Outsourcing the Forest Service John R. Obst, Vice President National Federation of Federal Employees Federal District 1, IAMAW

Upfront Clarifications:  1. The Union is not opposed per se to appropriate contracting, and recognizes that contractor contributions may be mission critical.  2. The Union is opposed to the Administration’s competitive sourcing initiative.

Competitive Sourcing (Commercial Activities Studies)  What is the Competitive Sourcing Initiative?  How is it to be done?  What’s wrong with it?  What’s being done about it?

President’s Management Agenda for the Executive Branch  Strategic Management of Human Capital  Improved Financial Performance  Electronic Government  Budget and Performance Integration  Competitive Sourcing The objective of the Competitive Sourcing (CS) initiative is to increase government performance and efficiency through the use of public-private competitions.

Paradigm shift: run government like a business. Nothing new here. Past administrations promoted “business-like” strategies to gain efficiencies. But, be careful what you wish for…which businesses should government model? Enron, K-Mart, Adelphia, ImClone, Tyco, MCI-WorldCom, Arthur Andersen, Wall Street investment firms???

A “new” paradigm: Turn government over to business. (Competitive Sourcing Initiative)

Competitive Sourcing Initiative  A mandate to conduct public-private competitions to determine who does federal work that is currently done in-house.  Technically, it is not privatization.  It is outsourcing.

Office of Management and Budget CS Quotas  Each agency will competitively source its “commercial functions”.  5% of FTEs (Full Time Equivalents) in FY  10% in FY  50% by the end of FY 2006 (10,000 FTEs) (OMB: “and then the rest of them; and if the agencies keep the work in-house, they’ll do it again in 5 years.”)

What competitive sourcing means to the Union.  Using federal jobs for Payback and Payoff Payback : to federal employees and federal unions who did not support this administration. Payoff : to contractors who did.  Backdoor way to destroy the public sector.  Yet one more attempt to create the illusion of smaller government, which always plays well with the electorate.

How is competitive sourcing done? Federal Agencies must follow Office on Management and Budget (OMB) Circular A-76 (The Circular is currently being revised. The proposed revisions are contractor-friendly, agency/employee unfriendly.)

A-76 Full Studies  Studies take a long time, 18 months is typical, but have gone longer.  Studies are expensive.  About half result in outsourcing.  Successful Most Efficient Organizations displace 30-40% of employees.

What’s wrong with competitive sourcing? There are not enough hours in the day, days in the week, for a full accounting, but let’s look a few of the problems.

“Managerial flexibility,” emphasized by this Administration, is lost.  The Administration wants to dump civil service personnel rules (“merit principles”) to give managers “flexibility to manage”.  But, the Administration has ordered “competitive sourcing” and has established quotas and timelines to do it – totally removing the “flexibility to manage”.

The failings of CS  Degraded mission/public service will result.  Expensive to do (in both funds and human capital).  Lost opportunities.  Contract overruns/add-ons more expensive latter.  Sole source contracts not competitive, are costly.  Savings undocumented (savings a myth?).  Contract administration/compliance poor.  Poor employee morale/productivity in residual organization.  Abuse of contract workers.  Loss of organizational memory/knowledge.

The failings of CS  Firefighting militia will be degraded.  Diminishes agency ability to attract and retain the “best and the brightest” employees.  Reduces ability to develop careers (pipeline gone). (FS Chief Bosworth started as a GS-3 in a FS commercial activity.)  Core functions at risk: because of “infighting,” Chief will not identify and protect core functions.  Worker loyalty diminished: disgruntled feds; contract employees may be loyal to their employer, but that’s not the Forest Service.

The failings of CS You get one chance to get it right. And many opportunities to do it wrong…

You get one chance to get it right.  If the PWS is wrong, you don’t get the work done – or, if contracted, it gets more expensive through add-ones.  If the MEO is wrong, the work goes out.  Once work goes “outhouse,” it rarely comes back into the government.

Outsourcing error costs 650 federal jobs, $30 million DoD 10 yr contract begun in 2001 for $346 million is more costly than doing the work in- house. – DoD Inspector General A consultant hired by DoD overestimated the personnel costs of the government workers' bid, making the contractor's proposal appear to be cheaper by $1.9 million.

CS is a recipe for organizational failure. People Make An Organization Successful  Sign on back of a commercial truck: Our people make the difference!  FS creed: People…our most important resource. OMB’s CS mantra: people don’t matter, only lowest cost counts.

Even if there were reduced costs, would anyone notice? The entire federal employee payroll is only one to two percent of the federal budget. Cost reductions, if they occur, will be not be felt by taxpayers - and will not offset budget increases in other areas.

Cutting federal workers has not resulted in lower government costs. Since 1990, 400,000 federal jobs (25%) have been cut, but since that time the budget has gone up 15%.

The failings of CS OMB’s quotas and timelines were not based on any analysis or strategic planning. (There is no longer an “M” in OMB.)

Are the Quotas for the FS ARBITRARY and UNWISE? “We would not be doing this if we did not have to.” - Anonymous high-level FS official

If competitions are such a good idea… …why didn’t Dale Bosworth do them before now?  Bosworth, in decades as a federal manager, including serving as Regional Forester, never encouraged, ordered or conducted competitive sourcing studies.  Bosworth now claims extensive and disruptive competitive sourcing is best for the FS!

Competitive Sourcing in the Federal Government Number of Positions Competed YearDefense FTEsNon-Defense FTEs 91 1, , , , , ,599 27, ,000?

FS “Strategic” Selection of Work Functions to Compete Information Technology selected. Why? 1) Because it is the “right size” (economy of scale, and it is 1/3 rd of the quota for ’03). 2) Because others have studied IT.

What is the Private Sector experience on outsourcing IT? Company after company is bringing IT “home.” Foremost Insurance outsourced IT to lower costs, but it never happened – costs went up. CIO Cecilia Claudio, “It all starts with pride of ownership. I believe I can do as good a job if not better…than an IT outsourcer.”

What happened to FS IT Managers’ Pride? The Forest Service simply did not believe that it could effectively run a computer helpdesk. Without even trying to form a “most efficient organization” it sent 150 jobs directly to a contractor.

IT Insourcing 78% of executives who have outsourced an IT function have had to terminate that agreement early for reasons of poor service, inflexibility, and high costs. - Diamond Cluster International 11/2002

Does competitive sourcing save money? “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.” - William Thomson, Lord Kelvin

Does contracting out lower costs? Government Accounting Office (1990): “DoD’s Reported Savings Figures Are Incomplete and Inaccurate” (GAO/GD-90-58) GAO Testimony: “Savings estimates did not take into consideration the costs of conducting the studies and implementing the results.” (GAO T, 2002)

Unknowns Neither Congress, the Administration, nor Federal Agencies generally know:  the costs of doing competitive sourcing;  long-term savings, if any;  the current number of shadow employees;  the performance and effectiveness of current contracts.

Contracting out: the disingenuous march toward “smaller government”. The transfer of work from the public to the private sector does NOT reduce the size of government… it’s a shell game.  The question should not be: “How can we contract out more government work?”  But, rather, “Has contracting out already gone too far?”

“The True Size of Government” by Paul Light  Democrats and Republicans alike believe that the true size of government is not to be found in head counts of federal employees but they appear to believe that the American public cannot be trusted with the truth.  Too much of the govt’s shadow appears to be an accident of political pressure, cowardly leadership, and tepid analysis.

Estimating the true size of govt. Defining the government workforce (which includes federal employees, contract and grant employees, postal employees, military personnel, and “mandate” employees) as that needed to fulfill the federal mission, the true size of government in 1996 was 16.9 million employees. Only 1.9 million were civilian federal employees.

Ratio of contract employees to federal employees In 1996: Total contractor work force 5,635,000 Civilian federal work force 1,934,000 There were almost 3 contract employees to each federal employee.

Contracting out has gone too far. Only 1/5 th of private companies used ‘supplemental’ workers to cover more than 10% of their workforce demand. However, “supplemental workers” comprise from 50 to 90% of the federal workforce, depending on how the “shadow” is defined.

Employee/Union Reactions  Be a part of the CS process to minimize harm.  Fight it: Lobby Congress Get the word out Union Grievance (legal action?) on arbitrary CS targets

Congressional Reaction HR 1711: Air Traffic Control System Integrity Act of 2003 would prevent the Department of Transportation from authorizing the conversion of any Federal Aviation Administration facility or the outsourcing of work currently performed by FAA employees in the ATC system to private or public entities other than the U.S. government.

Congressional Reaction TRAC ACT (Truthfulness, Responsibility and Accountability in Contracting Act)  Prohibits contracting out and privatization of current in-house work.  Requires centralized reporting on contracts.  Brings work back to the government if contractor work quality is lacking.

Employee Reaction Public Employees for Environmental Responsibility (PEER) have sued to block DoD plans to outsource hundreds of civilian biologist, botanist and archaeologist positions responsible for protecting natural and cultural resources on 25 million acres of DoD lands across the U.S.

Is Competitive Sourcing the answer to organizational inefficiency? No.  CS takes an inefficient organization and tweaks it to be putatively less costly.  Yet, because CS is not strategic, the organization remains inefficient..

CS is equivalent to taking a losing sports team, retaining all the coaches, firing all the players and bringing in minimally qualified, low-cost replacements.

Is there an alternative? It is easy to be against something, easy to be critical…but to move ahead you have to be FOR something.

HPWO/Strategic Sourcing The Union has proposed forming a “High Performance Work Organization” (HPWO). Strategic sourcing would be emphasized and competitive sourcing would be a component. Competitive sourcing would be a tool, one of many, but would not be the driving force to improve agency efficiency.

Why HPWO/SS?  Study 30,000 positions not just 10,000.  “Sacred cows” less likely to be protected.  “Inherently governmental” barriers become inconsequential.  Core functions identified and strengthened.  Major cost reductions would result.  Can be done with more “soft landings” for employees.

Can HPWO work in the FS? YES!

Will HPWO be given a chance? NO. FS Official: While we agree that strategic sourcing is better, we cannot ask OMB for an exemption to CS to pursue any alternatives. We have failed repeatedly on administration initiatives and have no credibility with OMB.