## [Competitive Sourcing - Questions and Answers]{.underline}

# **[Federal Activities Inventory Reform (FAIR) Act]{.underline}** 

## What is the FAIR Act? 

The Federal Activities Inventory Reform (FAIR) Act took the regulatory
requirement of

OMB Circular A-76 to conduct an annual inventory of commercial
activities and made it

the law in 1998. Under the provisions of the FAIR Act, each agency must
annually

provide OMB with a list of the commercial functions performed in that
agency that are

not inherently governmental. The definitions that led to designations of
"commercial"

and "inherently governmental" are published by OMB and must be applied
in all

government agencies. These lists of commercial functions are also made
available to

the public, after review by and consultation with OMB.

## How does the FAIR Act relate to A-76?

The FAIR Act provides that each time the head of an executive agency
considers contracting with a private sector source for the performance
of an activity included on the FAIR Act inventory, the agency must use a
competitive process to select the source and must ensure that, when a
cost comparison is used or otherwise required for the comparison of
costs, all costs are considered and the costs considered are realistic
and fair. OMB has directed that in carrying out these requirements,
agencies must rely on the guidance contained in OMB Circular A-76 dated
May 29, 2003.

## Will every function listed in the inventory be competed?

No. The inclusion of a function on the agency's inventory of commercial
activities does

not mean that the agency is required to compete the function. Rather,
the FAIR Act

requires that each agency review its inventory of commercial activities.
Presumably,

this review would include consideration of competition, consolidation,
privatization, other reinvention alternatives or maintaining the status
quo. Not all commercial activities

performed by Federal employees must be performed by the private sector,
though all

such activities must be inventoried under the provisions of the FAIR Act
and OMB Circular A-76. The decision as to which commercial functions
represent "core capabilities," and thus should not be competed, remains
with each agency head (bureau director or his/her designee).

## Are there functions that cannot be contracted?

Yes. These are inherently governmental activities that are so closely
related to the

public interest that they require performance by Federal government
personnel.

2

**How are decisions made concerning which functions are inherently**

**Governmental and which are not?**

OMB has issued guidance in the OMB Circular A-76 delineating the
criteria to be used in

determining whether a function is inherently governmental. DOI used
these criteria to

develop its own guidelines to assist the bureaus\' FAIR Act inventory
points of contact in

making their determinations regarding inherently governmental functions.
Inventories

are reviewed by the Departmental Competitive Sourcing Team and
Procurement and

Acquisition Management to ensure consistent designation of functions
across the

Department.

## Can the inventory be challenged?

Under the FAIR Act, "interested parties" can challenge an agency's
judgment about

what is included on the inventory within 30 working days after the
inventory is published; the inventory is published after review and
consultation with OMB. Interested parties include current employees and
their representatives and contractors who are actual or prospective
bidders to perform the function.

**What recourse do affected employees have to challenge the way that
their**

**functions have been classified on the FAIR inventory?**

Interested parties, including current employees who are actual or
prospective bidders

for a function, can challenge what is included on the FAIR inventory.
Any challenge

must be made in writing within 30 working days of the date a notice is
published in the

Federal Register by OMB that the inventory is available. The Federal
Register notice

identifies the person to whom challenges should be sent.

## [OMB Circular A-76]{.underline}

## What is Office of Management and Budget (OMB) Circular A-76?

First promulgated in 1955, OMB Circular A-76, Performance of Commercial
Activities, is the traditional methodology for comparing the value of
performing a function inside

government with the value that can be produced by obtaining that service
from outside

the government. The new OMB Circular A-76 rejected the longstanding
general principle that the government should not perform commercial
functions. The new emphasis is selection of the best service provider,
public or private, as determined through competition. Competition for
these services will ensure they are provided to the public, either by
government employees or the private sector, or other non-Federal
entities such as a university, in the most cost-efficient and effective
manner possible. The key concept behind A-76 is that competition
enhances economy and productivity.

3

## What is a commercial activity? 

Commercial activities are products or services that are obtainable from
a commercial

source. One convenient, although not technically complete way to think
of them is as activities that are listed in the yellow pages. Commercial
activities fall into two categories: 1) functions performed in-house by
Federal personnel, or 2) contracted activities provided by contractor
personnel. OMB defines commercial activity as a recurring service that
could be performed by the private sector and is an agency requirement
that is funded and controlled through a contract, fee-for-service
agreement, or performance by government personnel.

## What is an inherently governmental activity?

An inherently governmental activity is a function so intimately related
to the public

interest that it mandates performance by government personnel. These
activities require the exercise of substantial discretion in applying
government authority and/or in making decisions for the government.
Inherently governmental activities normally fall into two categories:
the exercise of sovereign government authority or the establishment of
procedures and processes related to the oversight of monetary
transactions or entitlements. An inherently governmental activity
involves: 1) Binding the United States to take or not to take some
action by contract, policy, regulation, authorization, order, or
otherwise; 2) Determining, protecting, and advancing economic,
political, territorial, property, or other interests by military or
diplomatic action, civil or criminal judicial proceedings, contract
management, or otherwise; 3) Significantly affecting the life, liberty,
or property of private persons; or 4) Exerting ultimate control over the
acquisition, use, or disposition of United States property (real or
personal, tangible or intangible), including establishing policies or
procedures for the collection, control or disbursement or appropriated
and other federal funds.

Has any contractor won an A-76 study by appealing a tentative decision
to award the work to the government?

Yes. There have been some decisions by the General Accounting Office's
Comptroller

General overturning agency A-76 decisions to retain a function in-house.
In those

cases, the appealing contractor won the study on appeal.

## [Competitive Sourcing Background Information]{.underline}

## What is Competitive Sourcing? Why is it being emphasized?

Competitive Sourcing is the process through which commercial-type
activities that are

currently performed by governmental agencies are evaluated,
re-engineered for

efficiency, and where appropriate are offered to the private sector for
bidding on a

competitive basis in order to ensure that customers, stakeholders, and
citizens are

4

provided services at the best possible value. Used judiciously, it can
be one of the most

effective tools for improving the Federal workforce. It is one of the
five elements of the

President\'s Management Agenda. Collectively, these five elements are
designed to

provide better service to the American citizen by improving how
government works.

Competitive Sourcing can be accomplished using OMB Circular A-76
methodologies. Its purpose is improved service: not downsizing,
streamlining, contracting out or cost-cutting.

## Does Competitive Sourcing mean DOI does not value its employees?

Our employees are our most valued resource. Department of the Interior
is

implementing the Competitive Sourcing process in accordance with the
August 2001

President's Management Agenda in order to explore the potential for
further improving

citizen service and effectiveness. Every effort will be expended to
ensure department

employees receive fair and equitable treatment during Competitive
Sourcing reviews.

The President has emphasized the importance of government to being
accountable and

up-to-date. Improvements resulting from competitive sourcing may relieve
many current workplace frustrations because of efficiencies we can
realize by working smarter.

## Why is Department of the Interior engaging in competitive sourcing?

We are always looking for ways to provide better value to our customers.
We are also always looking for ways to work smarter so we can free up
cash to reinvest in our mission. The Federal Activities Inventory Reform
Act (FAIR) of 1998 requires that Federal agencies annually provide the
OMB and the Congress a list of commercial functions they perform that
are not considered inherently governmental. In FY 02/03, OMB required
all agencies to subject to competition 15% of their commercial
functions. The results of the FY 02/03 studies at Interior yielded
annual savings of \$2.4 million at a one-time cost of \$2.1 million.
This has produced new cash for the bureaus to use to restore facilities,
fight invasive species, and invest in other priorities. In FY 04, we are
studying additional functions.

Are there FTE reduction goals or targets for DOI or its bureaus
associated with Competitive Sourcing?

No. There are no FTE reduction goals. The focus of competitive sourcing
is the efficient and effective delivery of services or products to the
customer. Competitive sourcing is a process that implements change. One
aspect of an organization that might change is the amount of staff
needed to deliver the service or product. The scope and nature of the
changes required are a result of the process and are not to be guided by
any predetermined expectations.

## 5

## Does competitive sourcing target blue-collar jobs?

No. Competitive sourcing potentially includes the entire workforce
except positions that are determined to be inherently governmental.

## Which jobs will be studied under Competitive Sourcing?

The functions and positions to be studied are selected by management
officials in the

bureaus/offices, with subsequent consultation with the Office of the
Secretary. Factors to be considered when choosing activities to study
for competitive sourcing include:

are there unusually large numbers of vacancies projected for this
activity, has the activity already been successfully outsourced within
the agency or the Federal government, do private sector sources exist to
perform the activity, does the agency currently have a skills gap,
technology gap or staffing shortage in the activity, and might
contracting allow us to avoid having to make a large capital investment
in equipment.

Are all Bureaus and Offices in the Department of the Interior
participating in competitive sourcing?

Yes.

## How many positions at Interior will be reviewed through FY 2004?

Interior will review activities involving about 5,000 positions for
possible competitive

sourcing by the end of fiscal year 2004. This represents about 25% of
the DOI

positions on the FY 00 FAIR Act commercial inventory and about 7% of the
total employment at Interior.

## Will there be direct conversions in DOI?

Prior to the new OMB Circular A-76 disallowing direct conversions after
May 29, 2003, DOI looked at direct conversions, formal A-76 cost
comparison studies, and

streamlined A-76 studies. As part of the Administration's competitive
sourcing

requirements, a number of FTEs across the Department were directly
converted. Interior took extra steps to protect employee interests
beyond what the old circular required for direct conversions. These
conversions have not resulted in the separation of fulltime permanent
employees. Any direct conversion at DOI required a complete business
case analysis.

## [Methodologies, Timetables and Responsibilities]{.underline}

## What is the A-76 study methodology?

The key concept of A-76 is that competition enhances quality, economy
and productivity. OMB Circular A-76 provides procedures to conduct
managed competitions between

6

public and private sectors. Such competitions will determine whether
it\'s better for a function to be performed by the private sector, by an
in-house government workforce, or through an inter-service support
agreement with another government activity. In A-76 competitions,
agencies and contractors are equal and viable competitors.

The A-76 process provides a level playing field between public and
private providers of

goods/services, encourages competition and choice in the performance of
commercial

activities, and helps ensure that sound and justifiable business
decisions are made.

Competition is important to ensuring financial flexibility and reducing
costs. An A-76

study will examine and improve the processes and make them more
cost-effective. An

A-76 study does not necessarily result in \"contracting out\" a
function - rather, an A-76

study can help us develop a more efficient government operation and
demonstrate its

effectiveness through competition. A full A-76 cost comparison study
generally takes 12 months to complete but may be extended up to 18
months.

## How does the A-76 competition process work?

Following the guidelines set forth in OMB Circular A-76, the managed
public/private

competition process examines the financial impact of continuing to
provide certain

services in-house or by contract. A team of employees or a consultant
(or a

combination of employees and consultant support) develops a performance
work

statement (PWS) and a quality assurance surveillance plan (QASP). A
second team,

the agency bid team, separately and confidentially, prepares a proposal
for undertaking

the function described in the PWS, much as a commercial source would do.
Specific

guidelines are included in the process to cover all costs and
performance requirements. The government participates in the competition
on an equal basis with the commercial sources. Using this process, the
competition winner, whether commercial or governmental, must adhere to
and meet the performance parameters contained in the PWS.

The agency bid team is established within an affected function to design
and create a

management plan that includes a Most Efficient Organization (MEO) to
compete against

industry. The creation of a management plan also includes developing an
in-house cost

estimate based on the MEO. The MEO estimates the number and type of
government

personnel required to perform the tasks cited in the PWS. The
MEO/in-house cost

estimate will be completed at the same time initial offers are due from
private sector

firms on the solicitation containing the PWS.

Once initial private sector offers are received, these offers are
evaluated and rated like

any other service contract solicitation. The government will determine,
based on \"best

value\" (performance value relative to cost), the best private sector
offer. Once this

selection is made, the best private sector offer is compared with the
government's

in-house cost estimate. A decision is made between the private sector
offer and the

7

MEO based predominantly on price (after the government bid is
automatically given a 10 percent advantage in personnel costs). Once
this decision is made, conversion process to either the MEO or a private
contract must begin.

**How does competitive sourcing differ from privatization?**

The OMB Circular A-76 as revised on May 29, 2003, no longer allows
direct conversions. It used to allow agencies to contract out positions
without any economic analysis. However, at Interior, we always required
an economic analysis with direct conversions, in order to protect
employees and the public.

## How does competitive sourcing differ from privatization?

# Some think competitive sourcing is synonymous with privatization. This assumption is

not correct. Under competitive sourcing there is managed competition
between the

public and private sector to determine the most cost effective methods
of

accomplishing a function. Privatization refers to a decision by the
government to get out

of a given line of business and turn over operations and possibly assets
to the private sector, with or without competition. Privatization is the
process of changing a government program to private management, control
and/or ownership.

Under privatization, the government no longer retains responsibility or
control over the

delivery of the privatized goods or services, depending on the
privatization model used.

## What is a Performance Work Statement (PWS)?

A PWS is a statement of the technical, functional and performance
characteristics of

the work to be performed, identifies essential functions to be
performed, determines

performance factors, including the location of the work, the units of
work, the quantity of

work units, and the quality and timeliness of the work units. It serves
as the scope of

work and is the basis for all costs entered on the Cost Comparison Form.

## What is a Quality Assurance Surveillance Plan (QASP)?

The QASP is the government's plan to inspect either contract or in-house
performance

to determine if services meet required quality and quantity standards
set forth in the

Performance Work Statement (PWS). The plan describes methods of
inspection to be

used, the reports required, and the resources to be employed, with
estimated work

hours. A QASP should focus on performance outcomes.

## How will the comparative evaluations be conducted?

The Performance Work Statement will define what is being requested, what
the

performance standards and measures are, and what time frames are
required. The

procurement will be conducted in accordance with the Federal Acquisition
Regulation

8

and OMB Circular A-76. The source selection board (as determined by the
contracting officer and the managers in the activity under study) will
evaluate all contractor proposals and select the best value, considering
technical, cost evaluation and past performance. Then, after all
necessary adjustments have been made to ensure that the government's
in-house cost estimate and the other offers are based on the same scope
of work and performance standards, the contracting officer will open the
government's in-house cost estimate and/or provide it to the study team
to complete the cost comparison.

**Should an activity wait until it has been identified for cost
comparison to begin optimizing work processes?**

No. Begin immediately. Where an organization can begin to improve
performance and

service prior to initiating a competitive sourcing study it should do
so. Improvements

should not be undertaken once a study has been formally announced. Until
such time as an activity has been identified for study, employees should
work to prioritize tasks and

identify those that could be contracted regardless of the competitive
sourcing initiative.

Improving service and product delivery should be an ongoing activity.

## What should an employee do for himself or herself while the study is taking place?

# While the study is taking place, employees are expected to continue performing their

work assignments in the same manner as before the study was announced.
Until the

study is completed and a decision made, it is impossible to predict the
outcome or

degree of impact. At Interior, our employees have won about two-thirds
of the competitions that took place in FY 2002/2003. While feelings of
uncertainty, stress, and/or anxiety are natural, the organization is
committed to providing a supportive atmosphere to help employees be
proactive in dealing with these emotions. However, we would encourage an
employee not to change jobs with so many unknowns.

How can an employee help safeguard information that may give prospective
contractors an unfair advantage?

During the course of the study, employees should only discuss their jobs
and the nature

of their work with those who have a genuine need to know. While the
study is

underway, prospective contractors may try to find out about an
employee's job through

casual conversation with the employee. The employee may not even know
that person

is associated with a contractor. In short, employees should know who
they are talking

to and why. All persons with any knowledge of the functions under study
are obligated

to safeguard that information.

## 9

## [Personnel Issues]{.underline}

**How and when will employees know that the work performed by their
position is eligible for competitive sourcing?**

# As soon as any legally required union consultation has occurred, their bureaus will notify

affected employees. Affected employees will be kept apprised of the
status of the

competitive sourcing initiative at every major milestone of the process
or at least every

30 days.

## How and when can unions participate in the competitive sourcing process?

The Department and individual Bureaus, as appropriate, will consult with
national unions

and local bargaining units prior to announcing any competitive sourcing
studies. Unless

otherwise provided for in existing bargaining unit agreements, unions
will be limited to

participating in the development of the PWS.

## Will employees have any input into the review and cost comparison process?

# There is opportunity for employees to participate in teams and workgroups that are

involved in the process. It is the supervisor's responsibility to make
assignments and

determine how best to accomplish the work. Participation on the PWS,
Management

Plan and source selection teams needs to be carefully managed to
minimize certain

functional conflicts of interest and to protect the employees' rights of
first refusal.

Where a formal Competitive Sourcing cost comparison is initiated, DOI
will follow OMB Circular A-76. In addition, upon issuance, a
solicitation used in the conduct of a cost comparison will be made
available to directly affected Federal employees or their
representatives for comment. The employees or their representatives will
be given sufficient time to review the document and submit comments
before final receipt of offers from the private sector. Private sector
offerors shall also comment as provided by the Federal Acquisition
Regulation (FAR).

Can employees bid on their own work? If employees can form groups and
bid on their own work, don't they have the advantage over a contractor
bidding on the same work? Is this fair?

# The A-76 process allows employees to bid on their own work through the process of

designing a Most Efficient Organization (MEO) and formulating a
government cost

estimate. The FY 04 Interior appropriations law requires that studies of
10 FTEs or more allow for creation of an MEO option. The Department also
strongly supports MEOs as being good for employees and good for the
taxpayer. The procedures in OMB Circular A-76 are designed with
safeguards to ensure fairness to all affected parties.

10

There is also the possibility that employees may wish to form their own
company and

bid on the work. If that is the case, certain government ethics
limitations and Federal

Acquisition Regulation (FAR) restrictions would apply and would need to
be addressed.

Contact the Competitive Sourcing Center, 202-219-0727, for more
information on

bidding or the Departmental Office of Ethics, 202-208-5916 for more
information on

ethics limits.

Can employees appeal the outcome of a cost comparison decision that
results in the work of their positions being contracted out?

Yes. In standard competitions, a directly interested party (see
Attachment D, OMB Circular A-76) may contest any of the following
actions taken in connection with a standard competition: (1) a
solicitation; (2) the cancellation of a solicitation; (3) a
determination to exclude a tender or offer from a standard competition;
(4) a performance decision, including, but not limited to, compliance
with the costing provisions of this circular and other elements in an
agency's evaluation of offers and tenders; or (5) a termination or
cancellation of a contract or letter of obligation if the challenge
contains an allegation that the termination or cancellation is based in
whole or in part on improprieties concerning the performance decision.
The pursuit of a contest by a directly interested party and the
resolution of such contest by the agency shall be governed by the
procedures of FAR Subpart 33.103. In a streamlined competition, no party
may contest any aspect of a streamlined competition.

What happens to DOI employees if the function is awarded to the in-house
DOI organization (the Most Efficient Organization)?

If the Most Efficient Organization is awarded the contract, DOI will
work hard to help

any affected employees.

Given the expected changing nature of the workforce in the coming years,
it is the

Department's goal to either avoid or minimize the need for Reductions in
Force (RIFs).

It is worth noting that of the nearly 3,000 positions studied to date
under competitive sourcing, not a single fulltime permanent employee has
been involuntarily separated from the Department. We have early out and
buyout authority, as well. If, as a last resort, RIF is necessary,
affected employees have many rights and benefits of which DOI will make
maximum use. Affected employees will be provided numerous career
transition services and get placement consideration for positions
elsewhere inside the bureau, in other DOI bureaus, and other Federal
agencies. Where possible, we will also train affected employees for
other DOI occupational areas. Employees should understand that there is
no guarantee that these options will be available in all instances, or
in a timely manner. If separated from the Federal service, employees
will continue to receive placement assistance for one to two years and
also be eligible for severance pay and unemployment compensation.
Numerous benefits are also provided through the State employment
services.

11

**What happens to the DOI employees at the end of an A-76 study if the
function is awarded to a private sector contractor?**

# In addition to the benefits available to employees who are affected if the contract is

awarded to the MEO, employees whose functions undergo full A-76 studies
and

subsequently are converted to a private sector contractor are eligible
for Right of First

Refusal (ROFR). Federal acquisition regulations provide for the Right of
First Refusal

(ROFR) which requires that for full A-76 studies, the successful
contractor offer

affected Federal employees first consideration for open positions
available under the

contract for which they qualify. A standard clause indicating this is
included in cost

comparison solicitations. For streamlined awarded to the private sector,
contracting officers can negotiate that ROFR be included in the
contract. As previously stated, to date no fulltime permanent employee
has been involuntarily separated from the Department as a result of
competitive sourcing. We also have authority to offer early outs and
buyouts to affected employees.

Is a contractor obligated to offer the same compensation and benefits
package as DOI?

A contractor must pay wages based on the Department of Labor Service
Contract Act

(SCA) wage determinations specified in the solicitation. Except for bona
fide executive,

administrative and professional positions exempt from SCA wage
determination

coverage, any employee must be paid the minimum wage determined by the
Federal

Labor Standards Act. Contractors do not have to pay the same as the
government

does and there is no requirement that the selected contractor be
obligated to include

any benefits not included in a SCA wage determination. However, there
are contractors

who have employee benefit packages that offer higher salaries and
benefits than the

government. There have been actual experiences where seasonal DOI
employees have gone to work for successful contractors and been given
fulltime jobs with benefits.

**What types of programs are available to assist federal employees who
are**

**separated or face separation by reduction in force?**

The Department of the Interior (DOI) Career Transition Assistance Plan
(CTAP)

provides career transition and placement services for DOI employees who
have been,

or are faced with, separation by RIF:

***Career Transition Training and Support Services***: The Department of
the Interior

# University (DOIU) will provide career transition services to surplus and displaced

employees affected by RIF to help give them the skills and resources
necessary to find

other employment. Types of services offered may include skills
assessment, resume

preparation, counseling, job search assistance, etc. Eligible displaced
employees can

12

use the career transition services for up to one year following the
separation. For

further information contact the Director, DOIU Learning and Performance
Centers, at

\(202\) 208-5616.

***Special Selection Priority (SSP):*** The SSP gives selection priority
to well-qualified DOI

employees who receive an official surplus or RIF notice and apply for
DOI vacancies

that are in the local commuting area and are at the same grade from
which the

employees are being separated (or have the same full performance level).
This SSP is

available to eligible employees while they are still on DOI rolls.
Eligible employees must be selected before other candidates within or
outside of DOI may be selected.

***Reemployment Priority List (RPL):*** The RPL provides placement
assistance for DOI

positions in the local commuting area to employees who receive an
official surplus or

RIF notice and register for the program. RPL priority placement
consideration is given

for up to 2 years after separation. Eligible employees must be selected
before other

candidates outside of DOI may be selected.

***Interagency Career Transition Assistance Plan (ICTAP):*** The ICTAP
gives selection

priority to well-qualified DOI employees who have received a specific
RIF notice and

apply for other Federal agency vacancies that are in the local commuting
area and are

at the same grade from which the employee is being separated (or have
the same full

performance level). ICTAP selection priority is available to eligible
employees for up to

1 year after separation. Eligible employees must be selected before
other candidates

outside of the other Federal agency may be selected.

For more information regarding career transition services and programs,
please see the

OPM Employee's Guide to Career Transition. A copy may be obtained online
at

http://www.opm.gov/rif/general.htm.

When is an employee whose job has been abolished eligible for
discontinued service retirement?

An employee is eligible for discontinued service retirement under both
CSRS and FERS

only if the employee is reached for an involuntary action (such as job
abolishment or

reassignment to a position in a different commuting area), and does not
receive an offer

from his or her agency of another position in the same local commuting
area that is

within two grades of the employee\'s present position.

a.  The employee must be at least age 50 and have completed 20 or more
    years

> of total creditable service, or

b\. The employee may be any age, but must have completed a minimum of 25

years of total creditable service.

13

Under the Civil Service Retirement System (CSRS), the gross annual
annuity of an

employee who retires before age 55 on a discontinued service retirement
is reduced by

2% a year (or the month fraction thereof) for each year the employee is
under 55.

Under the Federal Employees Retirement System (FERS), there is no
annuity reduction

for employees who retire on a discontinued service annuity under the age
of 55.

## What is RIF (reduction in force)? How does it apply to competitive sourcing?

# Reduction-in-Force (RIF) refers to the statutory and regulatory procedures federal

agencies must follow when it is necessary to lay off employees, furlough
them for more

than 30 days, reassign them when doing so would displace another
employee, or demote them because of lack of funds, reorganization,
changes in program or decreases in work. Any of these situations might
arise when a function previously performed in-house is converted to
contract or the MEO implementation results in fewer positions. For more
information, see the OPM Employee\'s Guide to RIF. A copy may be
obtained online at http://www.opm.gov/rif/general.htm.

**What if an employee is not separated through RIF but instead
experiences a change to lower grade as a result of RIF procedures. Do
grade and pay**

**retention provisions apply?**

Grade and pay retention apply in certain situations when an employee is
demoted

through no fault of his/her own. For example, if an employee's position
is abolished by

virtue of being converted to a private sector contractor or the MEO, and
that employee is

placed in a lower graded position through RIF procedures, then grade
retention would

apply as long as the employee had served the 52 consecutive weeks (or
more) at a

grade level higher than the grade to which the employee was demoted.

## How long does grade retention last and how does it work? 

Eligible employees may receive grade retention for two years commencing
on the date

in which the employee is placed in the lower graded position. During the
two-year

period, an employee's retained grade is considered the employee's grade
for pay

administration purposes, retirement, life insurance, eligibility for
training, and

noncompetitive promotion. The employee is entitled to receive within
grade increases

and comparability increases at the retained grade level.

## What is pay retention and how long does it last?

Pay retention comes into play when the two-year grade retention period
expires for

employees who were changed to a lower grade due to RIF procedures.
Example: If an

employee whose job was converted to a private sector contractor or the
MEO had been

changed to a lower grade and was unable to find a job at his or her
original grade during

14

the two-year grade retention period, then at the end of the two-year
grade retention

period, he or she is reclassified to the lower grade but is placed on
pay retention. The

employee is then entitled to retain his/her rate of basic pay earned in
the position prior to

the RIF that is higher than the maximum rate of the lower graded
position.

Unless terminated under the conditions spelled out in Title 5, Code of
Federal

Regulations (CFR) 536.209, pay retention continues until the maximum
rate for the

grade the employee is occupying equals or exceeds the employee's
retained pay rate.

Under pay retention, an employee only receives 50 percent of the annual
pay

adjustment. Thus, each year the gap between the employee's retained pay
rate and the

rate of pay for the position occupied gets smaller.

## How are Federal benefits affected in a RIF situation?

The Office of Personnel Management's Employee's Guide to Benefits for
Those

Affected by Reduction in Force covers how an employee's retirement,
health, life

insurance and the Thrift Savings Plan are affected when the employee is
separated

under RIF regulations. A copy may be obtained online at
http://www.opm.gov/rif/general/egrifben.htm.

## Do severance pay and unemployment compensation apply in RIF?

Yes. If an employee is separated under a RIF, is not eligible to retire,
and is not drawing

military retirement, that employee is entitled to severance pay and
unemployment

compensation. The employee\'s Servicing Personnel Office can provide him
or her with

estimates of what the severance pay will be. Employees can also estimate
the amount

of their severance pay using the OPM Employee's Guide to Benefits for
those affected

by RIF. Servicing Personnel Offices can also provide for information
about

unemployment benefits.

Does an employee have rights under the EEO process to file for alleged
discrimination (age, race, etc.) when and if their position is (1)
identified as commercial in the inventory phase or (2) outsourced at the
end of a competitive sourcing study?

Any employee who believes that he/she has been subjected to
discrimination on the basis of race, color, sex, national origin,
religion, disability, or age, can file an EEO complaint on any
employment matter. Therefore, this matter would be covered. Whether or
not the conversion, etc., was discriminatory is a different issue. What
is questionable, is whether an employee can file a complaint concerning
a conversion because of alleged discrimination based on sexual
orientation. This is different from the other basis because the other
basis (race, etc., is a matter of law), the sexual orientation is an
internal administrative process.

15

Under existing rules, is there an appeal process for studies of 10 and
Fewer FTE?

The appeal is limited to agency management **compliance** with the
criteria contained in OMB Circular A-76 and its Supplemental Handbook.
**Compliance** with the Circular by agency management and their
application to the function/site in question can clearly be appealed.
Employees can review and appeal a contracting officer decision with
regard to the availability of fair and reasonable prices.