[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.

                          ____________________