The Carter administration yesterday proposed rules that encourage federal agencies to continue to use their own employees to provide existing commercial services but prod them to hire private companies if the agencies decide they need additional services.
The Ford move had been fought by to force agencies to buy from private companies hundreds of millions of dollars of services now provided by federal employees.The Carter administration temporarily reversed that policy last June to study the contracting out question.
The Ford administration had sought federal employee unions and yesterday's action was at least a partial victory for them.
At the same time, Carter officials agreed with Ford that the government has been underestimating seriously the costs to the taxpayer of using federal employees to provide services that could be provided by private industry.
Among the services in question are laundries, maintenance, security and film processing. As of July 1, government agencies were engaged in 21.130 commercial and industrial activities that required a capital investment of nearly $13 billion and cost $9 billion a year to run.
The government is supposed to use outside companies for these services unless it can be shown that it is in the "national interest" for the government to provide the service.
A government review of 7.432 of the commercial and industrial activities found that about 16 per cent, or 1.168, were justified by the agencies on the ground that the government could do the job cheaper than industry.
James T. McIntyre Jr., acting director of the Office of Management and Budget, told reporters yesterday that the government has decided that it should be "relatively more difficult" to convert an ongoing activity to an outside contract but that for new activities it will be advantageous to start off on a contract basis.
When the cost of an ongoing activitity is compared with a bid from a private contractor, the government personnel costs will be reduced by 10 per cent, to "recognize that we incur a premium price penalty to convert that activity to contract."
However, McIntyre said, when the work to be done is brand new to the agency, "with no federal workers' jobs at stake," then the government pays a penalty if it starts in-house, both in terms of personnel and the plant and equipment investments the government must make.
In the case of new activities, the government will apply a 10 per cent factor in favor of the private contractor's personnel costs as well as a 25 per cent "equipment cost factor," these rules would make it difficult for an agency to show that it can do the job cheaper than the private company.
Lester A. Fettig, administrator of federal procurement policy at OMB, said the Carter administration has decided that the rules in effect before 1976 underestimated the costs of providing retirement benefits to federal employees.
Ford administration officials had argued that this often gave the government the cost advantage in comparison with private companies. They proposed boosting the retirement charge from 7 per cent of the wage bill to 24.7 per cent.
Fettig said the agency had reexamined the retirement factor and had reduced it slightly to 20.4 per cent. Last June, when OMB announced a review of the contracting out question, it temporarily set the retirement number at 14.1 per cent.