Federal civil servants proved they could do their work better and more cheaply than private contractors nearly 90 percent of the time in job competitions last year, according to the Office of Management and Budget.

An OMB report released yesterday found that such competitions, the cornerstone of President Bush's "competitive sourcing" initiative, cost federal agencies $88 million in fiscal 2003. But they are projected to bring savings of $1.1 billion in reduced personnel costs and overhead during the next five years, the report said.

Clay Johnson III, OMB's deputy director for management, said the report confirms Bush's belief that requiring federal employees to compete for their jobs promotes government efficiency, even when the work stays in-house. Congress this year required agencies to report annually on competitive sourcing efforts amid concerns that the initiative was taking money away from programs.

"The real savings comes because of competition, because of the challenge of finding the most effective way of doing it," Johnson said in an interview. " . . . You ought to always be looking for the most efficient and effective way to do something."

Federal employee union leaders dismissed claims of savings as inaccurate and unrealistic. They renewed their criticism of the Bush initiative as an unproductive effort that wastes resources, scares employees and rewards contractors for supporting the administration.

"Anytime there is anything close to a fair competition, we do well," said John Gage, president of the American Federation of Government Employees, the largest federal employee union. Gage also said there should be an independent review of projected savings.

Colleen M. Kelley, president of the National Treasury Employees Union, called such projections "fiction." That's because agencies, at the direction of OMB, do not include the costs of diverting workers from their regular duties to work on preparing the in-house bid, she said. Costs incurred before the announcement of a competition, such as assessing workloads and evaluating how offices could be reorganized, also are not counted.

Also, many in-house teams win only by agreeing to trim the workforce, limiting services, Kelley said.

"After a public-private competition for federal work, there often simply aren't enough agency employees left to provide the service at the level the public wants, needs and expects," she said in a statement.

Contractor groups also objected to the report, saying the high win rate by federal employees raises concerns that the competitions were not fair. Several earlier government studies found that federal workers typically win public-private competitions about 60 percent of the time.

Stan Z. Soloway, president of the Professional Services Council, said savings would be even greater with "real competition."

"When you have a 90 percent rate for either side, you have a process that's clearly out of balance," Soloway said. "In the private sector there is tremendous concern about the credibility of the process and the program, since very little real competition seems to be taking place."

Chris Jahn, president of Contract Services Association of America, said, "The deck is being stacked against private companies."

"At some point, if these competitions continue to be drastically one-sided, the private sector will stop playing," Jahn said in a statement. "The taxpayer will be the loser in the long run."

Of 17,595 federal jobs studied in competitions last year, 15,660 jobs, or 89 percent, were found to be best-performed by federal civil servants, the OMB report said. Agencies determined that the work done by 1,935 federal employees could be handled more efficiently by private contractors.

Moreover, agencies transferred work done by 4,309 more federal employees to the private sector without even conducting competitions. Such "direct conversions" are being discouraged and phased out, Johnson said, and were not included in computing the 89 percent win figure for federal employees.

Johnson noted that employees do not automatically lose their jobs when work is moved to the private sector. Some are reassigned within agencies, while others may be offered jobs with contractors and some may be offered buyouts.

"This is not anti-employee," Johnson said of the initiative.

The experience of agencies varied widely, according to the report. The Defense Department, the government's largest, completed competitions involving more than 9,200 positions last year, with 81 percent of the jobs staying in-house. Meanwhile, no competitions were completed at such agencies as the Department of Labor, the Department of Homeland Security, the Smithsonian and OMB.

Several agencies that ran job competitions reported a net loss of money, including the Agriculture Department ($3.6 million), the Social Security Administration ($78,000) and the Environmental Protection Agency ($7,100).

Johnson said such deficits are less likely to happen as agencies gain experience with the process.

"We now have a base of information to continue to discuss this with Congress and with the agencies," he said, "and a base of best practices and worst practices and real solid experience -- as opposed to anecdotes -- to build upon to get even better about it as we go forward. . . . It's a very positive sign for the taxpayers and it's a very positive sign for what the federal employees are capable of doing."

Savings for taxpayers will increase as agencies get more familiar with the process, says Clay Johnson III of the Office of Management and Budget.