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Bush Plan To Contract Federal Jobs Falls Short
Scope and Savings Have Not Met Goals

By Christopher Lee
Washington Post Staff Writer
Friday, April 25, 2008

Joseph Wassmann thought he had a secure position producing videos for the U.S. Military Academy, but not long ago he found his job on the line because of a Bush administration plan to inject more efficiency into the federal bureaucracy.

Wassmann, 40, was among a group of information management employees at West Point who had to prove that they could do their jobs better and more cheaply than a private contractor. If they could not, they were told, the work would be outsourced. It was all part of President Bush's government-wide plan to reduce costs by inviting contractors to bid on about 425,000 federal jobs that could be considered "commercial" in nature.

The West Point competition dragged on for more than two years. In the end, Wassmann and most of his co-workers won, but only by agreeing to downsize from 119 employees to 88. And the mood has never been worse, he said.

"Tensions are at an all-time high," he said. "We have to cut ourselves to the bone to win these bids. . . . And morale is just destroyed afterward."

The public-private face-off at West Point illustrates just what Bush envisioned when he proposed the "competitive sourcing" initiative in 2001 as part of his management agenda. It turned on a simple idea: Force federal employees to compete for their jobs against private contractors and costs will decrease, even if the work ultimately stays in-house.

But as Bush's presidency winds down, the program's critics say it has had disappointing results and shaken morale among the federal government's 1.8 million civil servants.

Private contractors have grown increasingly reluctant to participate in the competitions, which federal employees have won 83 percent of the time.

The program fell short of the president's goals in scope and in cost savings. Between 2003 and 2006, agencies completed competitions for fewer than 50,000 jobs, a fraction of what Bush envisioned.

Moreover, the Government Accountability Office found that the administration has overstated the savings from some competitions by undercounting the costs of running them. Collectively, they cost $225 million, or about $4,800 per job, according to White House figures.

"The competitive sourcing initiative did little to improve management, produced a ton of worthless paper, demoralized thousands of workers and cost a bundle, all to prove that federal employees are pretty good after all," said Paul C. Light, a professor of government at New York University's Wagner Graduate School of Public Service.

"From a legacy perspective for the president, I think this will be seen as a costly failure on his part," said Colleen M. Kelley, president of the National Treasury Employees Union (NTEU), which represents 150,000 employees in 31 agencies. "They have not made any progress on what their stated goal was, and that's a good thing. It has been just an endless fight to slow them down and to derail them."

Bush officials acknowledge that they had hoped to put many more jobs up for competition -- as varied as janitorial services and computer management. Even so, they say, the competitions completed thus far have generated realized and projected savings of more than $7 billion.

"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.

The unions are not happy, either. They cite another troubled competition, this one at the Internal Revenue Service. In 2005, about 1,100 agency employees initially won in their bid to keep jobs to manage paper tax returns at seven IRS service centers. After a company protest, though, the agency reversed itself and hired IAP Worldwide Services.

Shortly before IAP was to take over in late 2006, it notified the IRS that it was not prepared to do the work at all locations. By then, federal employees were already moving to other jobs. The contractor did not get fully on board until late last year. Yet in a report issued last spring, the OMB claimed about $35 million in savings, said Kelley, the NTEU president.

"This, for me, is just an example that OMB's projections of savings from federal contracting are wildly speculative and they are completely unsupported by any evidence," she said.

The OMB's Johnson said agencies are doing more to validate savings claims.

"The bottom line," he said, "is the federal government can be more focused on its cost and its performance. We should always look at what it costs us to do everything -- IT, human resources, building maintenance, everything. And if we ever stop doing that, then we are being poor stewards of the taxpayers' money."

At West Point, the workers won, but they are not celebrating. Some displaced employees found other academy jobs. Some took early retirement.

Soft landings are getting harder to come by, and more competitions are on the way, said Don Hale, president of the AFGE Local 2367, which represents 1,600 workers at the academy.

"When we first started the competitive sourcing initiative, we had some fat here," he said. "Now it's at a point where we're going to start losing people because we can't gain any efficiencies."

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