Administration officials who want to "privatize" large sections of the civil service will have an easier time in the future thanks to a rules change that gives a cost-advantage tilt to private firms seeking to take over functions now performed by government employes.
The change in the government's contracting guidelines was approved by the Office of Management and Budget and went into effect Aug. 12. It revises the yardstick that federal agencies must use when they consider whether to contract out work or to keep doing it in-house with civil servants. The changes make the civil service costs appear considerably higher than private industry, largely because of the formula used to include fringe benefits.
Federal agencies are required to take periodic looks at the cost of their support and service-type functions -- clerical, administrative, custodial and the like -- to see if the work could be performed at less cost by private firms.
More than half a million civil service jobs, ranging from word-processing and computer operations to laundry and guard services, fall into the category of service or support. Many private firms offer the same services and say they can do a better job than civil servants for less cost to the taxpayers. In recent years many government jobs have been turned over to the private sector.
OMB said the changes more accurately reflect the real value of civil service pensions and fringe benefits.
The affected A-76 guidelines are used by agencies to determine what it costs to perform a function and to measure that in-house cost against bids from industry. In many cases private firms can underbid the government because they use fewer workers or pay employes less than the government does.
Contracting out is a multibillion- dollar business that federal workers appear to be losing. The current issue of the Defense Management Journal says, for example, that in 1,000 military base functions sought by contractors over the past five years the contractors underbid the government 52 percent of the time.
On average, the Journal said, the companies came in with bids that were 17 percent lower than the government cost for the same work. Most of the savings offered by the contractors came in reduced personnel costs.
Under the guidelines used until this month, agencies were told that in preparing their cost estimates civil service retirement was equal to 20.4 percent of payroll. Health and life insurance costs for government employes were pegged at 3.7 percent of payroll. Other federal fringes were valued at 1.8 percent of payroll.
All of the government personnel costs were added up and compared with bids submitted by private firms seeking to take over federal operations. The new OMB guidelines do credit the government with some cost reductions in some areas, but overall make the major personnel component more expensive.
OMB says the new guidelines include the payroll cost of the 300,000 U.S. workers hired since 1984 who are under both civil service retirement and Social Security.
The new tables assign federal pension benefits as 27.9 percent of payroll costs. Life and health insurance benefits are raised to 4.7 percent, and fringes like sick and annual leave are reduced to 1.8 percent.
Whatever you think of the numbers, or of contracting, the changes will make it easier for private firms to submit more attractive bids.