Proposal Would Make Retirement Benefits a Factor in Bidding

The Bush administration continues to have a hard time selling its plan to turn more federal work over to the private sector.

In a move that has roiled federal contractors, the Senate has proposed making retirement benefits a factor when the Defense Department puts certain federal jobs up for bid.

The proposal would prevent contractors from obtaining an advantage if they provided less generous retirement benefits than the government does to its employees. Contractors said that would drive up the cost of bids by 24 percent.

This comes two years after Congress stipulated that private-sector bids include an amount for employee health benefits at least equal to the amount paid by agencies. Contractor associations said that drove up the cost of bids by 5.5 percent.

Federal unions, especially the American Federation of Government Employees, have lobbied Congress to curb job competitions with the private sector, contending that they lower morale in the workplace and often do not deliver the promised budget savings.

Contractor associations argue that the Senate's move, if agreed to by the House, would stop the Defense Department from trying to outsource work through a process set up by the Office of Management and Budget as part of President Bush's federal management agenda. That effort -- competitive sourcing -- is also known as A-76, after the name of the OMB directive that lays out the rules for the competitions.

Contractors find the health-care comparison and the proposed retirement benefit comparison especially onerous because the standard rules used in competitions require the contractor to save the government $10 million or 10 percent of agency personnel costs (whichever is less) or the work will be retained within the agency.

Although many agencies conduct studies to see whether federal work can be turned over to the private sector, the Defense Department has been the most active over the years in contracting out and has drawn the most attention from unions. The agency said in 2004 that job competitions that year were on track to produce about $740 million in savings.

Under the job competitions, agencies try to determine if the government's commercial work can be done more efficiently by a contractor. For decades, the government has followed a policy of buying goods and services in the marketplace rather than setting up operations that compete with business.

Where that line gets drawn, however, can be difficult. For example, Congress has debated whether airport passenger screening, collection of delinquent taxes and air traffic control operations should be performed by government employees or by contractors.

Projected cost savings are a key factor in job competitions, prompting congressional supporters of federal employees to back legislation, usually as a part of spending bills, aimed at creating what they call a level playing field.

Stan Soloway , president of the Professional Services Council, an industry group, called the Senate proposal "sound-bite legislation" aimed at discouraging the Pentagon from conducting job competitions. "The intent here is to put that nail in the coffin," Soloway said.

Sens. Edward M. Kennedy (D-Mass.) and Orrin G. Hatch (R-Utah) proposed the amendment to make retirement benefits a factor in contracting out decisions. Their provision was accepted on a voice vote shortly after Congress returned from the Labor Day recess. The fate of the provision will be decided by congressional negotiators later this year because the House did not include a similar provision in its Defense appropriations bill for fiscal 2007.

In introducing the amendment, Kennedy said more than 10,000 civil service employees at the Defense Department could be "at risk of unfair termination" through competitive sourcing. "This skewed privatization policy is fundamentally unfair to federal workers who lose contracts simply because they receive decent benefits," he said.

Talk Shows

---

Michael Johnson , founder of Brightline Compliance and a former Justice Department lawyer, will be the guest on "FEDtalk" at 11 a.m. today on http://federalnewsradio.com and WFED radio (1050 AM).

Lisa Schlosser , chief information officer at the Housing and Urban Development Department, will be the guest on "The IBM Business of Government Hour" at 9 a.m. Saturday on WJFK radio (106.7 FM).

Stephen Barr's e-mail address isbarrs@washpost.com.