Federal employees are on track for an average pay increase of 3.1 percent next year.

House-Senate negotiators locked in the pay raise as part of a $137.6 billion spending bill for fiscal 2006 that covers the departments of Treasury, Transportation and Housing and Urban Development, as well as other agencies. The House approved the measure, 392 to 31, Friday and sent it to the Senate.

The 2006 raise will vary by locality, under recommendations made by the Federal Salary Council, an advisory group. If the White House follows the council's recommendation, federal employees in the Washington-Baltimore area would receive a 3.44 percent pay increase in January.

In approving the raise, Congress continued a "pay parity" practice of recent years to ensure that the civil service and the military receive equal raises. President Bush had proposed a two-tier raise for next year -- 3.1 percent for the military and 2.3 percent for the civil service.

Rep. Steny H. Hoyer (D-Md.), who pushed for the parity approach, said many civil service employees work with the military daily to protect the nation. "With security threats at home and abroad, it is important that federal employees, nearly 700,000 of whom work at the departments of Defense and Homeland Security, receive a fair pay adjustment," Hoyer said.

The White House argued against the civil service raise, saying that an increase of 3.1 percent would cost about $1 billion more than Bush's proposal and "would be very difficult for agencies to absorb." The White House's statement said the government is not having recruitment and retention problems.

But several Washington area members of Congress worked as a team to turn aside the White House pay proposal. In addition to Hoyer, they included Reps. Frank R. Wolf (R-Va.), Thomas M. Davis III (R-Va.) and James P. Moran Jr. (D-Va.) and Sen. Paul S. Sarbanes (D-Md.).

Union leaders hailed the pay raise but reserved some of their biggest cheers for a provision that would allow federal employees to reorganize into a "most efficient organization" and compete against contractors seeking federal work performed by more than 10 federal employees.

In addition to allowing employees to submit their best bids, the provision would require contractors to show a savings of at least 10 percent or $10 million.

The provision has been resisted by the Bush administration because it complicates agency efforts to make "direct conversions" -- essentially abolishing federal jobs without a contract competition -- and because it makes price, rather than a "best value" process, the key factor in the contract decisions.

Sen. Barbara A. Mikulski (D-Md.), who fought against a White House veto threat, said the provision "is the first step in leveling the playing field for federal employees."

The provision would apply across government, except at the Defense Department and the Transportation Security Administration. The spending bill for Defense, however, has carried a similar restriction since fiscal 2004.

The White House had knocked out the Mikulski provision in closed-door negotiations with Congress during the past two years but did not prevail this year. John Gage, president of the American Federation of Government Employees, praised Mikulski, Sen. Christopher S. Bond (R-Mo.), Rep. Chris Van Hollen (D-Md.) and others who fought for the provision.

Alex Conant, a spokesman for the Office of Management and Budget, said the administration, after discussions with Congress, "determined that these provisions do not significantly erode the president's management agenda." But, he added, "if they are found to limit the benefit the taxpayers get from the president's management agenda, we will work with Congress to fix them."

Other modifications to the administration's "competitive sourcing" initiative also may win congressional approval this year. Sens. Susan Collins (R-Maine) and Daniel K. Akaka (D-Hawaii) have won Senate approval of an amendment that would expand employee appeal rights in bid disputes.

Currently, only an agency official can file an appeal on behalf of employees. The Collins-Akaka amendment would permit employees to choose a representative, such as a union official, to protest a contract award if the management official did not do so.

Diary associate Eric Yoder contributed to this column.