everything to meet these goals. Not a single
one. Not a single one that I know of. The Department of
Agriculture plan that was represented here, they came in with
that plan and we said absolutely not. That's not what we are
about. We are about competition and we are not about meeting
these goals through direct conversions.
Mr. Davis. Let me make one other comment and just address
this to Ms. Kelley and Ms. Simon. We had a conversation on what
we agree on. But let me just tell you what I've tried to do to
help along, just marginally, the issues we've talked about. We
have our Services Acquisition bill, our digital Tech Corps, our
Acquisition Work Force Exchange Program. Our recruiting and
retention efforts in our CERA bill in particular, I think, will
be very, very helpful to employees and we haven't been able to
get support from you on that. I know there's a lot of
suspicion. I know there are other issues on that. But I think
we need to try to work together and where you don't agree
figure how we can make this go. This is complicated. There's a
lot of mistrust on all sides of the table. I recognize that.
I'm a big boy. I have been here awhile and probably will be
here a little longer. These are issues that we have to have a
serious, dispassionate discussion about. And I think, Mr.
Walker, you made a good start with this panel that you put
together where you got everybody around the table and so on. If
we could sit here and quit gaming it and just sit down--we have
a number of areas we do agree on. That's a great starting
point. We need to focus on some of the areas that you didn't
discuss here that, if we could add pieces to that on work force
training and recruiting and retention issues we've talked
about, they might feel a little bit better about some of the
other issues that you and Ms. Styles have addressed. And also,
the staff reminds me of this, that 60 percent of the A-76 stay
in government. 60 percent of the competition. So it's not
completely weighted but I still think we need work on the items
we've discussed. And I appreciate the union representatives
articulating that eloquently.
I'm way over my time. I am going to yield to Mr. Turner,
but I will get back to my script on the next round.
Mr. Turner. Thank you, Mr. Chairman. Mr. Walker, I want to
inquire of you and perhaps other panel members would comment on
one of the recommendations which as I understand was not
universally accepted by the panel but was a part of the panel's
recommendations; that is, to encourage development of high
performing organizations. Tell me a little bit about what that
concept was and perhaps those who had concerns about it could
share with me their concerns.
Mr. Walker. It's a concept that quite frankly I and, you
know, Bobby Harnage really talked about early on in the process
and that is that while the administration is very committed to
the concept of competitive sourcing as a means to try to
achieve, you know, best taxpayer value as they would say, my
view is and that is in the end what we're looking for, as both
of you have said, we're looking for the best answer for the
taxpayers. And in doing that we have to recognize that a vast
majority of government will never be subject to public-private
competition. And therefore what are we going to do with that
vast majority of government that will be--where it never will
be subject to public-private competition. How are we going to
try to make them high performing organizations, what can be
done to do that? But as a supplement to that to the extent that
there are certain functions or activities that might at some
point in time be subject to public-private competition, might
we provide them to have an opportunity to take advantage of
this high performing opportunity concept to see if they can
deliver under that and not get a permanent pass from
competitive processes, but to get some type of temporary stay
from competitive processes if they end up, you know, committing
to and delivering on certain key objectives in advance, whether
they be performance objectives, cost objectives or whatever
else?
And let me also say, I couldn't agree more that we have to
keep this in context. Our biggest problem is what are we going
to do to attract and retain a qualified and motivated work
force. And this is a subset of a much bigger issue and we've
got to make sure that we're also taking steps not only to deal
with this controversial area but to deal with the more
fundamental problem, which is what we are going to do to
accomplish that broad objective, because over time if we don't,
the decks are really going to be unfairly stacked just because
of erosion in government's capacity and capabilities over the
years to be able to effectively compete.
Mr. Turner. Clearly to have a high performing organization
you're saying you have to have a trained and competent work
force and you have to figure out how to recruit it, train it
and retain it. What else is in the concept of a high performing
organization?
Mr. Walker. It's the concept that you would end up
providing not only some financial resources to try to be able
to help the function or activity or agency or entity be able to
become a high performing entity, but second, you would also
provide access to technical expertise, that there would be
individuals who would have requisite expertise with regard to
people process technology issues, change management issues,
etc., to try to help determine what needs to be done and most
importantly to get it done, because in most things in the
public-private, not-for-profit sector the difference between
success and failure is not the plan, it's the implementation of
the plan. Ninety percent of success or failure is based on
implementation. And so people need support both as it relates
to resources, as it relates to expertise, training, other types
of activities.
Mr. Turner. The high performing organization--is the
concept then to select certain agencies or subsets of agencies
and apply management principles and techniques to evaluation of
the performance of that particular organization that is
selected and then to implement those? Is that the concept?
Mr. Walker. Basically. And obviously there's a capacity
problem. I mean you can't have every department and agency
doing this at once. It's got to be something that you end up
doing, you know, in some considered fashion and, you know,
possibly on some type of an installment basis looking for the
best targets of opportunity, matching resources to where you
think you're going to get the best results.
Mr. Turner. Do you envision a special team of managers with
expertise being available to the various agencies when they are
selected and they come in and they begin to evaluate it and
determine what changes need to be made within that agency?
Mr. Walker. Without getting into too much detail, I
envision there could be individuals that are Federal employees
who have skills, knowledge and abilities in this area as well
as contractors who have skills, knowledge and abilities and
experience in this area who could end up being made available
to provide assistance to the targeted, you know, entities,
functions or activities.
Mr. Turner. And I gather that the concept that you're
referring to is not universally accepted by the panel members,
and I would like to hear from someone who saw some
difficulties.
Mr. Walker. Let me mention one thing and let Jackie speak.
We voted on the additional recommendations as a package. And
while the vote on that was 8 to 4, my personal opinion is the
reason the vote was 8 to 4 was not as much concern over this
HPO concern, but it is because we voted on it as a package, and
of course Jackie can speak for AFGE and Colleen for NTEU, etc.,
but my sense was that the concerns that caused them to vote no
was not this. It was the issue of the FAR-based process and how
many times Congress should be required to act. I mean that's my
understanding, but they can speak for themselves.
Ms. Simon. There are sort of two aspects of the HPO issue.
First, President Harnage would like to say that MEOs shouldn't
be something that Federal agencies aspire to only when they
have a gun to their head, the gun being the threat of losing
the work to the private sector. But if you situate the issue of
MEOs or high performing organizations in the larger context of
contracting out, which is where we were discussing this idea,
it's part of the shift. Once upon a time, privatization and
contracting out were advocated as a way of saving the
government money. The idea was that the government was too
expensive and the private sector could do the job less
expensively. And for a while, you know, that was sort of the
reigning argument and the reigning ideology in favor of
contracting out. But the problem with that was first, as
Chairman Davis indicated, using a cost based process for
public-private competition, the contractors lost most of the
time when cost was the criterion that decided whether something
would stay in-house or go to contract. And then when the work
did go out the door and did go to contractors, when cost was
the criterion for deciding, the resulting contracts were not as
profitable as the contractors wanted them to be. Consequently,
when we were discussing a new way of deciding whether work
should be contracted out and on what the criteria would be for
selecting which source and the criteria for selecting which
contractor was going to be something other than cost, the new
rhetoric was the private sector was better, was more
technologically adept and more modern and more competent. And
then that raised the question of, well, why is that the case?
And you know, the discussion--there's a few factors that we
could cite but certainly one of them was what Mr. Walker was
just describing, is the fact that those agencies are
constrained by Federal budgeting processes when it comes to
hiring necessary personnel because of FTE ceilings even though
they are illegal. And in the Department of Defense they are
still certainly practiced. And the fact that the government is
prohibited from making large capital expenditures even when
that's the necessary--to get the new technology that's needed
to perform at a very high level. And consequently, this concept
of HPOs was developed. And part of the HPO concept that was
controversial on the panel, not from our perspective--we
supported this--was the idea that while an agency or an office
had been designated as an HPO, it would have a break from being
subjected to the privatization quotas and it would allow the
workers in that office or agency to focus on the agency's
mission and the work at hand rather than spending so much time
and energy figuring how to comply with quotas or engage in
competition.
Mr. Soloway. Mr. Turner, as one who supported the
recommendations and certainly agree with everything Mr. Walker
just said in terms of the lay down of how the debate went and
sort of the issues that were in play, there were a couple of
areas some of us were concerned about with regard to HPOs but
not enough to have us certainly oppose the concept because it's
a very logical, common sense approach. There are really two
core issues, one of which Jackie just touched on in her history
lesson, which is the question of are we going to have a process
where we have commercial activities that are going through an
HPO process of some kind and using it as an excuse not to
optimize as opposed to improve. And the report is fairly clear
that competition is the principal driver of top optimal
efficiency. So there was that issue. And the other point, even
perhaps more important to that, and Mr. Walker touched on this
in his answer, and that is that with all of the work being done
in government and the amount of government activity that would
never be considered for competition, appropriately not
considered appropriate for government competition--some of us
think that the HPO is best focused there because you are never
going to have the management tool of competition there and
therefore where you have other alternatives where competition,
for instance, can exist, you don't necessarily need to focus on
what will be limited resources, as Mr. Walker said, in an HPO.
You need to focus those limited resources where you're never
going to have competition. It's not a religious or
philosophical difference. It's just more of an implementation
question of where the emphasis ought to go.
Ms. Kelley. Mr. Turner, if I could add, from NTEU's
perspective, it's pretty hard not to support the concept of
high performing organizations, and in fact we do. I wish there
was more emphasis on it outside of the discussions around the
commercial activities panel because if every agency in fact
were given the resources and the support to strive for that,
then the--and if part of that was that agencies were able to
retain some or all of the savings that they recognize by in
fact becoming a high performing organization, then that would
be the incentive and the competition, whatever you want to call
it, that I think would help to lead agencies to be able to
actually reach that level without determining whether or not
it's going to be competitively sourced or out sourced or
contracted out, or whatever the words are. And so NTEU supports
that. That was not an issue on our vote to not support the
panel. It was about quotas. It was about standing. It was about
a governmentwide roll-out of a new system rather than something
that would be tested first. Those were our issues on the panel.
Mr. Turner. Well, I think the concept certainly deserves
our attention. It certainly seems to go to the heart of
creating a more efficient Federal Government, and I hope we'll
have the opportunity to pursue that further. Thank you, Mr.
Chairman.
Mr. Davis. Thank you very much. Let me get back on my
script here. The panel endorsed the consideration of both cost
and non-cost factors. This is really for anybody who wants to
comment. The panel endorsed the consideration of both cost and
non-cost factors in making source selections in public-private
competition. Are there any instances in which such an approach
would not be appropriate? Why would the government not want to
consider technical past performance, innovation management
approach and other such non-cost factors? Anybody want to take
that?
Ms. Styles. I think it's important to clarify here that
costs from our perspective--cost is never, never the only
consideration. Whether it's our procurement process or an A-76
competition, whether it's the old one or the new we're
developing, it's never exclusively a cost determination. If
somebody can't meet the technical qualifications to do the
work, they shouldn't and I hope they aren't doing the work. My
best example is custodial and lawn maintenance services in our
minds, whether it's now or going forward, shouldn't be subject
to cost-technical tradeoffs. We should be buying those based on
lowest costs. But they do have to make a determination that
those kinds of things are technically acceptable, you know, you
have the ability to mow the lawn, you have the equipment, that
type of thing.
Mr. Sikes. I would add to that since DOD is the one that is
limited to cost by statute that I would agree totally with what
Angela said. We found that we've gone to cost-technical
tradeoff when it gets really complex because we find we're not
getting the best value to the government if the true innovation
of whoever is coming to bid is not able to be taken into
account. In effect, sometimes the competition gets skewed away
from that because we don't look at it. Cost is always going to
be there and we have ways we can do that in the simpler
custodial kinds of things. It gets difficult when we start
talking about some of the complex functions we're looking at
now.
Ms. Kelley. From NTEU's perspective there are two issues
that concern us and it has to do with one, a level playing
field for the Federal employees who currently do the work. If
the innovation which we are not opposed to nor are the Federal
employees opposed to, if they don't have the resources or
technology to be in that level playing field as the bar gets
raised, that's a concern. And also there's a concern as to
whether or not in fact the services being provided would have
what some might call bells and whistles that the taxpayers
don't need and could end up paying for services that are
actually over and above what in fact the taxpayers do need. I
don't have a specific example--I wish I did--that I could give
you in our experience in working with the A-76 process, but I
know that my concerns were not put to rest in our year long
discussions that we had on the commercial activities panel. So
seeing it actually play out and until I can see it play out
where those issues are eliminated, they will continue to be
concerns for NTEU.
Mr. Soloway. Mr. Chairman, we have a long experience with
what Angela referred to as cost-technical tradeoff or best
value judgments in Federal procurement. I think there are two
critical issues here. One is that under the A-76 process there
can be a best value determination made but only in the
evaluation of the private sector bidders. It does not apply to
the government bidder. So there's a fundamental inequity when
you have a whole set of factors that you apply to one side that
are not then applied to the other. That is one of the
inequities of a FAR-based process where everybody is subject to
the same evaluation, criteria and so forth would be addressed.
The second thing that's important to note is that we
sometimes presume that you either have a best value competition
or you have a cost competition, but in the Federal acquisition
legislation best value really encompasses virtually all
categories of procurement with the exception of things like a
sealed bid where we wouldn't get into that. But it is either--
it can be a low cost, technically acceptable decision and go
all the way up the spectrum to very high end, high technology
R&D kinds of environments where cost becomes very secondary
because you are really looking for unique technical skills or
what have you. But the best value construct underneath it
exists all of these varying alternatives that we're talking
about and the whole concept is that you would design your
acquisition strategy to meet your requirement rather than being
locked in as you are in A-76 to effectively a cost only
decision.
Mr. Wagner. Stan was right. Currently the A-76 process
forces the MEO to produce a low cost, technically acceptable
bid and actually I think puts a wet towel on their ability to
innovate. The beauty of the FAR is that it allows you the
flexibility. If the particular service that you are procuring
is the type that you want to buy in a low cost technically
acceptable process, then the buyer may want to take that
approach. They have the flexibility to go to best value or
anything in between in terms of tradeoffs and percentages,
including past performance and other criteria, whether they be
management or technical things to consider in there. The beauty
of the FAR-based process is that it will allow the MEO to
actually propose best value solutions if that's the way the
procurement is designed because that's the best solution for
whatever the complexity--if the particular service they are
buying is complex. And sometimes they can be. Sometimes you can
have grass mowing along with some IT services bundled into it.
You could have a whole lot of different services put together
to make a relatively complex procurement.
Mr. Sikes. Following on my two former DOD colleagues, I can
guarantee you this is essential to the discussion of the
integrated process because we worked for a long time with the
separate process to figure out how to deal with that. And no
matter what we did, everybody thought we were skewing it the
other way. So it's sort of what they used to call a second bite
of the apple. We were trying to level it, but whoever thought
they were going to lose figured we were just skewing it one way
or the other. The integrated process should hopefully allow us
a way to do that at once so it's obvious that we are treating
everybody fairly.
Ms. Simon. Chairman Davis, in our written testimony we
offer a very long and detailed critique of the FAR-based best
value process and its subjectivity. And I am really happy about
this discussion here today because it's very different from the
last hearing on the CAP panel where it seemed--the implication
seemed to be that A-76 lacked a mechanism for considering
quality and was only a cost-based process. But one of the
things I think is really important to point out with the FAR-
based process is it takes away from the government or certainly
allows the government to divest itself of the responsibility
for determining what quality standards the government wants in
its purchase. Although the government needs to reveal in its
request for proposals whether cost or technical factors will
predominate, they don't have to reveal by how much and they
don't have to reveal which cost or technical factors will have
what weights assigned to them prior to the offeror submitting
that proposals.
And I would also like to quote Marshall Doke, a very well
known conservative legal scholar actually from Texas. He is
very prominent in the Texas Republican Party. He has written at
length on the shortcomings of the FAR-based best value process.
And I will quote him here briefly. He says it's a popular
misconception that a low price means low quality. If you're
buying or selling gold and specify 98 percent purity, the price
is irrelevant to quality if you specify the purity required and
inspect to ensure that the product conforms and reject any
nonconforming products. The problem with the FAR is that all
those standards aren't required to be revealed until after the
proposals have been submitted and it's really ultimately a very
anticompetitive process.
And one other point about the FAR-based best value. A lot
of times contractors say they are very comfortable with it
because it's widely used in private-private competition,
competition between contractors. And although it has some
problems in that area that I really can't speak to here, one
thing that can be said is that when it's private-private
competition, you can't have any kind of systematic bias in
favor of one group at the expense of another. Contractors will
be competing between one another and a contractor--one
contractor will win but the loser will also be a contractor.
But in the context we're living in where there's such
tremendous political pressure to privatize, agency officials
are under tremendous pressure to use the discretion that the
FAR process gives them to exercise a bias against Federal
employees and in favor of contractors. And that's one of the
most important problems with the FAR approach to best value.
Mr. Walker. First, it's not that A-76 doesn't provide for
considering something other than cost. It's just not dynamic
enough. Second, A-76 does not provide for a level playing
field. A-76 is not consistent with the principles adopted by
the panel. At the same point--existing A-76. At the same time
the panel recommended modifications to A-76 and it did not
expressly recommend repeal of A-76, I might note. It said that
we needed to move to a new integrated FAR-based process that
was consistent with the principles, it had a level playing
field. Had to modify A-76 in part to be able to handle the
transition period and in part possibly there are some
circumstances where it makes sense where it's not highly
sophisticated and it's not highly technical and where cost is a
primary driver and where you don't need the dynamic interchange
on technology and certain other things. I think when you get
right down to it there's three kinds of businesses we're
talking about here just cutting through it, thinking about the
panelists. You've got core that the government should do that
should not be out sourced, and without getting into the debate
of what that is, all right, that's one reason you need HPOs.
There's a lot of that, tremendous amount of that.
Second, you have noncore that's new. It's new. The
government may or may not have people who could do it, they may
or may not have the technology available, they may or may not
have the excess capacity. And in that kind of situation more
likely than not it's probably going to be done externally. And
you have noncore or gray areas where we do have government
workers working. And one of the real fairness issues that I
think people are touching on but not raising directly is that
sometimes you need investments in technology and sometimes you
need investment in training and development in order for the
work force to be able to effectively compete. And candidly the
way our budget system works, it doesn't facilitate that always,
you know the fact that we don't have a capital budgeting
concept and the fact that things are done based on cash-flow
and not based on economical value added or discounted present
value concepts. So as a result that ends up leading in certain
circumstances to perverse decisions.
But last thing is, I think words matter. I think A-76 has
got a lot of baggage. Rightly or wrongly, I think best value
has a lot of baggage, too. I think what we're talking about
here is what's the best choice, what's the best choice for the
taxpayer, which is a lot more dynamic term. It considers
whether or not we ought to ever think about it going outside
the government or not as well as all these other factors that
we're talking about.
Thank you.
Mr. Davis. Ms. Simon, let me ask you a question. In your
statement you made it clear that you object to the use of any
FAR-based, best-value type process for public-private
competitions. But I was puzzled to find no mention of the FAR-
based process that DOD has used over the past decade and-a-half
or so for its depot-level workloads. As I understand it, that
process has evolved over the years from one that used the
standard FAR-based value selection process in the late 1980's
and early 1990's, to a more limited best value process based on
the assignment of dollar values to technical aspects of the
proposals. Also, as I understand it, in the most recent
competitions using this process, the public sector either won
outright or its proposals submitted in conjunction with the
private sector partner were selected. These awards were quite
substantial, in the realm of hundreds of millions of dollars up
to over $10 billion.
I guess my question is, and if you don't want to answer it
today you can get back to us, but try to understand this as we
move and try to iron out where the administration is coming
from with their FAR-based proposals. Have you studied the DOD
FAR-based depot competition process? What specific objection,
if any, do you have to the DOD competition process and do you
think the experience gained with this process would be valuable
in implementing the panel's recommendation for a FAR-based
process?
Ms. Simon. I would like to answer you later in writing.
Mr. Davis. It's not a trick question, but we all want to
understand what works for you.
Ms. Simon. Just responding now, you know, the FAR allows
both best value and cost-based decisions. And it sounds like
you're referring to a procedure for assigning costs to quality
differences that are sometimes called dollarization. And one of
the principles that AFGE certainly sought in the panel and has
continued to advocate is that additions in public-private
competition should always be cost based. We are no more wedded
to A-76 than anybody else, although for very different reasons.
I think there was one reason that all of the panelists agreed--
one area of A-76 that everyone agreed A-76 needed improvement
in, and that was the area of how time consuming it was and how
slow a process it was. And although the FAR-based best value,
as is acknowledged in the report, will certainly be no faster
than A-76, we have always been open to changes in A-76 that
would make it faster and we have been open to wholly new
approaches that were in the end cost based.
Mr. Davis. You might want to supplement. If anything, this
panel showed that everybody is prepared and there is a lot at
stake obviously for the individual constituencies here. Ms.
Styles, let me ask this. The panel recommended that OMB make
limited changes to the existing A-76 process and outlined a
number of potential changes. Can you share with us what changes
you anticipate making and will you be making more changes, do
you think, in addition to the ones included in the panel's
report, and what's the time period you think before any changes
could be implemented?
Ms. Styles. We have really over the past several months
taken kind of a top to bottom review of A-76 and we have
completely overhauled it. We are ready very soon to cancel the
existing circular and come out with an entirely new circular
and reissue it as a new document. We are going to be folding in
a couple things. We are folding in another circular A-97 which
deals with sales to and from State and local governments. We're
also folding in a policy letter 92-1 on what's inherently
governmental and what's commercial. So you are going to be
seeing very shortly, and it's in final clearance right now, I
would expect by the end of October, a draft proposal with some
very significant, substantive changes to the circular itself.
They are coming out in draft. We're going to have a 45-day
notice and comment period. Then we'll take some time after that
to assess the comments we received.
But I think what you're going to see is some real needed
changes to this circular. It's been a document that's been
around for 50 years. People kept tacking things on to it and
changing them without consistency. So you are going to see a
readable document, one that makes sense, one that reads well.
When I was reading the old circular, I came upon the word
``privatization,'' and I thought and thought and thought and
I'm like I've never seen privatization in the circular. Why is
it defined here in the definitions? Turns out I did a search
and privatization was never used in the circular. So there are
a lot of strange inconsistencies that we've cleaned up.
Specifically, some of the things that were recommended, I think
all of our changes are consistent with the recommendations of
the panel. There's going to be some issues that people are
probably going to argue about, whether they're consistent or
not. There are a few things that were recommended in changes to
the A-76 process itself that we've definitively adopted,
strengthening the good business practices by eliminating even
any appearances of conflict of interest between the MEO and the
PWF, implementing some tools for aggressive enforcement of the
process, including better pre and post-award reviews, audits
and inspections. You will see an adoption of the integrated
process. You'll also see an overlay of many of our FAR
processes that we have for consideration of the solicitation,
of the award, of how bids are treated.
I think you will see this as a document that people in the
acquisition field will understand and can use to a much better
extent than the current circular.
Mr. Davis. Anything further?
Mr. Wagner. Could I add one last thing. I think Mr. Walker
said it best when he said what's really important is the best
choice. You get to the best choice through competition, through
good, rigorous competition, where the best come to play and
compete. At the end of the day whatever process OFPP will come
up with, and I hope it will be a good one, it's got to be one
that the private sector is willing to compete in vigorously and
good companies coming in and getting good quality proposals
because on a public-private competition, the public sector will
be there every time. If you don't have a process that is not
attracting the best in the private sector, the government and
the taxpayer are going to be cheated out of getting the best
choice ultimately.
Mr. Davis. Let me say, the nub of this is we need to do two
things. One is bring in the best from the private sector to
compete and try to beef up our public sector and make sure that
we can continue giving them the tools so they can be even
sharper than they are now. If we do that, taxpayers won't lose
and at the end of the day that's what we are about.
I want to take a moment to thank everybody for attending
the hearing today. A lot of thoughtful testimony, not all in
agreement of course, but that's why we are here; to try to
solicit comments. I want to thank Congressman Turner for
participating and thank staff for organizing this. I think it's
been very productive and I'm going to enter into the record the
briefing memo distributed to subcommittee members. We'll hold
the record open for 2 weeks from this date for those who want
to forward submissions for possible inclusion on some of the
questions or afterthoughts that you may have.
Thank you very much and the proceedings are closed.
[Whereupon, at 3:20 p.m., the subcommittee was adjourned.]
[Additional information submitted for the hearing record
follows:]
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