Effort to Skirt Contracting Rules Unnerves Federal Workers

Treasury Secretary Henry M. Paulson Jr. wants the ability to move quickly to smooth the very rocky road that is now Wall Street.
Treasury Secretary Henry M. Paulson Jr. wants the ability to move quickly to smooth the very rocky road that is now Wall Street. (Mark Wilson - Getty Images)
By Joe Davidson
Tuesday, September 30, 2008

When -- maybe that should be if-- Congress passes legislation to bail out floundering financial institutions, the Treasury secretary likely will be granted unusually broad power to waive regulations covering the government's hiring of outside contractors.

But not as much power as he wanted.

While the nation's current economic situation gives everybody a headache, this provision, even though restrained when compared with the original, gives federal employees heartburn.

Treasury Secretary Henry M. Paulson Jr. wants the ability to move quickly to smooth the very rocky road that is now Wall Street. He proposed granting his office essentially unlimited authority to hire outside firms to help manage the assets of companies the government basically nationalizes.

He didn't get that. But under the legislation the House rejected yesterday, he still would have had extensive authority to ignore regulations on federal acquisitions. That provision, or a similar one, probably will be in whatever legislation finally passes.

That's anathema to federal workers who recoil at Bush administration efforts to give public business to private companies.

"We are not comfortable with Treasury being granted authority to waive contracting procedures," said Richard N. Brown, president of the National Federation of Federal Employees, with some bit of understatement. "It is an unnecessary power grab and we can envision this authority being abused."

The bailout bill says Paulson can disregard the regulations "upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest."

Federal acquisition regulations generally can be waived in other cases, but this authority is "much broader" than what officials normally have, according to Alan Chvotkin, executive vice president of the Professional Services Council, the trade association for companies with government contracts.

The government did not use such broad authority even after Hurricane Katrina or during the war in Iraq, he said.

But the power Paulson would get would not be unfettered. He would have to tell Congress what he is doing and why.

Federal regulations now require officials to follow certain procedures when paying contractors to do the government's business. That can be time consuming, by design, because officials must follow specific guidelines for soliciting contracts, seeking broad competition, reviewing proposals and ensuring participation by small, disadvantaged and minority businesses.


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