NTEU Views on Contracting Out Government Services

6/28/2001

Committee on Government Reform Subcommittee on Technology and Procurement Policy

Chairman Davis, Ranking Member Turner, and other distinguished Members of this subcommittee, my name is Colleen Kelley and I am the National President of the National Treasury Employees Union. As you know, NTEU represents more than l50,000 employees in 25 federal agencies and departments, including employees who work at the Department of Treasury, Department of Health and Human Services, and the Department of Energy. I want to thank you for giving me the opportunity to present testimony on behalf of these dedicated men and women who are on the front lines in delivering government services in an efficient and cost effective manner to the taxpayers.

We are here today to debate who should deliver government services and what the process and criteria for making that determination should be. I am sure we can all agree that government services should be delivered to the American taxpayers in the most reliable, most efficient, and most cost-effective manner. Furthermore, I am sure there is agreement that steps need to be taken to resolve the federal government human capital crisis to ensure that these services will continue to be improved and delivered well into the future. And I am sure we can agree that the taxpayers rightly demand and expect that there is accountability for how their tax dollars are spent on the delivery of these services.

When it comes to accountability and oversight of the federal workforce, thanks to the checks and balances within the federal civil service system, and oversight and scrutiny of federal agencies by Congress, there is crystal clear transparency of the work being done by federal employees. And through the budget and appropriations processes, the Government Performance and Results Act, and the FAIR Act, there is little we don't know about the quality and costs of government services delivered by federal employees.

However, we know virtually nothing about the contractor workforce and the work being performed by contractors. It is only due to the work of GAO, OMB, and the media that we are hearing more and more examples about the failure of contractors to deliver services to the government on time, on budget, and as promised. The American taxpayers want the same level of transparency and accountability of the work performed by contractors as there is of the work performed by federal employees. They want to be sure there are systems in place to track whether contracting out is saving money or improving the delivery of government services. And they want to be sure they are getting the best possible return on their investment of tax dollars, both in the short term and long term.

NTEU is very concerned about the lack of accountability within agencies to track the true costs of contracting out, and to determine whether contractors are delivering the services they promised. Before Congress even considers methods to change federal contracting procedures, the taxpayers deserve to know exactly how their tax dollars are being spent on current contracts. Even though more dollars are doled out to contractors each year than are spent on the federal workforce, there is little or no oversight of federal contracts once they have been awarded. And agencies continue to contract out federal work even though there are no reporting systems in place to determine whether contracting out has achieved real cost savings or improved government services for the taxpayers. Agencies need to implement reliable accounting and reporting systems and dramatically increase contract oversight to track the true costs of contracting out and the quality of services being delivered by contractors.

We need to get a better handle on the current system, and NTEU believes the best way to do this would be for Congress to approve, and President Bush to sign into law, H.R. 721, the TRAC Act. The TRAC Act would require agencies to implement systems to track whether current contracting efforts are saving money, whether contractors are delivering services on-time and efficiently, and that when a contractor is not living up to his or her end of the deal, the government work is being brought back in-house.

Unfortunately, even though no new accountability procedures have been adopted, the Bush Administration has taken extreme actions that will undoubtedly only exacerbate current problems with contracting out. For example, OMB recently directed agencies to include inherently governmental jobs on their FAIR Act Inventories. Inherently governmental work was deliberately excluded from the scope of the Federal Activities Inventory Reform Act because there was a bipartisan consensus that inherently governmental work should be performed by federal employees. But now the Bush Administration wants agencies to list on their FAIR Act inventories the inherently governmental jobs right next to jobs that are not inherently governmental, despite the fact that the FAIR Act requires only the listing of jobs that are not inherently governmental. We believe that if we head down the path initiated by the Bush Administration, it will be just a matter of time before contractors are performing a majority of inherently governmental jobs. At some point, this will likely lead to a one-stop shop on OMB’s website for contractors to go shopping on-line for more government work. Point – click – enter your contract bid – and hit send: suddenly a private contractor will be collecting your taxes next April.

Congress excluded inherently governmental jobs from the FAIR Act because Democrats and Republicans alike agree: some government functions should not be performed by private sector companies. The American taxpayers do not want tax collection services to be contracted out to the private sector companies who may have an interest in selling taxpayer information. They do not want private sector consultants to control what illegal goods flow through our ports and borders. They do not want new prescription drugs or medical devices to be tested and approved by the same people who develop and manufacture them. And they do not want our financial markets regulated by banks or securities firms.

We believe that in many instances the American taxpayers are willing to pay a little bit more for certain government services to ensure that these jobs continue to be done by government employees, not private contractors. It is very difficult to assign cost values to the protection of the privacy of American taxpayers, the security of our nation both externally and internally, or responding to economic or unknown crises in the future. Sure, a private contractor may be able to submit a bid to perform a certain government function over the next three years for less cost than federal employees, but what happens when that private contractor goes broke in the 2nd year of that contract? Who is going to pick up the slack if a sole source contract is awarded for inherently governmental work and that contractor is in bankruptcy court? Is it worth the long-term risks to our nation to shut the government out of the government service business, and be dependent on profit-driven private sector companies? It is incumbent upon Congress and the Administration to make investments in increased agency staffing and better training so that government services can be delivered by federal employees at even lower costs and increased efficiency than they are today.

Another example of a misguided Bush Administration policy is the recent OMB directive to agencies that at least five percent of the jobs on their FAIR Act inventories must be either put up for competition or directly converted to the private sector without competition during FY02. And we just learned last week that the Administration will direct agencies to open up ten percent of the jobs in Fiscal Year 2003, as part of a larger effort to arbitrarily open up to the private sector 425,000 federal employee jobs. Again, how can the Bush Administration set these arbitrary quotas without first evaluating their impact on an agency’s delivery of services? Most agencies will likely see a sharp decline in service performance with such a severe cut, yet the directive makes no mention about what affect contracting out five percent, or ten percent, or fifty percent of the work will have on an agency’s mission. We believe these actions are only going to lead to more waste, more broken promises, and more cost overruns in government contracting. And we know that this directive is already having a negative impact on the morale of the federal workforce.

Furthermore, since many of the non-military Departments and Agencies have very little experience in administering public-private competitions, they are turning to contractors to run the competitions. For example, at the Farm Services Agency, in order to meet the five percent directive, the agency is hiring a contractor to develop the agency’s Most Efficient Organization, the agency’s statement of work, and the official government cost estimate for performing the work. And the agency is using additional contractors to train the agency’s contracting personnel. Something is “inherently wrong” when private contractors are being hired to put the government’s bid together, to estimate the government’s costs, and to train the government employees on how to administer the competitions.

So we now know that agencies opting for the public-private competitions are hiring outside private contractors to run the competitions. However, we believe that most other agencies will opt instead for direct conversions of these jobs to meet the arbitrary targets. What incentives do agencies have to go through the expense of hiring contractors to run a competition, when they can just as easily directly convert the work? As AFGE National President Bobby Harnage and I stated in a letter to OMB Director Mitch Daniels earlier this year, “absent a compelling rationale arising out of an extraordinary set of circumstances, there can be no justification for a direct conversion to private contractors, no matter how many or how few jobs are at stake. If federal employees are performing the work and taxpayers will continue to pay for the work to be done, then that work cannot be taken from federal employees without giving them adequate chances to defend their jobs.” NTEU continues to urge the Administration to withdraw its shortsighted five percent directive.

Next, NTEU is very concerned that as the amount of government work being contracted out continues to increase – and with it the workload for contract officers – there has been a steady decline in staffing levels for agency contracting offices. The increased workload and decrease in staffing has led to inadequate public-private competitions and practically non-existent contractor oversight. And according to the General Accounting Office, the problem is only going to get worse. At a hearing before this very subcommittee last month, the GAO testified that 27 percent of agencies’ current contracting officers will be eligible to retire through the year 2005. So now we’re going to turn around and give the federal employees who must look over the contracts more work and not provide them with the resources they need to do their jobs? Again, what’s going to happen once those contracts have been awarded? How are we going to monitor them?

Mr. Chairman, the issues before us are very complex and finding solutions is no easy task. As you know, I am a Member of the Commercial Activities Panel, which was established last year by Congress to look at the subject matter we are discussing today. The Panel, chaired by Comptroller General David Walker, and comprised of members from the Bush Administration, federal employee labor unions, government contractors, and scholars, is working to develop a set of recommendations for Congress on how best to improve our government’s service delivery decision-making procedures. The Panel is required to report to Congress by May of next year, and I am hopeful that we can reach agreement on methods to improve the delivery of government services to the taxpayers. I have urged the Panel to recommend to Congress five changes: institute accountability systems to track contractor costs and delivery of services, increase involvement of front-line employees in discussions on how agencies carry out their missions, ensure public/private competitions are held on a level playing field, give federal employees appeal rights of agency decisions, and increase oversight of government work being performed by contractors.

In closing, I am hopeful this subcommittee will wait for the Commercial Activities Panel to complete its work and send its recommendations to Congress before legislating any changes to government contracting procedures. However, I do believe that more accountability controls over current government contracting, such as those contained in the TRAC Act, cannot afford to wait for the Panel to finish its work. The most important thing to do before any more service contracts are awarded is to clean up the current system. The government should not contract out government work if we do not know if it is in the best interests of the taxpayers. Furthermore, I am hopeful this subcommittee will use its oversight authority to urge the Bush Administration to withdraw the recent arbitrary directives to contract out more work. We cannot continue to allow agencies to arbitrarily award contracts to private companies to meet quotas, while simultaneously letting valuable resources – our federal employees – slip away.

Thank you for giving me the opportunity to testify today.