Bush Plan To Contract Federal Jobs Falls Short

"We've delivered real savings -- over $1 billion a year," said Clay Johnson III, deputy director for management at the Office of Management and Budget. "I thought we would have generated by now even larger savings than that. But anything that generates savings of that magnitude has to be deemed a big success."

Competitive sourcing dates to Dwight D. Eisenhower's administration, when the White House began encouraging federal agencies to turn to the private sector for certain goods and services. For decades, almost all such competitions took place in the Defense Department, the government's largest.

Bush entered office with a deep skepticism of government. He saw competitive sourcing as a way to improve agencies' performance.

Private companies loved the idea of vast new contracting opportunities. But federal unions feared the concept was simply a way to steer lucrative business to the administration's political backers.

From the outset, the program's rocky path illustrated the collective political power of federal workers. The initiative drew early criticism from politicians whose districts included many federal employees, including Sen. Barbara A. Mikulski (D-Md.) and Rep. James P. Moran Jr. (D-Va.). They argued that the White House was pursuing "arbitrary" numerical job targets.

In the end, the unions and their allies in Congress largely stymied the administration's efforts. They banned the use of numerical quotas. They inserted special provisions in annual appropriations bills that denied funding for some competitions. And they walled off certain federal jobs after declaring them "inherently governmental."

The unions, including the American Federation of Government Employees and the NTEU, also won legislative restrictions that removed health care and retirement benefits from the cost comparisons, wiping out an advantage for many private-sector bidders.

Many contractors threw up their hands and stopped participating, said Stan Soloway, president of the Professional Services Council, an Arlington-based contractor group.

A competition involving 258 administrative positions at the Labor Department, including 50 in the Mine Safety and Health Administration, illustrates why contractors lost interest, Soloway said.

In May 2007, the department awarded the work to GAP Solutions, a small, minority-owned firm in Virginia whose bid promised $62 million in savings over five years. But at the behest of unions, Sen. Robert C. Byrd (D-W.Va.) had the jobs declared inherently governmental, prohibiting the contractor from taking over the work.

The company had already hired some employees, but when Labor officials terminated the $71 million contract, they refused to reimburse the firm for its upfront costs, Soloway said. (GAP Solutions officials declined to comment.)

"It's unfortunate that it has effectively gone from being a management tool to really more of a political issue," he said.