[Congressional Record Volume 143, Number 79 (Monday, June 9, 1997)]
[Senate]
[Pages S5390-S5392]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FREEDOM FROM GOVERNMENT COMPETITION ACT
Mr. THOMAS. Mr. President, I come to the floor today to talk about a
problem that I think we have in this country in terms of the
organization of Government, in terms of the future role of Government,
in terms of where we want to be with respect to Government and the
private sector, and specifically Government's competition with the
private sector. This competition, of course, takes many forms, but the
basic premise is that the Federal Government provides commercial goods
and services in-house instead of going to the private sector and
contracting out for these needs. This is called insourcing, and it
leads to larger
[[Page S5391]]
and larger Government. It is my view that given limited Federal
resources we ought to set priorities as to where we spend money and
find ways to meet these commercial needs more reasonably, more
efficiently by contracting.
Insourcing, of course, tends to stifle job creation in the private
sector. It weakens economic growth. It erodes the tax base, of course.
It hurts small businesses and costs taxpayers money.
There is a great deal of talk that goes on in this country about
downsizing, about reinventing Government, but the fact is very little
of that actually goes on. The Clinton administration has talked some
about how there are fewer employees in the Federal Government than
there used to be, but almost all of that is a result of base closures
in the Department of Defense and RTC when it finished its work with
regard to the savings and loan scandal. The fact is that Government
expenditures and Government continue to grow and will, indeed, continue
to grow under the budget that was approved recently.
But more specifically, I want to talk just a moment about legislation
that I have introduced called the Freedom From Government Competition
Act that would address this problem. Congressman Duncan from Tennessee
has an identical bill in the House. I use an example that just happened
that I think we ought to reevaluate, one that we ought to look at, one
where we ought to say wait a minute, what is going on here? This is an
example of unfair competition in the private sector, and in fact it was
on the front page of the Washington Post on May 22, 1997. I ask
unanimous consent that the article be printed in the Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:
[From the Washington Post, May 22, 1997]
When the Government Hires the Government
(By Rajiv Chandresekaran)
When the Federal Aviation Administration announced last
fall that it was looking for someone new to operate its
computer systems for payroll, personnel and flight safety,
several of industry's biggest players came knocking.
Computer powerhouses International Business Machines Corp.,
Unisys Corp., Computer Science Corp., and Lockheed Martin
Corp. all bid for the juicy contract, worth as much as $250
million over eight years.
The winner, announced Friday, turned out to be an
organization well known in Washington, though not for its
computer experience; the U.S. Department of Agriculture.
In a surprising decision being lauded by the Clinton
administration but derided by the computer services industry
and some members of Congress, the FAA's number-crunching will
be handled by a USDA computer center in Kansas City, MO.
The contract, which many observers predict could alter the
landscape of competition between the public and private
sectors, is one of the largest ever awarded to a government
agency in a head-to-head contest with industry.
The center is one of several federal facilities that have
been allowed, and even encouraged, to compete for business
from other agencies in recent years as part of the
administration's effort to ``reinvent'' government. The USDA
center's bid was nearly 15 percent lower than those from the
private sector, said Dennis DeGaetano, the FAA's deputy
associate administrator for acquisitions.
``This shows that there are some organizations that are
both efficient and effective within the federal government,''
said Anne F. Thompson Reed, a USDA spokeswoman. ``We're
giving the taxpayer a good value.''
The administration, particularly Vice President Gore's
National Performance Review project to streamline the way
federal agencies operate, views such competition between
government and industry as a cost-effective way for some
facilities to bring in new work--and money--to offset the
effects of budget cuts.
But federal contractors, many of which have their
headquarters in the Washington region, contend that the new
competitors will reduce the dollar amount of computer
services the government buys from the private sector,
estimated at more than $21.3 billion this fiscal year,
industry executives argue that federal agencies, which don't
have to pay taxes and which account for overhead expenses
such as electricity differently, receive an unfair
competitive advantage.
They also question whether the government's technical
expertise matches up to industry's. The government is ``not
as tech-savvy, not as agile, not as aggressive'' as the
private sector, said Bert M. Concklin, president of the
Professional Services Council, a Vienna-based association
of federal contractors.
The FAA decision already has come under fire from some
congressional Republicans, who argue that many other USDA
computer systems are grossly mismanaged.
The General Accounting Office's director of information
resources management, Joel C. Willemssen, told a
congressional subcommittee last week, ``USDA's inadequate
management of information technology investments resulted in
millions of taxpayer dollars being wasted.''
In response to previous congressional inquiries, the
department in November put on hold all computer purchases
exceeding $250,000 until it revamps its information
technology management structure.
``The bottom line is: `Can they do it better than the
private sector?' The evidence we've seen suggests that there
are a lot of reasons to question that assumption,'' Rep.
Robert W. Goodlatte (R-Va.), chairman of the House
Agriculture Committee's subcommittee on department
operations, nutrition and foreign agriculture, said
yesterday. ``This could be a case of the blind leading the
blind.''
Concklin and other industry leaders also contend that the
FAA contract was improperly awarded because it skirted a set
of rules established by the Office of Management and Budget
for public-private competition. They also allege that the
USDA's bid was not scrutinized as much as those from private
firms.
``We seriously doubt that the USDA proposal was visited
with the same precision and critical eye that was visited on
the private-sector proposals,'' Concklin said.
The FAA's DeGaetano denied that a double standard was used,
but he said yesterday that the agency's chief acquisitions
executive, George Donohue, decided to temporarily suspend
work on the contract while the agency investigates whether
OMB rules were followed. DeGaetano also said the agency wants
to respond to industry concerns ``over the fairness of
contracting with another government agency'' before allowing
the USDA to begin work.
But DeGaetano emphasized that ``this doesn't mean we're
rescinding the award.'' He said the Agriculture Department
won the award based on its low bid and its track record of
handling work for other agencies.
The Kansas City center, called the National Information
Technology Center, operates most of the USDA's big computer
projects, as well as obscure programs, including a timber-
management system for the Forest Service and a database of
plants for the Natural Resource Conservation Service. The
center has handled computer services for other government
agencies for the past decade, but not as the result of a
contract competition with the private sector, Reed said.
The center, known in Beltway parlance as a ``revolving-fund
agency,'' functions as a quasi-private entity within the
Agriculture Department. It operates by charging its
``customers''--various arms of the USDA and other agencies--
for the services it provides, money that is used to pay the
center's salaries and operating costs.
But because the center by law can't make a profit--nor can
it seek commercial work--administration officials say its
services can be as much as 20 percent less expensive than
those of private contractors. ``The point of these operations
is to bring down the costs for government,'' said John A.
Koskinen, OMB deputy director for management.
Private contractors, however, contend that such government
operations, even if they have separate budgets, do not have
to pay for overhead costs and taxes in the same way.
``The cost structures are totally different,'' said Olga
Grkavac, a vice president at the Information Technology
Association of America, an industry group based in Arlington.
``It's not a level playing field. How can you have a fair
competition?''
Industry executives say they didn't pay much attention to
legislation that set up such competition, namely the 1994
Government Reform Act, which established six pilot revolving-
fund projects. ``We never thought it would happen,'' said Pat
Ways, a group vice president at Computer Sciences, ``A
government data center that's more qualified than a
commercial one?''
At the same time, federal contractors don't have a spotless
reputation. Almost every large company that performs work for
the government has been accused, at one time or another, of
cost overruns and delivering faulty systems.
USDA officials maintain the agency's computer center will
be able to handle the FAA's work, which includes maintaining
personnel and payroll records, financial information, and a
large aviation safety database. The center will largely use
existing mainframe equipment but may need to hire additional
staff, officials said.
``We're definitely qualified to do this job,'' Reed said.
Particularly worrisome to the information technology
industry, however, is the fact that the FAA contract had been
handled by a private firm, Electronic Data Systems Corp.
Ways said government competition for contracts could put
his company in the ``awkward position'' of competing with its
customers for new business. Computer Sciences, for instance,
performs work for the USDA, he said.
The contract is expected to renew a long-standing
Washington debate about the rules of competition between
government and industry, say several observers. On one hand,
several Republican legislators and industry executives
believe that the government shouldn't perform functions that
can be handled by the private sector. A bill introduced by
Sen. Craig Thomas (R-Wyo.) would bar federal agencies from
bidding for work that could be handled by outside
contractors.
Administration officials acknowledge that private contracts
could suffer in the new
[[Page S5392]]
competitive landscape, but they contend that might not be
such a bad thing.
``Ultimately, the government is not always going to win and
the private sector isn't either,'' said Michael D. Serlin, a
former National Performance Review official who now works as
a consultant on federal contracting issues. ``If the result
is genuine competition, however, it's the taxpayer who's the
winner.''
Mr. THOMAS. The FAA recently announced it was awarding a contract of
about $150 million for data processing and information technology to
the Department of Agriculture. The problem is that there are plenty of
private-sector groups that are more efficient or more capable of doing
that job.
When you think of technology, do you think of the Department of
Agriculture? I do not think so. When you talk about doing payrolls and
managing the FAA's technology, do you think of the Department of
Agriculture? I do not think so. That is because information technology
is not part of the Department of Agriculture's core mission.
The folks down at OMB and the Clinton administration will tell you it
is a great thing; it is encouraging entrepreneurial Government. But I
think we ought to be encouraging private business and entrepreneurial
enterprise, not Government. By recruiting contracts from other agencies
to offset budget cuts, we are maintaining big Government at the expense
of businesses in the private sector, especially small businesses. We
are also cheating the taxpayer. Studies have shown that outsourcing can
save the Government up to 30 percent. Congressman Duncan and I wrote to
the President the day this article appeared to protest his plans on
reinventing Government.
Mr. President, I ask unanimous consent that a copy of that letter be
printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. Senate,
Washington, DC, May 22, 1997.
Hon. William J. Clinton,
President of the United States, The White House, Washington,
DC.
Dear Mr. President: We are writing to express our strong
concerns regarding a recent decision by the Federal Aviation
Administration (FAA) to award a large information technology
(IT) contract to the Department of Agriculture. We are
concerned that American taxpayers may be shortchanged by this
proposed contract. We seriously question whether your plans
for ``reinventing'' government should include federal
agencies unfairly competing with the private sector to
provide commercial goods and services to other government
agencies.
The current process for evaluating whether or not the
federal government should perform commercial functions is
woefully inadequate. Federal agencies have an unfair
advantage in these competitions because the government's true
costs are generally understated due to the absence of an
activity-based accounting system. The federal government
doesn't pay taxes and it accounts for overhead expenses
differently than private sector firms. Most alarming, it is
our understanding that the A-76 process was possibly
circumvented entirely, so that no rigorous competitive
analysis was performed at all.
In addition, the FAA appears to have decided to ignore the
past performance of the Department of Agriculture in the IT
area. Just last week, the Department was criticized by the
General Accounting Office (GAO) for ``inadequate management
of information technology investments that resulted in
millions of taxpayer dollars being wasted.'' In addition, in
response to previous congressional inquiries, the Department
of Agriculture recently put on hold all computer purchases
exceeding $250,000 until it revamps its information
technology management structure.
As you know, we recently introduced legislation in the U.S.
Senate and House of Representatives, S. 314 and H.R. 716,
that would eliminate unfair government competition with the
private sector. Our legislation corrects the problems with
the A-76 process and stops ``entrepreneurial'' government by
creating a ``best value comparision'' in which many factors,
such as qualifications, past performance and a fair cost
accounting system, are used to determine which entity will
provide the best value to the American taxpayer.
We encourage you to reevaluate the decision to award this
contract to the Department of Agriculture based on the
criteria laid out in S. 314 and H.R. 716. We look forward to
your prompt replay.
Sincerely,
Craig Thomas,
U.S. Senator.
John Duncan,
U.S. Representative.
Mr. THOMAS. Unfortunately, this reinventing Government is not
achieving its purpose. It is recreating big Government. The current A-
76 process, which is the system that is supposed to be used to decide
if a function can be done more cost effectively and more efficiently in
the private sector, may not even have been used by the FAA before
awarding the contract to the Department of Agriculture. And when A-76
is used, it does not provide a level playing field for comparing
Government and the private sector. Finally, the GAO has strongly
criticized the Department of Agriculture's management of its current
information technology. We shouldn't be giving them more work when they
can't handle their current assignments.
So my legislation would address these issues. The legislation would
stop entrepreneurial Government dead in its tracks, create a best value
comparison between Government and private enterprise based on fair
accounting systems, based on qualifications, based on past performance.
There are certainly activities within the Government that are
inherently Government functions and should be done by the Government,
but there are many others that are commercial in nature. They are as
commercial as anything in the private sector could be. So this
legislation will lead to more efficient Government, will inject fair
competition into Government monopolies and continue to reserve a
Government role for inherently governmental functions. It also will
encourage more and more contracting with the private sector for more
efficiency and giving American taxpayers more bang for their buck.
So I urge my colleagues to join me in supporting this good
Government, common sense of reform.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The distinguished Senator from West Virginia
is recognized.
Mr. BYRD. Mr. President, I thank the Chair.
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