U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

88–936 PDF 2004

S. Hrg. 108–244

THEN AND NOW: AN UPDATE ON THE BUSH

ADMINISTRATION’S COMPETITIVE SOURCING

INITIATIVE

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JULY 24, 2003

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE RECHTSCHAFFEN, Minority Staff Director and Chief Counsel 

AMY B. NEWHOUSE, Chief Clerk

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD J. DURBIN, Illinois 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

MARIANNE CLIFFORD UPTON, Minority Staff Director and Chief Counsel 

CYNTHIA SIMMONS, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Durbin ................................................................................................. 1

Senator Voinovich ............................................................................................. 12 

Senator Lautenberg .......................................................................................... 14

Senator Akaka .................................................................................................. 17

Senator Carper ................................................................................................. 52 

WITNESSES 

THURSDAY, JULY 24, 2003

Angela Styles, Administrator, Office of Federal Procurement Policy, Office 

of Management and Budget ................................................................................ 20

Hon. David Walker, Comptroller General, U.S. General Accounting Office ....... 23

Jacques Gansler, Ph.D., School of Public Affairs, University of Maryland ........ 39

Paul C. Light, Senior Fellow, The Brookings Institution ..................................... 42

Charles Tiefer, Professor of Law, University of Baltimore .................................. 44

Frank Camm, Ph.D., Senior Analyst, RAND ........................................................ 45

ALPHABETICAL LIST OF WITNESSES

Camm, Frank, Ph.D.: 

Testimony .......................................................................................................... 45

Prepared statement .......................................................................................... 190

Gansler, Jacques, Ph.D.: 

Testimony .......................................................................................................... 39

Prepared statement with an attachment ....................................................... 93

Light, Paul C.: 

Testimony .......................................................................................................... 42

Prepared statement .......................................................................................... 159

Styles, Angela: 

Testimony .......................................................................................................... 20

Prepared statement with an attachment ....................................................... 57

Tiefer, Charles: 

Testimony .......................................................................................................... 44

Prepared statement .......................................................................................... 175

Walker, Hon. David: 

Testimony .......................................................................................................... 23

Prepared statement .......................................................................................... 81

APPENDIX

Letter from Senator Lieberman, dated July 24, 2003, sent to Joshua Bolton ... 5

Prepared statements submitted for the Record from: 

Federally Employed Women (FEW) ................................................................ 202

Colleen M. Kelley, National President, National Treasury Employees 

Union ............................................................................................................. 207

Bobby L. Harnage, Sr., National President, American Federation of Government Employes, AFL–CIO ...................................................................... 215

William Dougan, President, Forest Service Council, National Federation 

of Federal Employees, International Assn of Machinists & Aerospace 

Workers AFL–CIO ........................................................................................ 243

Stan Soloway, President, Professional Services Council ............................... 249

The President’s Management Agenda, Executive Office of the President, Office of Management and Budget, Fiscal Year 2002 ........................................... 259

Page

IV

Questions and Responses for the Record from: 

David M. Walker, Comptroller General of the United States ...................... 274

Administrator Styles ........................................................................................ 278

(1)

THEN AND NOW: AN UPDATE ON THE BUSH 

ADMINISTRATION’S COMPETITIVE SOURCING INITIATIVE 

THURSDAY, JULY 24, 2003

U.S. SENATE, 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE,

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:43 a.m., in room 

SD–342, Dirksen Senate Office Building, Senator George V. 

Voinovich (Chairman of the Subcommittee) presiding. 

Present: Senators Voinovich, Akaka, Durbin, Carper, and Lautenberg. 

Senator VOINOVICH. I would like to welcome everyone here to the 

Subcommittee on the Oversight of Government Management, the 

Federal Workforce, and the District of Columbia’s hearing to discuss the past, present and future of the Bush Administration’s 

competitive sourcing agenda. 

Senator Durbin has indicated to me that he is in the midst of a 

markup in the Judiciary Committee, and I would like to accommodate him and give him an opportunity to make his opening statement before I make my statement as Chairman of the Subcommittee. 

Any objection to that Senator Lautenberg? 

Senator LAUTENBERG. Not really. [Laughter.] 

Senator VOINOVICH. Senator Durbin. 

OPENING STATEMENT OF SENATOR DURBIN 

Senator DURBIN. Thanks for the vote of confidence, Mr. Chairman, and my colleague, Senator Lautenberg. 

Thank you all for joining us today, and thanks for convening this 

morning’s hearing to examine the complex and controversial topic 

of competitive sourcing initiative being advanced by the administration. 

I want to thank the Chairman for his willingness to hold this 

first Senate hearing on this topic since the publication of the rewritten OMB Circular A–76 in May. I have heard from a lot of my 

constituents who are proud Federal public servants, dedicated to 

their chosen professions, who expressed their growing apprehension about what the administration’s plans might do to their jobs. 

Federal employees are concerned that agencies are conducting 

competitions simply to meet quotas, not because there are valid 

2

reasons to believe the private sector could do the work more efficiently. 

Federal employees are concerned under the rewritten rules the 

definition of what is inherently governmental has evolved into a 

stringent test that is specified under Federal law by adding inappropriate modifiers or conditions, and they are concerned as well 

that even when A–76 competitions are adequately performed, careful analysis cannot establish that decisions have been beneficial 

and cost-effective. They are concerned that outsourcing decisions 

will not be based on merit or cost savings, but on OMB mandates, 

and because of the unprecedented magnitude of OMB’s quotas, the 

variability of the agency’s to fulfill their missions will be put at 

risk. 

Numerous questions need to be asked and answered. Do the 

agencies have the resources to carry out fair and equitable competition? Have Federal agencies lost the capability to effectively perform their missions due to over outsourcing? How will current competitive sourcing quotas affect capabilities, and how are we going 

to monitor this to make sure that the private sector is doing the 

job and doing it well? 

Mr. Chairman, I note you have raised the issue of human capital 

implications. If there is one issue that has been the hallmark of 

your Senate career, it is your dedication to professionalism and improving the Federal workforce. It strikes me that it will be just 

about as formidable as the perils of Sisyphus to make any headway 

in tackling the human capital challenge by trying to recruit and retain the best and brightest Federal workforce, when in the same 

breath, these Federal workers are being told, ‘‘Oh, by the way, over 

the next few years, one out of four jobs could disappear into the 

private sector. How are you going to maintain morale and interest 

in aspiring to Federal service with that hanging over the Federal 

workforce.’’

It is no wonder there is real concern about morale among the 

Federal workforce. How can we possibly expect peak performance 

when those we entrust with meeting missions on the front line are 

consumed with concerns about whether their career is at stake on 

any given day because of an OMB order. 

This is a real Catch-22. In an effort to meet these quotas, Federal agencies may not have the personnel in place to even handle 

the competitions. 

I would like to make the rest of this statement part of the record, 

Mr. Chairman, and thank you of raising this issue. 

[The prepared statement of Senator Durbin follows:]

PREPARED OPENING STATEMENT OF SENATOR DURBIN 

Thank you, Mr. Chairman, for convening this morning’s hearing to examine the 

complex and controversial topic of the Competitive Sourcing Initiative being advanced by the Administration. 

I applaud your willingness to hold this first Senate hearing on this subject since 

the publication of the rewritten OMB Circular A–76 in May. I also appreciated your 

interest and participation in a similar hearing I chaired in March 2002 on the issue 

of ‘‘Who’s Doing Work for the Government?: Monitoring, Accountability and Competition in the Federal and Service Contract Workforce.’’

I have heard from many of my constituents who are proud Frderal public servants 

dedicated to their chosen professions but who express their growing apprehension 

3

about what this Administration’s plans for competing jobs may do to their livelihoods. 

Federal employees are concerned that agencies are conducting competitions simply to meet quotas, not because these are valid reasons to believe that the private 

sector could do the work more effectively. 

Federal employees are concerned that under the rewritten rules, the definition of 

what is an ‘‘inherently governmental’’ function has been morphed with a more stringent test than specified under Federal law by adding inappropriate modifiers or conditions. 

Federal employees are concerned that even when A–76 competitions are adequately performed, careful analysis cannot establish that decisions have been beneficial and cost-effective. 

Federal employees are concerned that outsourcing ‘‘decisions’’ will not be made 

based on merit or cost savings, but on OMB’s mandates and the lack of agency familiarity with the A–76 process. 

And because of the unprecedented magnitude of OMB’s quotas, the very ability 

of agencies to fulfill their missions will be put at risk and tens to hundreds of thousands of civil servants will be displaced. 

Numerous questions need to be asked and answered. Are OMB’s quotas justified 

by considered research and sound analysis, and are they consistent with the mission 

of the agencies? Are internal agency quotas so jusitified? 

Do the agencies have the resources to carry out fair and equitable competitions? 

Have Federal agencies lost the capability to effectively perform their missions due 

to over-outsourcing? How will current competitive sourcing quotas affect their capabilities? 

How are we monitoring and evaluating the costs and the quality of services being 

performed in the private sector under contract with the Federal Government? Do 

the current rules and practices ensure that in-house talent gets a fair opportunity 

to compete for their jobs? 

Mr. Chairman, I note that you have raised the issue of human capital implications of this effort. It strikes me that it will be just about as formidable as the perils 

of Sisyphus to make any headway in tackling the ‘‘human capital’’ challenge by trying to recruit and retain the best and brightest to the Federal workforce when in 

the very next breath they’re being told that, ‘‘oh, by the way, over the next few years 

one out of every four jobs could potentially disappear into the private sector.’’

It’s no wonder there’s angst and anguish capturing headlines like this one from 

June 10th’s edition of The Washington Post: ‘‘Cuts Sap Morale of Parks Employees’’ 

with the subhead of ‘‘Many Fear Losing Jobs to Outsourcing.’’

How can we possibly expect peak performance when those whom we entrust with 

meeting agency missions on the front line are consumed with concerns about the 

continuation of their careers? At what point do efforts to study whether to privatize 

become counterproductive and disruptive to government operations? 

It also strikes me that we have a Catch-22. In an effort to meet these quotas, Federal agencies may not have the personnel in place to even handle the competitions. 

As they bump up against what are now even tighter deadlines, they may end up 

just directly concerting the work to the private sector or using streamlined processes 

that may not provide essential protections. 

We really don’t have a trove of solid, agency-by-agency information about the costs 

and performance of work that is being performed for the government under contract. 

I have long been interested in whether we have a good system (or any system at 

all) to measure and account for these costs, determine if there are savings, and oversee the work that is being done with Federal funds. 

It’s been my impression that some of my colleagues have been just hidebound to 

outsource, without regard to either the price tag or the performance. Their motivation is to reduce the size of the Federal workforce—at any cost. 

When I have suggested amendments—arguing that we had to save money, they 

rejected them. They told me that’s not the point—we have to turn some lights out 

in some Federal buildings. I’d like to know whether that’s still driving the 

outsourcing fervor. 

During the last Congress, joined by over two dozen colleagues, I introduced legislation to try to get a better handle on this situation. I am putting the finishing 

touches on similar legislation to be introduced shortly. Mr. Chairman, I’d like to 

share a draft with you with the hope that you could join me in making this a bipartisan effort. 

The TRAC Act would require Federal agencies to track the costs and savings from 

contracting out. It also calls for a comparative study of wages and benefits, conducted by the Office of Personnel Management and the Department of Labor to get 

better information. GAO has indicated that since contractors have no oblication to 

4

furnish the necessary data, it is difficult to assess this. The bill provides a reasonable opportunity for Federal agencies to make substantial progress in carrying out 

the tracking requirements before enforcement remedies like suspension of further 

outsourcing would be invoked. 

I am concerned that decisions to shift work to the private sector be made fairly, 

not arbitrarily; that public-private competition is fostered; and that we have a reliable system in place to track costs and performance of work being performed with 

Federal funds by the private sector under these contracts. In sessence, real accountability and true transparency. 

I also hope that we can get an answer to another important question about 

whether OMB is paying any attention to a Congressional directive prohibiting the 

use of arbitrary numerical quotas in its push to privatize work performed by Federal employees. I’m referring to Section 647 of Division J of the FY03 Omnibus Appropriations (P.L. 108–7) signed into law on February 20 of this year. Specifically, 

bill language stated that

‘‘[N]one of the funds made available in this Act may be used by an agency of 

the executive branch to establish, apply, or enforce any numerical goal, target, 

or quota for subjecting the employees of the executive agency to public-private 

competitions or for concerting such employees or the work performed by such 

employees to private contractor performance under the Office of Management 

and Budget Circular A–76 or any other administrative regulation, directive, or 

policy unless the goal, target, or quota is based on considered research and 

sound analysis of past activities and is consistent with the stated mission of the 

executive agency.’’ (emphasis added)

and conference report language provided that:

‘‘If any goals, targets, or quotas are established following ‘considered research 

and sound analysis’ under the terms of this provision, the conferees direct the 

Office of Management and Budget to provide a report to the Committees on Appropriations no later than 30 days following the announcement of those goals, 

targets, or quotas, specifically detailing the research and sound analysis that 

was used in reaching the decision.’’

I would like to note for the record that this morning, our full Committee’s Ranking Member, Senator Joe Lieberman, is sending a letter to OMB Director Joshua 

Bolten seeking answers to vital questions about the Administration’s compliance 

with this particular provision and the reporting responsibilities. I ask unanimous 

consent that a copy of Senator Lieberman’s letter be made a part of the record of 

this proceeding, and that the record be left open to permit inclusion of the Administration’s response. 

Mr. Chairman, I think today’s hearing will be an opportunity to probe these and 

other issues. I thank you again for scheduling it and welcome our distinguished witnesses.

Senator DURBIN. I believe that we need to get to the bottom of 

this. If the goal here is to outsource, to save the taxpayers money, 

and to provide better services, then this conversation is an important one. 

If the goal is simply the elimination of the Federal workforce and 

reduction of that workforce, then, frankly, I think it is wrong-headed. It is going to destroy the morale of many of those who were involved in the workforce today. 

I would like to note for the record this morning our full Committee Ranking Member, Senator Lieberman, is sending a letter to 

OMB Director Josh Bolten seeking answers to vital questions about 

the administration’s compliance with the appropriation provision 

and reporting responsibilities, and I ask unanimous consent that a 

copy of Senator Lieberman’s letter be made part of the record, and 

the record be left open for an inclusion of the administration’s response. 

Senator VOINOVICH. Without objection. 

[The letter of Senator Lieberman follows:]

5


88936.001
6


88936.002
7


88936.003
8


88936.004
9


88936.005
10


88936.006
11


88936.007
12

Senator DURBIN. Thank you very much, Mr. Chairman. 

OPENING STATEMENT OF CHAIRMAN VOINOVICH 

Senator VOINOVICH. Thank you. 

I think everyone realizes that in August 2001, President Bush introduced his management agenda, with the goal of creating a citizen-centered, results-oriented and market-based Federal Government. 

The five governmentwide initiatives of the President’s management agenda are (1) strategic management of human capital, (2) 

competitive sourcing, (3) improved financial performance, (4) expanded electronic government, and (5) budget and management 

performance integration. The administration also created an Executive Branch management scorecard to weave a results-based management approach into the fabric of Federal programs. 

As a former chief executive of the City of Cleveland, and the 

State of Ohio, I applaud President Bush for having the foresight to 

design a strategic, comprehensive and integrated plan to reform 

Federal Government operations. It was long overdue. 

The administration did not simply issue a press release describing high-minded management goals. Rather, they have sought to 

implement the management agenda vigorously, and it is having a 

positive effect. For example, the Economic Development Agency of 

the Department of Commerce requested a $15-million increase over 

the President’s FY 2003 request. OMB recognized EDA as an ‘‘effective’’ agency, focused on results in internal management improvement, therefore increased its budget. 

This type of analysis should be undertaken for every agency. It 

shows somebody is paying attention to whether we are getting 

something done. 

Despite significant turnover in the senior ranks, OMB has been 

able to maintain its focus on improving management. I recently 

met with Clay Johnson, the new Deputy Director for Management 

of OMB. I was impressed by his vision and encouraged by his stated willingness to partner with Federal employee groups, and that 

he has been meeting on a regular basis with them, which is important to the success of any program in this area. 

One of the five pillars of the President’s management agenda, 

competitive sourcing, has come under a hail of criticism from Federal employees, their unions, and Members of Congress of both parties. As far as I know, it is the only element of the Management 

Agenda to generate such opposition. Resistance is based, in part, 

on the administration’s goal of competing with the private sector 

the activities of almost one-quarter of the Federal Government’s 

nonpostal civilian workforce. 

To many, these goals seem arbitrary and lack a firm analytical 

basis. The potential job loss feared as a result of this initiative is 

doubtless another major cause for concern, particularly among our 

unions. 

On March 6, 2002, I participated in a Governmental Affairs Committee hearing, chaired by Senator Durbin, that examined competitive sourcing. During that hearing, I voiced my concerns with several aspects of the initiative, many of which I still have. 

13

My chief concern is that the administration’s original, across-theboard goals failed to take into account the unique mission and circumstances at each agency. In other words, competitive sourcing 

goals were not being driven by an agency’s strategic human capital 

plan. 

Without proper strategic planning, competitive sourcing could be 

as damaging to the Federal workforce as the Clinton Administration’s indiscriminate downsizing initiative. OMB is now working to 

establish competitive sourcing goals on an agency-by-agency basis. 

This is a great improvement, and I would like to hear more about 

this shift today. 

Second, I am concerned that senior managers may decline to 

make the necessary investment in their Federal employees, and indeed decide to conduct a competition with the private sector. OMB 

must make sure that even when Federal activities are being competed, Federal employees are given the professional development 

and empowerment to do the best job they possibly can. In other 

words, we must do everything we can to make sure our Federal 

workforce is competitive; evaluate our agencies and recognize here 

are some wonderful people. With upgrading their skills, they can 

get the job done. 

Third, I am concerned that competitive sourcing may dissuade 

good people from seeking Federal employment. I have devoted 

much time and energy to improving the Federal service and have 

worked with leading public policy experts to examine how we can 

do a better job of attracting new talent to government. 

Competitive sourcing could be at variance with this goal. Although roughly 75 percent of the Federal workforce would not be 

subject to competition, the knowledge that many Federal jobs could 

shift to the private sector might stifle recruiting efforts at a time 

when the Federal Government needs the right people to address 

our many significant challenges and replace the large number of 

baby boomers who are going to retire this decade. 

A student at Harvard’s Kennedy School of Government, when I 

was there, mentioned this exact concern, and I am interested to 

learn if OMB has thought of a way to address this possible unintended consequence. We do not want young people thinking about 

a career in government and then seeing everything compete. They 

will ask why should I go there and instead consider employment 

and go someplace else. 

Fourth, I am worried about the ability of each Federal agency to 

conduct public-private competitions and the resources associated 

with these efforts. I think Senator Durbin referenced that. Until 

this initiative began, most agencies had little experience conducting 

public-private competitions. Additionally, it is my impression that 

many acquisition offices are overworked and understaffed. 

Holding agencies accountable to competition goals before they 

have the capacity to conduct such competition is unfair. The government needs a robust acquisition workforce now more than ever. 

Without strong contract oversight, the government will be hardpressed to realize the savings generated by competition and ensure 

that contractors are meeting their goals. 

In addition, the need to conduct competitions must not cause unplanned cutbacks in other areas of agencies’ operations. It was reVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00017 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
14

ported recently in the Washington Post that the National Park 

Service postponed maintenance in order to pay for an 18-month 

privatization study by consultants. This type of trade-off is unacceptable. OMB must provide adequate resources for agencies to 

conduct competitions without putting their operations or service at 

risk. 

Fifth, I have a specific concern regarding the recently revised A–

76 guidelines. While I support the effort to streamline and improve 

the public-private competition process, I am troubled by the requirement that the government’s most efficient organization is subjected to a recompetition every 5 years. This may have yet another 

unintended consequence: Federal employees may believe that there 

is always another job competition just around the corner, which 

could weaken morale. I ask OMB to reconsider this provision. 

Finally, the tremendous anxiety this initiative has caused Federal employees lies partly, I believe, in the failure of OMB to fully 

explain the purpose of competitive sourcing. 

I take Ms. Styles at her word, that the initiative is not part of 

an ideological crusade against Federal employees. If I believed it 

was, I would be completely opposed to it. Rather, the purpose is to 

increase the efficiency of certain Federal operations through competition. 

This idea has merit. But the management shortcomings I have 

noted must be addressed, and the reasons and implementation for 

this initiative must be communicated more effectively to Federal 

employees, their unions, and Members of Congress. All of this could 

be done without an act of Congress. 

To the administration’s credit, they have made improvements to 

the competitive sourcing initiative since the hearing in March 

2001. We appreciate the fact that someone was listening. 

I am encouraged that OMB is now working with agencies on a 

case-by-case basis to make sure that the infrastructure to properly 

conduct public-private competitions. It is my understanding that 

Ms. Styles is going to announce additional modifications to the initiative today, which I will let her describe. These additional 

changes could go a long way towards reassuring skeptics that this 

initiative is being carried out in a careful, methodical manner and 

not with an arbitrary, one-size-fits-all approach. 

Federal employees deserve to know the administration’s plan for 

competitive sourcing. I intend to ensure that this initiative is 

soundly managed, and I will continue to conduct oversight towards 

that end. 

I would now like to yield to the Senator from New Jersey for his 

remarks, and thank you for being here this morning, Frank. 

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Thanks very much, Mr. Chairman. I think 

my absence of a couple years sabbatical I took may make people 

forget who I was and the fact that I am the junior member of the 

Committee puts me in a position that I do not really like. I had 

the fear that somehow or another I was going to be outsourced, 

that I was at the tail end of the senior list. [Laughter.] 

But, Mr. Chairman, you know we have a relationship that is 

treasured, I think, by both of us, respect, because I know how sinVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
15

cere you are about your responsibilities to your job and know that 

you, in your former career, exhibited the same kind of concerns for 

people. While you ran things with as tight a hand as you could do 

it, the taxpayers were treated fairly as well. 

I thank you for holding this hearing. The administration’s desire 

to privatize these vast swathes of the Federal workforce is fraught 

with controversy and needs a great deal of scrutiny by Congress. 

Now, I would like to say at the outset that I think there are jobs 

that could well be done outside of the government workforce, but 

I would tell you, having had 30 years in the corporate world, having built a company that I and two others started with nothing and 

now employs 40,000 people in an outsourcing business, and now 

having been in government 19 years—181⁄2, who is counting—and 

the fact is that I am able, I think, to make comparisons between 

the folks who are working for government and those who work in 

the private sector. 

I will take a minute more on my own background because it sets 

the condition for me to examine these things. 

(A) the company was not a unionized company. We were very 

careful about how we treated our employees. Everybody was made 

a partner through the stock options or stock purchase plans, and 

they worked hard, enormous hours, and rarely could a holiday be 

taken by all of the employees because our work had to be turned 

out on a daily cycle. 

Then, I come to government, and I see the same kind of loyalty, 

same kind of energy, but not the same kind of paychecks and not 

the same opportunity for advancement that I saw with people in 

the corporate world. 

(B) is that when our greatest growth took place, it took place 

when there was relatively full employment, and people were hard 

to find, and we siphoned off a part of the office operation and did 

it for our clients—over 400,000 of them. The company is a great 

American story about three poor boys who started the company, 

today, 45,000 employees. When the president of the company—and 

forgive this immodesty—when the president of the company talks 

to the employees, it is immediately translated into 10 languages. 

So the breadth is there, and it was all done with an understanding 

that the most important ingredient we had were not the programs, 

not the name, because the name itself did not carry it, but it was 

the output. 

And I see in my office, and I know I speak for lots of other people 

here, the kind of staffing, the kind of dedication, the kind of zeal 

for the job that you just do not see in the private sector, and I do 

not know where we are going with this. 

So, ultimately, when I look at this and think about today’s hearing, about people, individuals, who work for our government and 

who pay their taxes. Civil servants are the backbone of our government, and we have to remember that the skills, the talent, and the 

professionalism of the men and women in the Federal workplace 

are the best in the world. 

If there are malingerers, there are malingerers in every part of 

the economic world, and I saw it in my own company, and I have 

seen it here, but that is human nature. It does not mean that people who work for government are people who are trying to escape 

16

responsibilities. It means that they are—most of them, 98 percent, 

perhaps—are hardworking, committed people, and they are here in 

the morning, and they are here at night. 

The overwhelming majority of our civil servants are truly dedicated to their jobs, and many of them could make more money in 

the private sector, and I do not want my staff to hear this, but they 

work in government because they see public service as a higher 

calling, and the ability to make more money outside was just a 

passing thing. 

It is crucial that we all hold civil servants accountable for the 

jobs they do. There are jobs and activities that should be moved 

from the public sector to the private sector. As a former businessman, I salute that review. But I must say that I am concerned 

about the administration’s announced intention to compete 127,500 

Federal jobs within the next year. I am particularly concerned 

about setting an arbitrary quota and impossible deadline for privatization, and then deliberately withholding from agencies the financial resources they need to conduct the public/private competitions. 

I get the impression that the administration has determined in 

advance the way these competitions always should go, and that is 

to the private sector. And we heard Grover Nordquist, who is a 

senior adviser to the administration, paid or otherwise, I am not 

sure, but the fact is that he does render advice that government 

should be squeezed down, and we should try to eliminate 850,000 

jobs. 

And with all due respect, many of us here in the Congress disagree when we look at how stretched we are militarily right now, 

wish we had more people, asking the people who are serving to go 

way beyond the call of duty, those who are reservists to be called 

on maybe for a weekend every other week and for a couple of 

weeks of summertime, away from home a year-plus, away from 

family, away from jobs. We ask so much, and the military, in my 

view, compares very favorably, let us say, to the FAA, which I see 

as a fifth branch of the military. 

And with all due respect, many of us here see anomalies. For instance, it struck me as ludicrous that we would federalize baggage 

screening at airports, then turn air traffic control over to the lowest 

bidder. Talk about security on the cheap, that is really backwards. 

So I offered an amendment to the FAA reauthorization bill to prevent that. Eleven Republicans voted with me—and that is not an 

easy job for a Republican, George. Eleven Republicans voted with 

me on an amendment which the Senate adopted 56 to 41 to keep 

FAA in the Federal employment structure. 

Last week, the Washington Post ran an article about the administration’s attempt to privatize the job of the archaeologists who 

protected cultural heritage contained, found in our national parks. 

John Ehrenhard, director of the Southeast Archeological Center, 

put it this way: ‘‘We do what is in the best interests of the public, 

which is not always in the best interests of some developer. It may 

not make the most sense economically, but we are the government, 

and we can’t be bought.’’

And I think those are wise words, and we should contract out 

where it makes sense, but not because there is an ideology that 

17

says they would like to cripple the government. Many people correctly point out that taxpayers are owners of the Federal Government and deserve the most effective and efficient government possible. 

And I agree, but I would also point out that Federal employees 

do pay taxes also. They have invested even more than their taxes. 

They have invested their working lives. They deserve to be treated 

fairly and with respect, and doing so will maximize all taxpayer 

values. 

And I find it such a challenge, when I look at a report that is 

GovernmentExec.com, issued on July 11. The writer writes, ‘‘Nearly a million and a half in performance bonuses went to political appointees in 2002, according to the Office of Personnel Management, 

and one House Democratic leader is raising a question about the 

Bush Administration’s use of bonuses at a time when the administration is seeking to hold down pay raises for rank-and-file Federal 

employees. The cash awards were sent to 470 political appointees.’’

There is something that just does not ring true here. We have 

got over 6 percent of our people unemployed, we lost nearly 2.5 million jobs in the last couple of years, and now we want to farm out 

these people who have been good, loyal people, to say there is going 

to be competition for your job, and you may be put out of work. 

And we will have someone performing services, and what do we do 

if there is a strike, a labor difficulty with a company out there that 

is providing some of the replacements? 

I think there are serious questions and, Mr. Chairman, I thank 

you for the opportunity to make the statement, and I look forward 

to hearing from our witnesses. 

Senator VOINOVICH. Thank you, Senator Lautenberg. Senator 

Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Good morning to you and good morning to our panel. I want to 

thank you, Chairman Voinovich, for having this hearing today. It 

is certainly a step in the direction of dealing with some of the 

issues that will be facing us quickly concerning our workforce and 

for continuing the Committee’s interests in issues affecting the 

Federal workforce and the management of agencies. 

Ms. Styles, I want you to know that I really appreciate your time 

and your effort you have spent on these issues over the past several years, and I would also like to thank Mr. Walker for his tremendous dedication, and I say that because I have been working 

with him, also, and I want to thank our witnesses for your testimony this morning. 

Mr. Chairman, no one disputes the importance of a government 

that is both cost-effective and accountable. Agencies require the appropriate tools and skilled personnel to meet their missions. It is 

in that light that we should examine what work is best performed 

by government employees and which could be performed by the private sector. And when I say that, I want to, again, think about 

what Senator Lautenberg mentioned, as a person who has been on 

both sides, and deeply on both sides, and can certainly share his 

experiences. 

18

As agencies make their contracting decisions, we should ask 

what impact outsourcing will have on the Federal workforce. With 

a number of the current Federal workforce eligible for retirement, 

we should take steps now to fill the void that they will leave, and 

that is something that we need to work on immediately and take 

care of. We cannot expect our young people to work for the government if they believe their work will be subject to outsourcing, nor 

should we accept policies that will instill fear and distrust among 

current employees. 

While the contracting debate is not new, the administration’s 

contracting and other management proposals have attracted congressional attention. There is growing bipartisan concern that too 

much government work has been contracted out already. 

We should encourage, and I want to stress that, we should encourage, not discourage, employment with the Federal Government. 

We should tear down barriers that stand in the way of promoting 

the Federal Government as an employer of choice. We should ensure that Federal managers, employees, their unions and associations, Congress, Office of Personnel Management, and Office of 

Management and Budget work together to determine what is inherently governmental. 

Contracting policies should be fair to Federal workers, should be 

transparent, and in the best interests of the public. We have a 

strong and effective Federal workforce and should put to rest, once 

and for all, the faults, stereotype of the inefficient government bureaucrat. 

Let me touch, briefly, on the newly revised A–76 process for public-private competitions. Mr. Walker and Ms. Styles are familiar 

with my concerns over what I see as a lack of fairness and transparency in the revised rules for A–76 competitions. Under the revised A–76 process, government work could be contracted out, even 

if the work could be performed more efficiently by Federal employees. 

Moreover, the revision sets unrealistic deadlines for conducting 

public-private competitions that could push government work out 

the door to the private sector as fast as possible and may not give 

Federal workers a fair chance to compete. Unlike the private sector, Federal workers are required to compete for their jobs every 

5 years and are prevented from competing for contracted-out work. 

True competition should be cost-effective and must promote 

trust. Federal workers should be provided with sufficient funds and 

personnel to compete. Revising the government’s contracting process without improving contract management will likely result in 

hollow victories. 

Mr. Chairman, I thank you again for holding today’s hearing. I 

thank our witnesses again for their time today, and I look forward 

to their thoughts and suggestions on the new A–76 process and 

other contracting issues. 

Mr. Chairman, I would ask that a copy of my full statement be 

included in the record. 

Senator VOINOVICH. Without objection. Thank you, Senator 

Akaka. 

[The prepared opening statement of Senator Akaka follows:]

19

PREPARED OPENING STATEMENT OF SENATOR AKAKA 

Good morning. I want to thank Chairman Voinovich for holding today’s hearing 

which continues this Subcommittee’s interest in issues affecting the Federal workforce and the management of agencies. Ms. Styles, I sincerely appreciate the time 

and effort you have spent on these issues over the past several years. I would also 

like to thank Mr. Walker for his tremendous dedication, and I thank our witnesses 

for their testimony this morning. 

No one disputes the importance of a government that is both cost-effective and 

accountable. Agencies require the appropriate tools and skilled personnel to meet 

their missions. It is in that light that we should examine what work is best performed by government employees and which could be performed by the private sector. 

As agencies make their contacting decisions, we should ask what impact 

outsourcing will have on the Federal workforce. With a large number of the current 

Federal workforce eligible for retirement, we should take steps now to fill the void 

that they will leave. 

We cannot expect young people to work for the government if they believe their 

work will be subject to outsourcing. Nor should we accept policies that will instill 

fear and distrust in current employees. 

While the contracting debate is not new, the administration’s contracting and 

other management proposals have attracted congressional attention. There is growing bipartisan concern that too much government work has been contracted out already. For example:

• The Fiscal Year 2003 Omnibus appropriations bill prohibits the use of funds 

to impose outsourcing goals, targets, or quotas at Federal agencies without 

thorough analysis.

• The Senate-passed Department of Defense Appropriations bill includes a bipartisan amendment requiring the Department to achieve a 10 percent cost 

savings before work is contracted out.

• The House—by a vote of 362 to 57—passed legislation to restrict contracting 

out in the National Parks Service.

We should encourage—not discourage—employment with the Federal Government. 

We should tear down barriers that stand in the way of promoting the Federal 

Government as an employer of choice. 

We should ensure that Federal managers, employees, their unions and associations, Congress, the Office of Personnel Management, and the Office of Management 

and Budget work together to determine what is inherently governmental. By involving all parties within the Federal Government we are better able to forge contracting policies that are fair to Federal workers, transparent, and in the best interest of the public. 

We can do all of this and still ensure efficient and cost effective government contracting. We already have a strong and effective Federal workforce. We ought to put 

to rest, once and for all, the false stereotype of the inefficient government bureaucrat. 

As the Comptroller General has said repeatedly, poor contract management costs 

the government billions of dollars. These deficiencies can be improved by ensuring 

that the government has the employees, skills, and technologies to determine costs 

for both government and contracted out activities over the long-term. 

Let me touch briefly on the newly revised A–76 process for public-private competitions. Mr. Walker and Ms. Styles are familiar with my concerns over what I see as 

a lack of fairness and transparency in the revised rules for A–76 competitions. 

Under the revised A–76 process, government work could be contracted out even 

if the work could be performed more efficiently by Federal employees. Moreover, the 

revision sets unrealistic deadlines for conducting public-private competitions that 

could push government work out the door to the private sector as fast as possible 

and may not give Federal workers a fair chance to compete. Unlike the private sector, Federal workers are required to compete for their jobs every 5 years and are 

prevented from competing for contracted out work. 

True competition should be cost-effective and promote trust. Federal workers 

should be provided with sufficient funds and personnel to compete. Revising the government’s contracting process without improving contract management will likely 

result in hollow victories. 

20

1The prepared statement of Ms. Styles with an attachment appears in the Appendix on page 

57. 

Mr. Chairman, thank you again for holding today’s hearing. I thank our witnesses 

for their time today, and I look forward to hearing their thoughts and suggestions 

on the new A–76 process and other contracting issues.

Senator VOINOVICH. I would like to introduce the witnesses testifying today. Sitting on the first panel is the Hon. Angela Styles, the 

Administrator of the Office of Federal Procurement Policy of the 

Office of Management and Budget, and the Hon. David Walker, 

Comptroller General of the United States and head of the General 

Accounting Office. 

Our second panel consists of Dr. Jacques Gansler, a former 

Under Secretary of Defense during the Clinton Administration, 

now with the School of Public Policy at the University of Maryland; 

Dr. Paul Light is a senior fellow at The Brookings Institute and 

has testified before my Subcommittee many times before; Charles 

Tiefer, a professor of law at the University of Baltimore; and Dr. 

Frank Camm, a senior analyst at RAND. 

If you will, I would like all of the witnesses to stand and be 

sworn in. 

[Witnesses sworn en masse.] 

Senator VOINOVICH. Let the record show that the answers are an 

affirmative of at least four of our witnesses. 

I would like to note that many other groups, including the American Federation of Government Employees, the Professional Services Council, and the Federally Employed Women requested the opportunity to testify before the Subcommittee today. Although the 

Subcommittee could not accommodate everyone’s request, we feel 

that this hearing will produce a balance and substantive discussion. 

And without objection, I will leave the hearing record open for 

1 week to allow any, and all, interested groups to submit their 

views for the official hearing record. Without objection, that will be 

the case. 

We are very fortunate to have Ms. Styles here, and I second Senator Akaka’s compliment of the time and effort that you have put 

into this effort. 

Comptroller General Walker, I want to say thank you for everything that you have done for this Committee and this Subcommittee. Without your input over the last couple of years, the 

significant changes that we made in the Federal workforce would 

not have occurred, and so I welcome both of you here today, and 

I appreciate your patience. 

Ms. Styles, you have heard some comments from us today, and 

I am anxious to hear your testimony. 

TESTIMONY OF ANGELA STYLES,1 ADMINISTRATOR, OFFICE 

OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET 

Ms. STYLES. Thank you very much. 

I appreciate the opportunity to be here today to update you on 

the administration’s competitive sourcing initiative. We are making 

significant progress towards public-private competition——

21

This initiative asks people to make very hard management 

choices, choices that affect real jobs that are held by dedicated and 

loyal career civil servants. But the fact that public-private competition and our initiative require hard choices and a lot of hard work, 

makes it one that can, and is, affecting fundamental real and lasting changes to the way we manage the Federal Government. 

The clincher here for us is the taxpayer. Competitive sourcing 

strives to focus the Federal Government on its mission, delivering 

high-quality services to our citizens at the lowest possible cost. 

I would like to spend a few minutes addressing four issues that 

I know are of particular concern to you: The use of numerical targets, communication with employees and the unions, the recompetition requirements of the new circular, and the effect of competitive 

sourcing on our ability to recruit Federal employees. 

First, the use of numerical targets. Attached to my testimony, 

you will find a report released by OMB today that contains an extensive discussion about the history of competitive sourcing and the 

use of numerical targets. Most significantly, you will note that we 

have changed our management scorecard to eliminate the use of 

governmentwide numerical targets for the measurement of success. 

Second, you have expressed concerns about communications with 

the employees and employee unions. I can tell you that the most 

challenging part of my job is effective communication. I spend the 

vast majority of my day, explaining to people that competitive 

sourcing is about a commitment to management excellence. It is a 

commitment to ensuring that our citizens are receiving the highestquality service from their government, without regard to whether 

that job is being done by dedicated Federal employees or the private sector. 

In spite of our extensive efforts, there is a tremendous amount 

of disinformation and confusion. Two examples have been mentioned here this morning: 

One, is maintenance at the Park Service. There were several 

press reports out dealing with Mount Rainier in Washington State 

and maintenance of the Park Service and funds being taken away 

from maintenance activities to actually run competitions at Mount 

Rainier. There are no public-private competitions planned in the 

near future, there are no public-private competitions planned at 

the current time at Mount Rainier, so those reports were erroneous. 

There was also a recent press report dealing with archaeologists. 

I have spent a lot of time researching the archaeologists that were 

mentioned in the Washington Post last week. The more research I 

have done, the more I have found out that these are not actually 

just archaeologists. 

These are technicians, these are people running computer databases. They are actually based in a Federal building in downtown 

Lincoln, Nebraska. They are not actually in a national park. They 

are not actually out in the field doing archeological work. They are 

running computer databases. They are publishing and writing 

newsletters. So I think it is a little bit different than has been articulated. 

We are constantly, as you look at those examples, fighting a flurry of erroneous propaganda about competitive sourcing. Unlike our 

22

past reforms that are focused on outsourcing, unlike other past reforms that have focused on outsourcing, privatization or downsizing 

through arbitrary FTE cuts, competitive sourcing is a review process that asks two very important questions: Should we reorganize 

for greater efficiency, and might a different provider, a local government, a nonprofit organization that employs disabled members 

of our society or a private business be better able to provide this 

service at a lower cost? 

Third, you have expressed concerns about the recompetition procedures in the circular. Specifically, our new circular does not assume that one competition or review of a function will ensure that 

the function is efficiently organized for the next 50 years. The concept here is that relevant procurement statutes and regulations require the private sector to recompete for government work every 3 

to 5 years. Competition and recompetition reduces costs and ensures that we are receiving the maximum benefit of private sector 

innovation. 

The policy in the circular applies this concept to commercial work 

performed by government employees, with a significantly less-stringent time frame: Every 5 to 8 years. There are also clear procedures for requesting a deviation from this generous time frame, 

and I can tell you that we will grant any deviation that is requested and supported. 

The practical reality of the situation, from my perspective, is 

there has not been one, not a single recompetition of a government 

function employed by Federal employees in the 55-year history of 

this circular. The reality is that we have well over 400,000 commercial positions, positions that the agencies have designated as open 

to competition, but have never been tested, reviewed or even competed one time. 

For a Federal employee that fears recompetition of a function 

that they have recently won and competed for, I think they are 

fearing a very distant and tenuous possibility. As a matter of practical reality, it will be quite a while before we even start thinking 

about recompeting functions won by government employees in the 

first round of competition. 

Finally, you have expressed concerns about the effect of competitive sourcing on our ability to recruit Federal employees. Clearly, 

competitive sourcing poses challenges for government personnel 

who perform commercial activities. These providers must critically 

examine their current processes and figure out how they can improve the delivery of services. Answers may not come easily, but 

they are ones which our taxpayers are owed and ones which efficient private-sector service providers ask themselves routinely. 

Despite the difficulty of this task, we have every reason to believe our workforce is up to the challenge. Historically, the government wins over 50 percent of these public-private competitions. The 

high success rate should give employees confidence that they can, 

and do, compete effectively in head-to-head competition with the 

private sector. 

The revised circular recognizes the talents of the Federal workforce, the conditions under which the workforce operates, and the 

importance of providing the workforce with adequate training and 

23

1The prepared statement of Mr. Walker appears in the Appendix on page 81. 

technical support during the competition process to ensure that 

they can effectively compete. 

In particular, the revised circular seeks to ensure that the agency provider has the resources available to develop a competitive 

agency offer. 

As an example—and this is one of my best recent examples—the 

Department of Energy competed the graphics function at their 

headquarters. Before the competition, this was a 13-person operation for graphics at DOE headquarters. Through the competitive 

process, the incumbent government provider, and the in-house organization, determined they could do the same job with six people. 

By sharpening their pencils and reorganizing the function, the Federal employees won against the private sector. Importantly, 

through managed attrition, there were no involuntary separations. 

Though small in number, this competition exemplifies the benefits of competitive sourcing. From this very small competition, DOE 

was estimating $635,000 in annual savings. The employees won, 

but through competition, we were able to save $635,000 a year for 

a 13-person operation. 

Even when the commercial sector is chosen to perform the activity, there are usually a very small number of involuntary separations—8 percent, according to one study that is listed in the report 

that I have attached to my prepared statement today, and 3.4 percent, according to another report. The percentage, I believe, should 

remain very small. 

In conclusion, while there is a certain comfort level in maintaining the status quo, our taxpayers cannot afford, nor should they be 

asked, to support a system that operates at an unnecessarily high 

cost because many of our commercial activities are performed by 

agencies without the benefit of competition. 

For this reason, the administration has called upon the agencies 

to transform their business practices, and we have provided the 

tools for them to meet this objective in a responsible, fair and reasoned manner. 

This concludes my statement. 

Senator VOINOVICH. Thank you very much. Comptroller General 

Walker. 

TESTIMONY OF HON. DAVID WALKER,1 COMPTROLLER 

GENERAL, U.S. ACCOUNTING OFFICE 

Mr. WALKER. Thank you, Mr. Chairman, Senator Akaka, Senator 

Lautenberg, and other Members of the Subcommittee. It is a pleasure to be back before you, this time on the important issue of competitive sourcing. 

If I might, Mr. Chairman, I assume my entire statement will be 

included for the record. 

Senator VOINOVICH. Without objection. 

Mr. WALKER. Thank you, and therefore I will summarize some 

highlights. 

Let me say at the outset, that this is a highly complex and controversial topic. It has been for years, and it is likely to remain so 

for a number of years. But let me also say that I have had the 

24

pleasure to work with Angela Styles on this complex and controversial topic over the last couple of years, and that in my mind there 

is no question that she is a dedicated, capable and caring public 

servant trying to balance the various issues here. She is only one 

member of the administration, and obviously there are not necessarily always uniform views, but I wanted to say that as part of 

the record. 

I think the critical points are as follows: 

First, our Nation faces a number of major trends and challenges 

that have no boundaries. Second, our Nation faces large and growing budget deficits and fiscal imbalances for a variety of reasons. 

Tough choices will be required in defining what the government’s 

proper role is in the 21st Century, how the government should do 

business in the 21st Century and, in some cases, who should do the 

government’s business in the 21st Century. 

Competitive sourcing is a tool. It is a means to an end. It is not 

an end in and of itself. It is not a panacea. It is something that 

clearly has implications from the standpoint of cost and quality. It 

also is important, not just what you do, but how you do it and 

when you do it, in order to address the very human elements and 

the issues that all of you Senators have talked about—the interaction between our desire to maximize economy, efficiency and effectiveness, at the same point in time being able to attract and retain a high-quality and high-performing workforce. 

I think we need to keep in mind that sourcing has to be a strategic decision. It could be outsourcing, it could be in-sourcing or, in 

many cases, it could be co-sourcing which, quite frankly, is frequently the case: Furthermore, even if the decision is to outsource, 

it is critically important that the government have enough qualified and capable public servants to manage cost, quality and performance of those activities that have been contracted out, and if 

we do not, everybody is going to be in trouble. 

And, in fact, we have several agencies—NASA, DOE, DOD, just 

to name three—that are on our high-risk list because of failure to 

do just that. 

As you know, the Congress has been concerned with this issue 

for a number of years, and therefore asked me to chair a Commercial Activities Panel, comprised of top-level individuals with a variety of perspectives. The Panel met for over a year, conducted a 

number of hearings, both in Washington and outside of Washington, came up with a report where there was unanimous agreement on 10 sourcing principles, and there was a supermajority 

agreement on a variety of other recommendations. 

Based upon the review of my staff and myself, it appears as if 

the revised Circular is generally consistent with the 10 principles 

that were unanimously agreed to by the Commercial Activities 

Panel. However, there are certain areas of concern, and there are 

certain omissions, some of which go beyond the principles, to the 

other recommendations that a supermajority of the Panel recommended. 

Those concerns are noted in my statement. I will mention a few 

at this time: 

The new Circular provides for expedited time frames for conducting these competitions. In order for that to occur, Federal emVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00028 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
25

ployees are going to have to have financial and technical assistance 

to be able to compete effectively and for the system to be fair, not 

only in reality, but in perception. 

There are also several concerns with regard to the streamlined 

competitions which, as you know, are for under 65 full-time equivalents, or FTEs. 

First, there is not an express provision to deal with potential 

unbundling by agencies of functions, activities or operations to get 

under the 65 number, and therefore be able to circumvent some of 

the other requirements; second, there is no 10-percent cost differential; third, there is no internal or external appeal right, which 

could leave an accountability gap. And depending upon how much 

activity ends up occurring under 65, it could end up being a matter 

of concern. 

And last, but certainly not least, is the Panel’s recommendation 

on high-performing organizations, one key element that a supermajority of the Panel recommended and, that members of organized labor supported, even though we voted on the supplemental 

recommendations as a package. Technically they did not vote for it 

because they did not vote in favor of the supplemental recommendations but they expressed support for this element. It was 

based on the idea that we need to recognize, and as I think Ms. 

Styles’ statement notes, and the report that she issues today notes, 

a vast majority of government will never be subject to competitive 

sourcing. Therefore it is incumbent upon all of us to figure out not 

only how can we make sure that these MEOs, most efficient organizations, can compete fairly and effectively, but also what can we do 

to try to make sure that for the vast majority of government that 

will never be subject to competitive sourcing, that we can improve 

its economy, efficiency, effectiveness, and responsiveness. And it is 

in that regard that a supermajority of the Panel recommended taking steps to create high-performing organizations throughout government. 

There is also interest in government in moving more towards 

pay-for-performance. However, the Federal Government, at the 

present point in time, and a vast majority of Executive Branch 

agencies, do not have modern, effective, credible and validated performance appraisal and management systems in order to make intelligent decisions on how to implement a pay-for-performance system. 

Therefore, Mr. Chairman, and Members of the Subcommittee, as 

noted at the end of my statement, OMB has recently recommended 

creation of a governmentwide fund for purposes of pay for performance. I would respectfully suggest we are not ready yet to implement such a governmentwide fund, and that while it is highly desirable that we end up moving forward towards pay for performance on a broader basis, we need to have the infrastructure in 

place in order to do it effectively and fairly and in a nondiscriminatory manner. 

Therefore, I would respectfully suggest that the Congress consider taking this governmentwide fund concept and making those 

funds available for several things: 

One, to provide financial and technical assistance such that most 

efficient organizations can compete effectively and fairly within 

26

these expedited time frames; two, that we can end up promoting 

high-performing organizations throughout the rest of government 

that will never be subject to competitive sourcing; and, three, as a 

subelement of both, that we provide support on a business casebasis for all of these, to be able to help agencies develop the type 

of systems and infrastructure that has to be in place in order to 

move towards more pay-for-performance-oriented structures. I 

think there would be many, many winners by taking that type of 

approach, and I think the time has come that we need to seriously 

consider doing that. 

Thank you, Mr. Chairman. I would be more than happy to answer any questions that you or the other Subcommittee Members 

may have. 

Senator VOINOVICH. Thank you, Mr. Walker. 

We are going to have 5 minutes of questioning by each of the 

Senators. I will try to stick to that and ask my colleagues to do the 

same. We will have a few rounds of questions. 

Ms. Styles, I am pleased to hear that the administration has decided to drop the government goals related to competitive sourcing. 

It is a significant change, and I commend you for going forward 

with it. How did you come to this decision? 

Ms. STYLES. I think it has come over a long period of time over 

the past 21⁄2 years, with experience that we have had with publicprivate competition, with input from the Hill. 

We do not want a number to be distracting from what we are 

really trying to do, which is provide a better service for the taxpayer at a lower cost. I think we want people to realize that we 

are listening to their concerns, and if the arbitrary numbers are 

making this controversial, then we don’t want a number to make 

this controversial. 

We want this initiative to work, and I think we are willing to 

recognize people’s concerns, to work with them to make this initiative work and to be effective. We really are committed to making 

this an accepted management practice at the departments and 

agencies. And if numbers and goals that are governmentwide are 

distracting us from that, then we will move away from those, and 

that is what we did today. 

Senator VOINOVICH. So agencies are not going to be graded on 

their scorecards, in terms of percentages, then? 

Ms. STYLES. Absolutely not. There will be individual plans for 

each department and agency that is appropriate for that department and agency. I think a lot of those have already been negotiated and are in place. For a long time, we have had departments 

and agencies that are moving to yellow, well below a 15-percent 

number, and I think we finally decided that we had so many exceptions to that rule that it made sense to get rid of the numbers. 

Senator VOINOVICH. Thank you. From my experience, when given 

the opportunity in competition, I have been amazed at what the internal group can do. I have seen that over the years. 

I will never forget, when I was mayor of the City of Cleveland, 

that we considered outsourcing the garbage collection. There was 

a lot of ‘‘feather bedding,’’ and I will never forget, after a long negotiation, the head of the union said to me, ‘‘Why didn’t somebody 

suggest that we do this a long time ago?’’ We eliminated one indiVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
27

vidual from the collection and reduced 50 percent the people that 

were working at the transfer stations. We saved a lot of money. I 

also had these experiences when I was governor of Ohio. 

So going forward with this does have some real ways of providing 

efficiencies to organizations. 

Mr. Walker, you observed the changes OMB has made, in the A–

76 circular. Do you want to comment on them? 

Mr. WALKER. Yes. They have made a number of changes in response to comments by us and others, and I think they have generally been responsive. I will say that I think it is totally appropriate that the administration has eliminated the 50-percent and 

the 15-percent across-the-board numbers. The Panel noted that 

there should not be any quotas of any type; and there should not 

be arbitrary goals. 

At the same point in time, I think that what the administration 

is now trying to move to, as I understand it, is considered goals, 

which are based upon individual facts and circumstances which can 

potentially end up resulting in a quantifiable target on an agencyby-agency basis in order to hold management accountable for results. 

So I think quotas are bad, arbitrary goals are bad, but considered 

goals, if they are established the right way, can be necessary and, 

in fact, appropriate. 

Ms. STYLES. We provided several examples of the specific agency 

plans for competition to move from red to yellow on our management scorecard. It is in the report that is attached. So people can 

get a very good idea of the numbers we are talking about, as well 

as the types of functions that agencies have decided to compete, the 

types of functions that they decided are not appropriate for competition right now. 

So we are trying to give people examples of how this is working 

with the departments and agencies. We will have a report out by 

the end of September that goes through this for every department 

and agency and is very forthcoming in what our plans are and 

where we intend to go with this. 

Senator VOINOVICH. I think, as you move along, it would be beneficial to share that with this Committee. 

Ms. STYLES. We absolutely will. 

Senator VOINOVICH. One of the things that was brought up in 

Comptroller General Walker’s testimony is the issue of improving 

and giving Federal employees the tools that they need and the empowerment to do better work. I would be interested in some written 

information about what it is that the administration is going to be 

doing in order to make that happen, I am particularly interested 

in the area of training, and upgrading the skills of individuals. I 

think that in too many agencies, that does not occur, and as a result of that, they cannot take on new challenges. Unfortunately the 

belief is training money is available, which hurts us in terms of our 

recruitment. 

So I would like to know what you are doing to try and help the 

current workforce, to empower them and give them the tools and 

the training they need to grow in the jobs that they have. 

Ms. STYLES. Absolutely. 

28

Senator VOINOVICH. We are going to use the early bird rule, for 

asking questions. Senator Lautenberg, I will call on you first. 

Senator LAUTENBERG. Thank you, Mr. Chairman. 

I want to say at the outset that I listened to each of you and am 

impressed with the way you have handled your respective assignments, the positions you hold regularly, but even as you make the 

case here. So this is not intended to be questions about you, but 

questions so much more about the policy that got us where we are. 

Because as I look at what is intended here, I get the feeling—

and I know both of you have excellent professional backgrounds—

I get the feeling that this is much more political than it is an exercise in efficiency. And I say that because, Ms. Styles, the fact that 

you say there are no arbitrary targets and so forth, but what is 

magic about the 65 number that can be handled at the local level, 

department level, up to 65 employees can have their jobs eliminated, turning toward commercialization, and why is 65 the magic 

number? 

Ms. STYLES. They actually can’t have their jobs eliminated. We 

eliminated the use of direct conversions altogether. One of the 

problems I saw is the old circular had a process that if it was a 

function of less than 10, you could directly convert that work to the 

private sector without determining whether it made sense or the 

in-house organization could perform it. And I saw agencies doing 

it all of the time, without a significant justification. Even if it is 

a small function, I just don’t think that is appropriate. 

What we did was we took a process that has been in place for 

at least 6 years, that was created by the previous administration 

for a function that is less than 65 Federal employees. We added to 

that I think a lot of transparency. It is called a streamlined competition process. It is not as extensive as our full-blown competition. 

Senator LAUTENBERG. No, but it does say that, in the streamlined process, the Federal agency head can outsource Federal work 

for a function of 65 FTEs, and private or private bids are not necessary because the streamlined process does not require truly competitive cost comparisons; is that not correct? 

Ms. STYLES. I do not believe that is correct. It is a competition 

process. There is transparency. The agency has to put a public notice out before they do it, and when they finish, and they also have 

to supply you, and me, and everybody else with a form that says 

what the private sector cost was, what the public sector cost was 

and explain to all of us why they made the decision. So I wanted 

some transparency and accountability in this. 

Senator LAUTENBERG. Well, what we will do, since we disagree 

here, is we will discuss this, Mr. Chairman, further, and we will 

have a sit-down, and we will go through that. 

Ms. STYLES. I am very happy to supply any information you want 

on this process. 

Senator LAUTENBERG. Yes, I am sure. 

And the question about how we got here reminds me of a little 

song that says, ‘‘Where did all of the money go?’’ I know it is a substitute for words, but the melody is there. ‘‘Where did all of the 

money go?’’

29

The fact is that we are not struggling alone here because there 

is not or there has not been sufficient funds to carry out the programs as we would like to, as we would like to be more intensive 

training. We certainly ought to be looking at the implementation 

of more efficiencies, the technology applications, wherever they can 

be, and as far as I am concerned, though we cannot discuss this 

at length here, I think the money went for other purposes. And 

when we look at the deficit, the money is not created, the deficit 

is not created by the explosion of costs internally, not at all. There 

have not been wholesale raises, there has not been anything that 

says suddenly it is going to cost more to operate. 

It is because people like me are getting tax breaks that we do 

not need, and frankly I would rather have plowed back into our society to build a stronger, more harmonious society than give people 

who have been successful more than they already have, and they 

have earned it under the system. 

So I look at this as a political exercise, denominated by the statement that I read earlier, and that is the mission is to get rid of 

850,000 employees, and let us do that. And that is as arbitrary as 

it gets to be. I do not understand why we do not look at what we 

have got, where we are going, and how we finance internal operations. 

And I can tell you this, that if we were to advertise for employees 

on the basis that they would find in the commercial world, I do not 

think that you would get anybody to work here. I think the fact 

that we have seniority systems that provide for longevity, and, yes, 

there are blips along the way, but the fact is that we do lots of 

things right. 

We have lots of policies that are excellent in terms of our research and things of that nature that carry on, beyond the military, 

beyond the law enforcement, and the money has gone into other 

places, Mr. Chairman. That is what I see as the biggest difficulty 

that precipitates this kind of thinking. 

Senator VOINOVICH. Thank you, Senator. Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Ms. Styles, you mentioned the rumors within the Park Service in 

your testimony. As the ranking member of the Senate Park Subcommittee, I am curious as to how you communicated with NPS 

employees to counteract these rumors. 

Ms. STYLES. There actually is a hearing this afternoon dealing 

with the Park Service, where Fran Mainella, the head of the National Park Service, is testifying. 

We do generally leave it to the agencies. We try to provide them 

as much information as we can, the resources to communicate with 

their people, and I know that the Secretary of Interior has sent out 

all employee E-mails trying to explain this initiative, and I know 

that Fran Mainella has worked hard to fight against this initiative. 

But we fight against information that may be inaccurate and not 

correct all the time, and I think we put—I don’t think we have put 

in enough effort, I think we put in a lot of effort, but I don’t think 

we could ever put in enough efforts to make sure that we are communicating appropriately on this, but we do keep trying. 

30

Senator AKAKA. Is OMB questioning agency decisions not to include a function on its FAIR Act inventory and under what circumstances would you do so? 

Ms. STYLES. We are actually required by statute to review those 

functions and make sure that they are consistent within agencies 

and among agencies. So, yes, we do review, as we are required to, 

and I think we fulfill that role as we go through each year with 

the FAIR Act inventory process. 

Senator AKAKA. Mr. Walker, you have reported, and OMB has 

acknowledged, severe limitations in the financial management systems throughout the Federal Government. How do these problems 

affect an agency’s ability to determine the cost of the President’s 

competitive sourcing initiative? 

Mr. WALKER. They have a very real effect. And let me say that, 

while I know that Bobby Harnage is not going to be physically 

present today, he has a statement for the record, and he has a comment there that I would like to address, in response to your question. 

The Federal Government’s financial management systems are 

not what they need to be. We have made a lot of progress, but we 

still have major challenges, especially in the Department of Defense. A vast majority of the historical A–76 competitive sourcing 

competition activity has been within the Department of Defense. 

The fact of the matter is that DOD and OMB estimate that historical savings, from A–76 competitions have ranged from 20 to 30 

percent no matter who wins. 

Those are unaudited numbers. They are OMB and DOD’s numbers. GAO has done work in this area, and we do believe that there 

are real cost savings. However we can’t express an opinion as to 

whether or not that 20- to 30-percent range is reasonable because 

the cost accounting systems are just not of a state that we can form 

an opinion on it. 

Senator AKAKA. Ms. Styles, I was pleased to receive OMB’s competitive sourcing report last night and hear your testimony this 

morning which focused on the steps OMB is taking to institutionalize the administration’s contracting out policies. 

The report appropriately acknowledged that now two agencies 

are alike. This is an important recognition, especially, as Mr. Walker notes, Federal agencies are faced with the dual challenges of implementing the revised A–76 provisions and the competitive 

sourcing portion of the President’s management agenda. 

He points to the Department of Defense, as he did, which despite 

being the government’s largest procurer of outside goods and services, has long occupied a place on GAO’s high-risk list because of 

contract management problems. 

Considering that most agencies lack the knowledge base, personnel and funding to carry out outsourcing competitions, what 

guidance will OMB offer to the new competitive sourcing officials 

to ensure that an agency’s competitive sourcing activities integrate 

with their human capital and funding needs? 

Ms. STYLES. We actually wrote the new circular with that specific 

thought in mind. When we looked at competitions in the Department of Defense, I can tell you what bothered me the most was the 

Department of Defense will go out, they make an announcement, 

31

without a whole lot of thought about it, that we are going to compete 1,000 people at this base, and then 4 years later they decided, 

after they did a little work and a little planning, we are really only 

going to compete 100 people here. And for 4 years, there were 900 

people that were very concerned about this, and there were expectations raised in the private sector about what this competition was 

going to look like. 

We want agencies to do a great deal of preliminary planning. 

You will see 2 pages, in a 23-page circular, that talk about preliminary planning, that before you make any public announcement of 

what you are doing, reengineer, understand what you do, understand the workload, understand how the private sector does this, 

understand what your human capital requirements are, and then 

make an announcement of what you are going to source. 

The best example I have is the Department of Education. They 

did it this way. They spent 2 years reengineering and planning before they made any announcements of what they were going to 

source, and it has worked very well. 

Senator AKAKA. Thank you, Mr. Chairman. 

Mr. WALKER. Mr. Chairman, can I come back on that? 

Senator VOINOVICH. Yes. Go ahead. 

Mr. WALKER. I think the process is very important, but I think 

this also reinforces a point that I made before. It takes time, it 

takes financial and technical assistance in order to be able to make 

this work, and what are we going to do for the 75 percent of government that is not subject to competitive sourcing? They need to 

look at their people, process, technology, and environmental situations, and we need to figure out ways that we can provide them 

with financial and technical assistance to get that done. 

Senator VOINOVICH. Ms. Styles, I share Senator Akaka’s concerns 

about having the people get the job done. And as you know, the acquisition workforce is facing a serious human capital challenges. It 

has been underscored by GAO, for instance. Twenty-two percent of 

the acquisition workforce is eligible to retire between now and 

2005, and after 2005, 69 percent of the workforce will be eligible 

to retire. 

What strategies will OMB employ to ensure that those Federal 

employees responsible for conducting public-private competitions 

and contract management receive the tools, training, and the resources they need to do their job efficiently? 

In other words, one of the things that Senator Akaka and I did 

last year when we amended the Homeland Security Act was upgrade human capital awareness by creating chief human capital officers in each of the departments. 

What are you going to be doing to make sure that those human 

capital officers have the people to do the work within their agencies? 

I think the point was that you have expedited in less than 12 

months that you are going to move forward with it. Well, you 

know, and I know, there is no way you can do that unless you have 

the people on board to get the job done. So I would be interested 

in learing more about that. 

The other thing is that we have not had any oversight hearings, 

and I am going to talk to Senator Collins about it, and particularly 

32

in the area that Dave Walker has referenced, in terms of these acquisition workforce, particularly in the Department of Defense. 

And I really think this is something that somebody is going to 

hone in on, and I would like to know what are you doing currently 

to respond to that. 

Ms. STYLES. Sure. I think it is a very serious and a valid concern. 

Our acquisition workforce took severe cuts over the past 10 years. 

They have been asked to do much more with much less. I will comment, though, on the 12-month time frame, that clock doesn’t start 

ticking until the agency decides they want it to. They do all of their 

preliminary planning, and once they get through preliminary planning, they decide when they want that clock to start ticking. 

In the human capital arena, as it relates to competitive sourcing, 

we recently established, with the help of the Council for Excellence 

in Government, a new council, a Federal Acquisition Council, and 

we met with groups of people from the agencies, specific people 

that are designated to this council. Much like the new Human Capital Officers Council, the CFO Council, CIO Council, we have one 

for acquisition, and we recreated it with the help of the Council for 

Excellence in Government. And one of our main focuses is human 

capital and competitive sourcing and how those two relate together. 

What we have asked is for the leads from the agencies—one is 

Scott Cameron from Interior on competitive sourcing, the other one 

is a career person from NASA, Tom Ludke—to get together and 

help us form a small group of Federal employees that will go to 

each agency and assess at that agency what their infrastructure is 

in place for competitive sourcing. 

I know one contact at the agency, but I do not now exactly what 

their infrastructure is, and who is doing this, and who is actually 

leading the charge below the head person. So we can take the best 

practices. We can understand where there are deficiencies. We can 

compare and share among the different departments and agencies. 

So we are trying to be very proactive in assessing what is working and what is not and where we have problems and what strains 

competitive sourcing is putting on our acquisition workforce or 

sometimes this isn’t always in the acquisition shop, which is an interesting dynamic at the agencies. Sometimes it is within the CFO 

shop or a different location, and we are trying to better understand 

the agencies that are successful and are not, how they are working 

and what infrastructure is best here. 

Senator VOINOVICH. Well, one of the concerns I have is that we 

speak about doing some of these things, but now that agencies are 

starting to think about workforce in reshaping they realize they do 

not have the people they need. I am hopeful that when an agency 

comes back to OMB and says, we do not have the folks to get the 

job done, that it is reflected in preparing their budget requests. 

Because part of the problem that we have had here is that, in 

the last dozen or so years, we just downsized and did not replace 

the people who were needed. Some agencies had the wrong people. 

We did not have the opportunity for early separation or for early 

retirement. I need some reassurance to know that you are just not 

going through the process, and then we just do not have the people 

there to get the job done. 

33

I know one of the things I was impressed with in my experience 

on the Foreign Relations Committee, was hearing Secretary Powell 

talk about adding about 300 people—and I know people do not 

want to hear about adding people—but the State Department was 

riddled, and they needed people. They are moving forward. He was 

very excited that a lot of people are interested in going to work for 

the State Department. 

I think too often the human capital aspect of one’s budget does 

not get the kind of attention that it ought to be getting. 

Ms. STYLES. We will——

Senator VOINOVICH. In the last budget, for example, did you entertain any requests for people? 

Ms. STYLES. Absolutely. We sit down with the agencies on a 

quarterly basis, and it is the relationship on competitive sourcing 

and the resources that are needed is maintained on a day-to-day 

basis, but we have designated quarterly meetings with the agencies 

to discuss where they are in the initiative and what their needs 

are. 

In our recent A–11 guidance to the agencies on preparing their 

2005 budget, we have a very specific item called out for them to 

designate what their needs are in terms of resources for competitive sourcing, so we can be very clear about the costs and what the 

agencies’ needs are in these areas. 

Senator VOINOVICH. Ms. Styles, the Commercial Activities Panel 

recommended limited changes to the A–76 and develop instead a 

FAR-type process for public-private competition. Could you describe 

how OMB came to the decision to incorporate those recommendations into the complete rewrite of Circular A–76? 

Ms. STYLES. Certainly. I was a participant on the Commercial 

Activities Panel, and one thing that I saw, and I think everybody 

on the panel saw, was that we had two different types of people. 

We had people who understood public-private competition and people who understood private-private competition. We had rules for 

private-private competition that worked very well together, and we 

really fundamentally needed to integrate those rules together. 

We took the recommendations of the panel very seriously, as we 

did our rewrite. We went out with a Notice for Public Comment. 

We received 700 comments on our draft, and we took all of those 

very seriously. We met and had discussions with GAO, the unions, 

the private sector and people that were involved before we actually 

came out—and the agencies, too. I sat down with every single agency for a 4-hour period, before that circular went out, to make sure 

I understood what the effect of these new provisions would be on 

their particular agency. 

So we spent a lot of time I think integrating the panel recommendations into our circular and working with people to make 

sure we understood the effects. 

Senator VOINOVICH. Mr. Walker, would you enunciate any further recommendations? We have the revised circular, and do you 

think there is anything that needs to be added or deleted? 

Mr. WALKER. Well, I mentioned in my oral remarks, as well as 

more detailed in my written testimony, some areas that I think 

bear looking at. 

34

I do also have a concern, which I don’t believe is in my testimony, about this recompetition 5 to 8 years down the road. My personal view is that it kind of relates to the high-performing organization issue that I talked about before. We need to have fair and 

effective competitions with regard to MEOs. A decision gets made. 

We then have to recognize that is not forever, but we ought to 

be incorporating the concepts of these high-performing organizations there, and only if there is a significant change in the circumstances, should we think about recompeting. I don’t think it 

should be something that is automatic. I think it should be something that is based on facts and circumstances, but we need to have 

mechanisms to provide reasonable assurance that there is continuous——

Senator VOINOVICH. In other words, eliminate the requirement 

that every 5 years, if you have decided they are doing the job, then 

it ought to be? The real issue should be not a 5-year deadline, but 

whether or not they are performing. It could be in 3 years that the 

decision is made that they are not performing, but if somebody is 

getting the job done, they ought not to be forced, at the end of 5 

years, Ms. Styles, to recompete. I do not think that is good public 

policy. 

Mr. WALKER. It should be facts and circumstances, and I think 

that is what Ms. Styles said, to a certain extent——

Ms. STYLES. Right. 

Mr. WALKER. At the same point in time, I think we also have to 

recognize: Perceptions matter. Even though there may be a small 

percentage that ultimately might be recompeted, if the perception 

is that the rule is that you are going to be recompeted after 5 to 

8 years, then perceptions matter, and that can have adverse behavioral effects, and I think we just need to be sensitive to that. 

Ms. STYLES. I have to say, in writing that provision, it was a very 

difficult one to write because the private sector feels that they have 

to recompete every 3 to 5 years, and I thought 5 years was too 

short a period of time for an organization that was doing a good 

job, and performing well, and was a group of Federal employees. 

I also understood the reality of the situation, that we can write 

a policy that says every 5 years, but I don’t think that we are really going to be able to enforce that. But that is the reason that we 

wrote one that essentially said, if you are a high-performing organization, you can have an extension of a period of time. I think it 

is a good question whether that is a long enough period of time, 

what other mechanism. 

There is a mechanism in place that even after 2 years, if you are 

the government organization and a private sector not performing, 

that you can terminate the contract. So it is not just you get it for 

5 years and that is it. But as a matter of practical reality, if you 

get it for 5 years, generally, you continue to perform for 5 years, 

and people try to help you perform better if things aren’t working 

out, whether you are a private contractor or a Federal employee. 

Senator VOINOVICH. I have just about run out of my time. Senator Lautenberg. 

Senator LAUTENBERG. Thanks, Mr. Chairman, and I will try to 

be short here. 

35

Ms. Styles, in looking at your statement, I am reminded that you 

made a specific comment, ‘‘The revised circular eliminates direct 

conversions and instead provides a versatile streamlined competition process for agencies to efficiently capture the benefits of public-private competition for activities performed by 65 or fewer fulltime equivalent employees.’’

So that 65 is a target. I mean, why did you not say 75? Why did 

you not say 95? I am just curious. 

Ms. STYLES. I think that is a fair question because it is a question of why is 65 an appropriate number for a less-extensive competition process than would be used for over 65. 

Senator LAUTENBERG. Yes. 

Ms. STYLES. I will be honest with you. The reason we chose it 

is because it was the standard that had been chosen before. It was 

the standard that was in the old circular that had been amended 

in 1996 and was used. From my perspective, it was less controversial to stick with an established standard. 

Senator LAUTENBERG. Fair enough. Now, those people who are in 

that group, do they lose some of the benefits they might lose, in 

terms of a retirement program as a consequence of the streamlining? 

Ms. STYLES. No, if they are involuntarily, I don’t believe they do. 

Senator LAUTENBERG. Well, right now, if we want to terminate 

somebody under the Federal system, assuming that there is, first, 

you justify the cause, but are there not benefits that are carried out 

or available to someone who is leaving the service? 

Ms. STYLES. Yes. 

Senator LAUTENBERG. The same would apply to these if they are 

one of the——

Ms. STYLES. Absolutely, all of the procedures that are in place 

would be the same for both mechanisms. 

Senator LAUTENBERG. Ms. Styles, you know that my amendment 

to the FAA reauthorization bill, and I mentioned this earlier, 

passed the Senate by a vote of 56–41 on June 12. My amendment 

would prevent the administration from trying to outsource or privatize air traffic control people using the A–76 process. 

And I think we saw quite a demonstration of skill, loyalty, and 

determination on September 11 when the air traffic control system 

jumped into place to bring roughly 10,000 flights to the ground 

safely, to clear the skies. There was a moment of great tension and 

fear, and I said earlier that I regard that as kind of the fifth 

branch of the military because of the emergency nature of their 

functioning. 

Why is the administration so focused on privatizing the air traffic control system? 

Ms. STYLES. We have no intention of privatizing the air traffic 

control system. 

Senator LAUTENBERG. But we have taken off a significant portion 

of them and taken them away from the inherently government protection that otherwise would be there. 

Ms. STYLES. There are a whole cadre of people that are commercial that are exempt from competition. There are three categories 

of people at the FAA, generally speaking, that your amendment affects. There are the large air traffic control towers and air traffic 

36

controllers. There are the small towers, over 100 of which are run 

right now by the private sector with a better safety record than 

Federal towers at a lower cost. 

Senator LAUTENBERG. Right. 

Ms. STYLES. There are also flight service stations as well. My understanding of your amendment is that we would not be able to 

look at any of these functions for public-private competition. 

Senator LAUTENBERG. Right. But it does grandfather the small 

airports and the services that go there. They are commercially handled now, and we are not thinking of doing anything differently. A 

lot of them are in remote places where it is hard to move people. 

Ms. STYLES. We have been very clear. There are two points here. 

We have been very clear that all we are doing here is being what 

we believe is honest in our articulation of air traffic controllers as 

being a commercial function because some of our towers are actually in the private sector. Other countries have privatized their entire air traffic control function. 

Senator LAUTENBERG. Have you examined the consequences of 

that privatization in the U.K. and Canada, for instance, where the 

number of near misses in the air have increased——

Ms. STYLES. I have not, personally, but I believe other people 

have. 

Senator LAUTENBERG. I am sure you have not, and I am not 

being critical of you, but I think any evaluation like that has to 

look at what happened in Canada and in the U.K., where expenses 

soared, where services were substantially reduced, where bailouts 

had to come in by those governments to further lend financial 

credibility. 

Ms. STYLES. Well, we have no intention of—all we wanted to say 

is that it is considered commercial in other places. We consider it 

commercial, but we are not going to compete it. 

The other part is we have flight service stations. These are people that check the weather for private pilots. There are 2,700 of 

them across the country. 

Senator LAUTENBERG. Ask Senator Stevens how he feels about 

the weather forecasters up in Alaska, and you will get a pretty interesting response. 

What I say to you, we have passed this through the Senate. Do 

you know whether the administration is going to help see that this 

gets through the conference and leaves it to reflect the will of the 

Senate when, again 11 Democrats joined me and others to say that 

this should not be done at this point? 

Ms. STYLES. I think we have been very clear that the President’s 

senior advisers would recommend a veto if there is not a sunset 

provision for the larger towers. And if we are constrained in our 

ability to look at the smaller towers or the flight service stations. 

Senator LAUTENBERG. So, in effect, it says, no matter what you 

folks in the Senate feel, that we are going to veto the will of the 

Senate and abandon the check and balance that is purportedly existent between the Legislative and the Executive Branch. 

Thanks very much, Mr. Chairman. 

Senator VOINOVICH. Senator Lautenberg, I wish to correct a 

statement. You said there were 11 Democrats that joined you, but 

there were 11 Republicans. 

37

Senator LAUTENBERG. That was a terrible oversight. [Laughter.] 

I guess that was, you know, sometimes dreams come out—you 

are right—dreams come out, and you say things you do not really 

mean, but you would like to see happen. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Ms. Styles, your testimony states that competitive sourcing is a major component of the administration’s vision 

of a market-based government, and therefore I would like to ask 

whether you would please provide us with a governmentwide estimate for the cost, an estimate of the cost of implementing the competitive sourcing component of the President’s management agenda, if you will. 

Ms. STYLES. We are certainly working—that is part of the reason 

we amended our guidance for the fiscal year 2005 budget is because we do not have a clear number to give you. I can give you 

estimates of how much it cost per person, although I have to tell 

you it is a double-edged sword. On one hand, you asked us to help 

the employees be able to compete, and on the other hand, people 

want us to keep the cost per position being competed low. 

So it is very conflicting goals here, in terms of making sure we 

have the resources available for our people to compete and keeping 

the cost of these competitions low because we get criticized on both 

sides of this. 

Senator AKAKA. Talking about kinds of costs, why is there no 

minimum cost savings for streamlined competitions? 

Ms. STYLES. When I took this circular to the Director at the time, 

when we were going through this, I had examples of competitions, 

and there would be one where the government offer was $3.4 million and the private sector offer was $3 million, and the government won. And I had a very hard time explaining why that was. 

We decided for a streamlined process to remove that cost differential in order to give agencies the flexibility that they were asking 

us for in doing these competitions. 

Senator AKAKA. Mr. Walker, I liked your comment about 

outsourcing as being a tool and its effectiveness would depend on 

how and when you do it to maximize the effects. I think that will 

ring throughout these discussions as we go along and prove you to 

be right. 

As you know, Mr. Walker, the Commercial Activities Panel, 

which you chaired, recommended that Federal employees be allowed to appeal A–76 and its decisions, just as contractors may do 

now. 

I understand that GAO is considering options for addressing this 

so-called inequity. What is the progress of GAO’s review of bid protests, and when do you expect the review to be completed? 

Mr. WALKER. Well, first, let me note that, as I have mentioned 

in my testimony, that for the streamlined competitions of under 65 

FTE there is not an internal appeal process or an external appeal 

process which I believe creates an accountability gap, which is a 

matter of concern. 

With regard to your question, Senator, we sent out a public notice seeking comments, and have received 50 comments back, some 

favoring us being able to consider appeals, some opposing it for 

various reasons. This is a high priority for us. We have a target 

38

of Labor Day. We would like to be able to come out with something 

the week of Labor Day, as to what our decision will be, and I hope 

that we can meet that time frame. 

Senator AKAKA. Ms. Styles, as you know, bipartisan legislation 

has been introduced in the House to identify contractors with histories of misconduct and bar them from receiving government contracts. What disbarment programs are now in effect? 

Ms. STYLES. We have what I believe is a rather rigorous process 

at the agencies for looking at the present responsibility of a contractor, whether they are financially capable, whether they are a 

good corporate citizen, whether they can perform, and this process 

is one that was established by statute and implemented by regulations, and it is pretty rigorous at most of our departments and 

agencies. 

It affords due process for the contractors to be able to make their 

case if there is an issue or a problem or a proposed debarment or 

suspension, and I think it generally works well. 

Senator AKAKA. Mr. Walker—for my final question, Mr. Chairman—the Defense Department procures more government contracts than any other Federal agency. It is responsible for $90 billion in service contracts alone. DOD has been identified on GAO’s 

high-risk list for contract management since 1992. 

At the same time, DOD’s Inspector General has released a report 

that DOD may have paid more than $4 billion for services without 

first determining that the work was needed. In fact, the report 

found that DOD failed to enforce contract terms and made payments without determining that contract terms were met. 

My question is how will OMB’s revisions to A–76 impact contract 

management challenges at DOD? 

Mr. WALKER. Well, directly, I don’t believe that they do because 

we are really talking about two areas that are on our high-risk list: 

First, current concerns with regard to inadequate procedures and 

practices to oversee contract management; and, second, also the acquisitions process, especially in conjunction with major weapons 

systems. Unless there is some intent to be able to do further 

outsourcing in this particular area with regard to the individuals 

who are performing this oversight that obviously would be a problem. We are not doing enough, if you will. 

As I said to you, when we contract out, we need to have an adequate number of skilled individuals to manage cost, quality, and 

performance of the contractors. I question whether or not we have 

that at DOD right now. 

DOD is an ‘‘A’’ on effectiveness. We are No. 1 in the world in 

fighting and winning armed conflicts. 

DOD is a ‘‘D’’ on economy, efficiency, transparency, and accountability. The general culture is get the money, spend the money; get 

the money, spend the money. There are not adequate checks and 

balances to protect the taxpayers’ interests in the military industrial complex, and we have a number of recommendations that we 

have had for a period of time in this area. Some have been adopted 

and others remain to be adopted. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Akaka. 

39

1The prepared statement of Mr. Gansler with an attachment appears in the Appendix on page 

93. 

We have many other questions, but in fairness to the next panel, 

I think that we will conclude. 

There are still some questions, Ms. Styles, that I would like to 

have answered, and I thank you for being here. You have had an 

opportunity to hear some of our concerns, and I would be interested 

in, after your hearing these concerns, if there is going to be any response to any of them that we have raised today in terms of where 

you are going. 

Senator LAUTENBERG. Mr. Chairman, just one comment, and I do 

not want to interrupt the flow, so, please, as far as I am concerned, 

feel free to get up. But I would say but there is another policy that 

could be spend the money, then get the money, and you can borrow 

it from places around town. 

Senator VOINOVICH. Thank you very much. 

Our next panel will come forward, and I think that all of you 

have been sworn in but for Dr. Light, if I am not mistaken. Is that 

right? 

Mr. LIGHT. I was not sworn in with the other witnesses. 

[Witness sworn.] 

Senator VOINOVICH. Thank you. Let the record show—Mr. Tiefer, 

did you get sworn in too? 

Mr. TIEFER. I am sworn. 

Senator VOINOVICH. We thank you for your patience. In order for 

us to get some questions answered, I would like you, if possible, to 

see if you can share with us, within 5 minutes, your testimony, understanding that the rest of your testimony will be made a part of 

the record this morning. 

We really appreciate your being here today. It is an intellectual 

group of people who are going to be looking at this. Frankly, we 

did not bring the unions in, or the contractors and so forth because 

so often it turns into a very contentious debate, and hopefully we 

are going to get a more objective view from the four of you, in 

terms of what you think about the competitive sourcing initiative. 

So, Dr. Gansler, we will start with you. 

TESTIMONY OF JACQUES GANSLER, Ph.D.,1 SCHOOL OF 

PUBLIC AFFAIRS, UNIVERSITY OF MARYLAND 

Mr. GANSLER. Thank you, Mr. Chairman. Thank you very much 

for inviting me here today to discuss competitive sourcing. 

Let me start off, though, Mr. Chairman, by complimenting you 

and the rest of the Subcommittee for focusing on this really critical 

issue of the government workforce. It is important, complex, and I 

must say obviously a somewhat controversial aspect of this competitive sourcing debate. 

I believe everybody here can agree that the government needs a 

high-performance, high-quality workforce for the 21st Century. The 

question is will competitive sourcing help or hurt in that objective? 

It is my personal belief that it will help, significantly. 

Unfortunately, today, many Federal employees view competitive 

sourcing as a personal assault, an accusation that they are incompetent, lazy and only interested in secure, life-long employment. In 

40

fact, competitive sourcing is not an attack on Federal employees; 

it is an attack on a system that encourages government organizations to maintain a monopoly over a service sector. And whenever 

a monopoly exists in the public or the private sector, innovation, 

improvements and cost reductions are discouraged. The missing ingredient is competition. 

Yet, while the evidence overwhelmingly demonstrates that competitive sourcing really works, we continue to hear the statements 

that, for example, ‘‘there is no data that show any benefits from 

competitive sourcing.’’ But there actually has been an abundance of 

data generated; it just hasn’t been made widely available. 

Recently, I issued a report on this existing data; I put copies of 

it over on the table (and it is referenced in my prepared remarks). 

What I found was that there was much confusion, including even 

on definitions, and I even heard some of them today. For example, 

competitive sourcing is not outsourcing, nor is competitive sourcing 

privatization, though it is often referred to in that way. In fact, the 

public sector has won, depending upon what statistics you use, 40 

to 60 percent of these competitions, and the public sector has won 

98 percent of the streamlined competitions. 

To summarize the overall results actually found, based on over 

2,000 cases in the Department of Defense alone, plus hundreds of 

other cases at the Federal, State and local levels, when competitive 

sourcing is done right—and that is important, and I will come back 

to that—the performance improves significantly, performance improves significantly while costs go down by an average of over 30 

percent. And, this result is true whether the winner is the government or the private sector. 

It is really important to understand that even when the award 

stays within the government, the performance improves significantly and the costs go down significantly. This is due simply to 

the shift from a monopoly environment to a competitive one. 

The incentives created by competition are what make the difference. Let me provide a few specifics that address what I think 

are the six most common misperceptions about the actual results 

achieved. 

First, performance does improve. The data at Federal, State and 

local levels overwhelmingly demonstrate that the performance improves dramatically, whether it is measured as customer satisfaction, system reliability, on-time delivery or whatever. These are 

measured results, comparing performance before and performance 

after the competition is introduced. 

Second, the savings are real. Again, the verified, comparative 

costs actually show an average saving of over 30 percent. And, this 

has been shown not to be due to low individual hourly rates, but 

due to productivity gains from process changes, as driven by the 

competitive forces, using obviously significantly fewer people, but 

often at higher individual hourly rates. 

Third, contractor costs do not increase after the award. Independent studies have found that, when best practices have been 

utilized, when a private-sector firm won the competition, the savings that were promised were actually realized at the end of the 

contract period. However, when a government organization wins 

the competition, there have been problems. 

41

Specifically, as was noted a few minutes ago, it has often been 

difficult to identify overall government costs, especially overhead 

costs, either before award or after performance achievement. However, you can use head count before and after as a way of making 

a comparison in the government, and they generally do match the 

reduced numbers in the government bids. Clearly, future government-cost visibility would be highly desirable. 

Fourth, small businesses actually benefit. Again, when best practices are utilized, the data show that small businesses do extremely 

well. For example, between 1995 and 2001, the Department of Defense conducted 784 public-private competitions and 79 percent of 

all of those awarded as contracts went to small businesses. 

Additionally, small business requirements for subcontracts and 

large awards can be even more significant to the small businesses. 

For example, the outsourcing of the Navy and Marine Corps 

Intranet, as well as the National Security Agency information technology infrastructure—these are both multi-billion-dollar awards—

each had a 35-percent small business requirement. 

Fifth, there is a minimum impact on government employees. As 

I noted, even when the government wins, the data show a 20- to 

40-percent reduction in the government staff. However, the independent studies of this show actual involuntary separation was 

only in single digits, ranging from one study that found about 8 

percent to another that found around 3 percent and some that 

found 0 percent. 

This low rate of involuntary separation is due to a combination 

of transfers to other government positions, retirements, and voluntary separations, often to the jobs created with the winning contractor. Clearly, this issue of the workforce is an important area, 

and it should be a major consideration, in both the requests-forproposal and the ensuing competition. In my report, I cover some 

ways in which that can be done specifically. 

And, finally, sixth, and of greatest importance, I would argue, is 

the government actually has greater control if you use competitive 

sourcing. In a competitive environment, the government managers 

have been found to have far greater control no matter who wins. 

If the government wins, it is now required to keep performance 

and cost metrics, along with the potential for competition—and I 

emphasize potential for competition—in 3 to 5 years in order to 

keep the pressure on the government workforce for continuous productivity gains. And I should emphasize that that is very similar 

to the normal competitive pressures that one in industry sees all 

of the time. So people going to work for the government or going 

to work for industry have the same competitive pressures at all 

times. 

While, if the contractor wins, the government manager has full 

of control and visibility into the performance and cost and can terminate the contract if they are dissatisfied, something the government manager cannot do with a civil service workforce. 

Senator VOINOVICH. Dr. Gansler, could you wrap up your testimony? 

Mr. GANSLER. Sure. In fact, I just wanted to summarize the five 

points that I think make the difference in terms of whether or not 

you do it right, and I think this is critically important. 

42

1The prepared statement of Mr. Light appears in the Appendix on page 159. 

The most important key to success is shifting from a monopoly 

to a competitive environment. 

Second, the competition must be for best value, not simply for 

cheapest. 

Third, even when the government contracts out the work to be 

performed, it does not give up any of its management responsibilities. 

Fourth, critical performance and cost metrics must be mutually 

agreed to at the beginning and monitored and reported throughout 

the program, and they have to be output oriented, results oriented. 

And, last, the government must aggressively provide the training, that you emphasized as being so necessary, to reshape and 

sustain the workforce and to help overcome the natural resistance 

to the changes that competitive sourcing brings. 

If one does these ‘‘best practices,’’ it is very clear that the government will gain, and the employees will be fulfilled employees working up to their full potential. 

Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you, Dr. Gansler. Dr. Light. 

TESTIMONY OF PAUL C. LIGHT, Ph.D.,1 SENIOR FELLOW, THE 

BROOKINGS INSTITUTION 

Mr. LIGHT. It is a pleasure to be here. 

Senator VOINOVICH. I am glad to welcome you back, Paul. You 

have been a frequent visitor over the years, and we thank you publicly for all of the help that you have given us. 

Mr. LIGHT. Thank you. It is a pleasure to be before you and on 

this panel. Jack and Frank I have known off and on for a long 

time, and we will have to get to know each other. 

I am going to leave it to Frank to talk about the quality of the 

data that underpin these estimates. The best research has been 

done by RAND, and I have a lot of confidence in their analysis of 

how much money gets saved and how durable the savings are, but 

I think the RAND analysts would say that it is a limited study, but 

an important contribution to the debate. Some of the data that 

float around here is just not very good, and that is an issue that 

you all may want to take on. 

I am going to be very brief here. I want to make one or two comments about the testimony this morning by OFPP Director Styles. 

I think what you are seeing here is, from a skeptic’s point of view, 

a little bit of a sleight of hand. It is true that we are going to get 

rid of the arbitrary targets, and I think that is a wonderful and important step forward, but I think what you are hearing and what 

you see in the OMB document is that the debate is going to move 

upstream. The debate is going to be about what the term ‘‘inherently governmental’’ means and what the reason codes justify by 

way of exemptions. 

The appointment of a chief or a competitive sourcing officer in 

every department is an important step forward here, but I think 

the debate is now going to shift to a place where we are not going 

to be able to view it very closely. 

43

Instead of 25 percent of Federal jobs being eligible for competitive sourcing, I would estimate—or I can’t estimate—I would argue 

that the goal will be to increase that number steadily by questioning the reason codes that are currently used to exempt commercially available activities from competition and by changing the definition of inherently governmental. 

Indeed, in the revised A–76 circular, there is an important 

change to the definition of what is, in fact, inherently governmental 

from activities which involve the discretion, the exercise of discretion of government authorities to the definition of activities that involve the ‘‘substantial’’ exercise of discretion. 

Now, substantiality is very much in the eye of the beholder, and 

I think what you are going to see here, as an important issue for 

oversight, is to maintain a steady focus on where the key decisions 

are made about eligibility. 

So, with all due respect to the Chairman, I do not believe that 

we are talking about a relatively small number of jobs in the long 

haul. 

With all due respect to my colleague and friend from GAO, who 

rightly argues that we need to bring these competitive pressures to 

bear throughout the government, if we are getting these kinds of 

savings, through competitive sourcing, why aren’t we getting them 

elsewhere? 

I will argue that within several years, we are going to see a very 

large proportion of jobs that will be defined as eligible for competitive sourcing, and that is an important area for debate. Now, this 

Committee, this Congress may decide that it would be best to codify the definitions of inherently governmental and commercially 

available, rather than leaving that to the Office of Management 

and Budget for regulatory rulemaking. 

In fact, you may wish to take a look at the OFPP policy letter, 

which defines these terms, which I would argue to you is an utter 

mess, in terms of actually interpreting what these terms means. 

What is inherently governmental? What is commercially available? 

Where do you use the reason codes? 

And if ever there was an area where the U.S. Congress could do 

the Executive Branch a favor, it would be in codifying the definitions of what these terms mean, so that as we move ahead with 

competitive sourcing, everybody is reading from the same script, in 

terms of what is what. 

I noted with some interest and support that OMB has decided 

that no two agencies are created alike. Arguably, on the air traffic 

sourcing issue, the United Kingdom, Canada, and the United 

States are, in fact, enough alike to make the decision that we can 

make some of our air traffic control commercially available. 

My summary, my statement goes into the good and the bad reasons for outsourcing. I accept and embrace the notion that competitive competition can, and does have, a salutary effect on performance. I think we need to learn how to do it so that it affects all 

Federal agencies. I believe the way to go is possibly through pay 

for performance of the kind that this Subcommittee has been struggling with. 

I also note with some concern the use of price as a surrogate 

measure of things we value. Price is not a good measure of motivaVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00047 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
44

1The prepared statement of Mr. Tiefer appears in the Appendix on page 175. 

tion. Price is not a good measure of fairness and commitment to the 

public service. So as we proceed with competitive sourcing by putting the emphasis on price, we need to understand not just what 

price measures, but what it ignores. 

I submit my statement for the record, and I am delighted to answer any questions that you might have. 

Thank you for having me. 

Senator VOINOVICH. Thank you very much. Mr. Tiefer. 

TESTIMONY OF CHARLES TIEFER,1 PROFESSOR OF LAW, 

UNIVERSITY OF BALTIMORE 

Mr. TIEFER. Thank you, Mr. Chairman. I am a professor of law 

at the University of Baltimore and the author of ‘‘Government Contract Law.’’

Mr. Chairman, you, yourself, have appropriately focused your 

own legislative efforts, in general, and this Subcommittee’s work on 

workforce issues. And like other people, like your colleagues and 

other witnesses, I salute you for those efforts. 

Today, you began the hearing by expressing a half a dozen concerns about the new A–76, which I can only say were extremely 

well taken, well articulated, and I share them more intensely I 

think even than you. 

Your first concern was the issue of across-the-board goals. Although we are trying to think positively of the steps we have heard 

today from OMB, I have studied the report and the testimony that 

they filed, and I am unable to find the tremendous departure from 

across-the-board goals that they seem to be contending they have 

made. 

When I look at Page 5 of their competitive sourcing report, 

‘‘Under the scorecard approach, numerical mandates were converted to incentives,’’ not eliminated, converted. ‘‘An agency would 

move from a red score to a yellow score if it completed competitions 

for 15 percent of the total commercial positions,’’ and it will move 

from yellow to green when it completes 50 percent of the total commercial positions. 

Now, earlier this year, OMB had a 15-percent near-term and 50-

percent eventual target, and as of today, OMB still has a 15-percent near-term and 50-percent eventual target. It does not have an 

announced percentage target that varies from agency to agency; it 

may have fixed governmentwide percentage targets. So that concern has not been eliminated. 

Another concern that the Chairman appropriately expressed was 

that as a result of this heavy emphasis on outsourcing, managers 

will not be investing enough in alternatives in ways of making 

their existing workforce do the job better, and I combine this with 

concerns that several members of this panel have expressed about 

the A–76 innovation of this radically exalted, ‘‘streamlined’’ procedure. The streamlined procedure is a way for a manager who is trying to meet these percentage targets not to invest in his workforce, 

but instead just to outsource. 

And in particular, the streamlined procedure does away with the 

requirement of a most efficient organization, an in-house bid that 

45

1The prepared statement of Mr. Camm appears in the Appendix on page 190. 

tries to maximize the in-house resources. Instead, it is practically 

a direct conversion. A manager who goes by a streamlined competition not only does not have to work on producing a most efficient 

organization, but as Senator Akaka emphasized, it eliminates, 

when you do a streamlined competition, the 10-percent minimum 

cost differential. 

And there was a very interesting exchange in which Ms. Styles 

was asked, ‘‘Where did that come from? Why did you get rid of the 

10 percent?’’

And she basically said, ‘‘I had a conversation with my Director, 

and my Director insisted on it.’’

Now, that is a translation. Ms. Styles is a government contracting professional. She yielded to the political directive, come up 

with a tool to outsource rapidly. 

Finally, the Chairman expressed his concern that their acquisition officers in the government are understaffed and overworked, 

and therefore unable to conduct full-scale, meaningful competitions, 

public and private. I share that. I cited the statistics. I am familiar 

with it from general government contract law, that the radical 

truncation, the cutting in half of the DOD acquisition force has produced problems in government contracting across the board, greatly decreased competition, greatly increased sole sourcing, and we 

are about to see what it is going to produce in the outsourcing area. 

It is going to produce a reliance upon streamlined, meaning nonreal competition or, if there is a full-scale competition because you 

are dealing with some large facility, over 65 people, that cannot 

even be split and broken down, which is an available tactic to avoid 

the 65 level. 

What we are about to see is that this underworked acquisition 

force will simply throw up its hands and say, ‘‘Give the jobs out.’’

Thank you, Mr. Chairman. 

Senator VOINOVICH. Thank you. Mr. Camm. 

TESTIMONY OF FRANK CAMM, Ph.D.,1 SENIOR ANALYST, RAND 

Mr. CAMM. Thank you, Mr. Chairman, for your invitation to testify here today. I will be testifying on the basis of work that I did 

on the Commercial Activities Panel, as well as policy analysis that 

we have conducted at RAND, but let me be clear that I am testifying as an individual not representing views from the RAND Corporation. 

I share your belief, Mr. Chairman, that we should treat the government’s career employees with respect and appreciation. Competition affects every person’s sense of self-respect throughout our 

society. Some Federal employees fear competition because they are 

convinced that they and their colleagues cannot or will not be allowed to compete successfully against an alternative commercial 

source. That cannot be good for morale, whether competition occurs 

or not. 

But on the other hand, thousands of other Federal employees 

have affirmed their self-respect by helping their Federal colleagues 

win public-private competitions. To me, the two critical challenges 

we should be thinking about here, for competitive sourcing policy, 

46

are to ensure that we properly empower our Federal employees, as 

has been repeated here today, and to create as level a playing field 

as possible for them to compete on and to prove themselves. 

Let me offer the following observations from the work that we 

have done at RAND and, to some extent, on the panel as well. 

Competitive sourcing is one of the best tools we have available 

to improve the cost effectiveness of Federal agencies. In its efforts 

to improve productivity since 1996, for example, the Department of 

Defense has consistently preferred this as the option with the best 

documented history of improvement. 

RAND analysis on the best commercial sourcing practices indicates the following conditions improved the morale of the workforce 

in a company when it is considering whether or not to outsource 

an activity. 

The sourcing decision process should be fair, objective and transparent enough for employees to understand the final decision. 

Second, the decision process should proceed rapidly. Employee 

morale suffers most when awaiting a decision and suffers more the 

longer the process takes. 

Third, displaced employees should be assured employment elsewhere in the firm. 

And, fourth, displaced employees should receive a soft landing if 

they leave the firm. This can occur in one of two ways. First, it can 

occur through formal severance or outplacement agreements with 

the firm if it outsources their positions. Alternatively, it can occur 

through criteria that are used to choose an external source that reward that source for having generous compensation benefit and 

training plans, as well as good opportunities for advancement. 

When we look in the commercial sector, well-managed outsourcing programs displace workers who often find themselves to 

be better off after being outsourced. Their new employers, who specialize more than their original employers did, are often more willing to invest in their skills and more likely to give them opportunities to grow. 

That said, we have to recognize that individuals who have selfselected into government jobs may simply not like jobs in the private sector, even if those opportunities are better for them in the 

private sector. 

OMB’s goal in the past of competing 50 percent of the positions 

in the commercial activities of the Federal Government has clearly 

raised concerns, and you all have expressed those clearly here 

today. Our analysis at RAND has long supported the strong empirical findings at the Center for Naval Analysis that the OMB Circular A–76 has achieved savings through competition and not 

through outsourcing. This simply confirms what Dr. Gansler talked 

about a moment ago, and we are talking about the same sources 

of information here. 

OMB’s recent changes in Circular A–76 emphasized that it is a 

competitive sourcing program. It is not an outsourcing program. 

Again, I emphasize the difference that Dr. Gansler drew between 

these two because it is important to see it. That said, is the 50-percent goal the right goal? I think everyone here today has agreed 

that it is not. The fact is that there is no one right percentage that 

can be applied to every agency. More broadly, a reliable method 

47

does not yet exist to determine exactly where competitive sourcing 

is cost effective in any agency, even DOD, the agency with the most 

experience in the Federal Government. 

I would prefer an OMB policy that motivated competitive 

sourcing with targets that had more operational or strategic significance to Federal managers, like specific targets for cost reductions 

or for performance improvements. Such a policy would make it 

easier for people to understand that competitive sourcing is, in fact, 

a tool, not an end in itself. 

OMB has done a remarkably good job of implementing the key 

elements of the Commercial Activity Panel’s recommendations that 

it can control. I generally agree with General Walker’s careful delineation of differences between the panel’s recommendations and 

OMB’s new version of A–76, and I will not try to list those differences here. Rather, I would direct your attention to the extent 

to which the new version of A–76 captures the central elements of 

the panel’s strong consensus on principles. 

Taken together as a coherent whole, these principles call for 

major changes in competitive sourcing policy, and OMB’s recent revision of A–76 captures many of those changes in an effectively integrated manner. The changes that Ms. Styles told us about today 

make it even more closely matched to the panel’s findings. 

Thank you, again, for the opportunity to testify. I look forward 

to answering your questions. 

Senator VOINOVICH. Thank you. 

There is one thing that I want to correct for the record. Mr. 

Tiefer, you said that reading a summary on page 5 of OMB’s new 

report on the new definition of what is required, in terms of getting 

yellow and green on the scorecard is not written in percentages. In 

other words, this document, the Competitive Sourcing, July 2003, 

lays out the new scorecard criteria. ‘‘OMB has modified the scorecard criteria. These refinements have been informed by discussions 

with,’’ and so on, ‘‘ensure an agency’s commitment to competitive 

sourcing is measured against targets that reasonably reflect its 

unique mission and circumstances, not arbitrary or official goals.’’

I just want to clear that up, and it is interesting that Dr. Light, 

you make the point that your concern is in the definition—this definition could open up a lot more functions because of the definition, 

and so we are going to look into that suggestion that you have 

made. 

Dr. Gansler, I am interested in your comment that competition 

is what provides the improvement in performance. If 75 percent of 

the workforce is not subject to competition, God help us if the only 

way you can improve performance is by turning to competition. I 

want to say that I got involved in this whole area in the beginning 

because I wanted to change the culture of the Federal workforce 

and try to build on what I did when I was in Cleveland, and when 

I was governor, where we aggressively pursued quality management and trained some 58,000 people in quality management. 

I and the union leaders had a 3-day retreat. At the end of my 

term we had 17 percent less employees in the State of Ohio. We 

did not just hack them out of there, but we did it through tools 

such as attrition, and we had a much better workforce because we 

empowered them, we gave them the tools, we increased dramatiVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00051 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
48

cally the amount of money that we provided to train them so they 

could upgrade their skills. I think that the next issue after this 

year is over that I am going to start going back to that and identifying agencies that have quality management. 

Mr. GANSLER. I couldn’t agree with you more, Senator. 

Senator VOINOVICH. I would like to give you each an opportunity 

to comment on the testimony of someone else at the table. I am 

sure there may be some questions, there may be some differences. 

I would give you this chance to do that. 

Mr. GANSLER. In the same order, I guess. 

The one obvious point that I would like to make about Mr. 

Tiefer’s comments, where he said that streamlining is the same as 

direct conversion, the empirical data are exactly the opposite. Ninety-eight percent of the time when streamlining is used the government wins. So, if you are worried about the government trying to 

break up the size of competitions so that they can use streamlining, 

the government is likely to win more of them than, on average, 

what it has in the past—40 to 60 percent—under full A–76 competitions. 

I think that streamlining, in fact, has favored the government 

rather dramatically, in terms of its win ratio. Having said that, I 

still think the important point here is not the fact that you get a 

cost reduction. The really important point is that you get performance improvement at lower cost, and that is what I think the government needs. That is your high-performance workforce, and that 

is what we need to strive for in the 75 percent not affected by competitive sourcing, as well as in the 25 percent that are. 

Mr. LIGHT. My general reaction is that I think Jack has taught 

me a great deal in his paper, and others have taught me a great 

deal about the value of competition. I think that we have got a serious problem in government playing off or pivoting off Frank 

Camm’s comments about allowing Federal employees or giving Federal employees the tools to compete and also creating a culture in 

which competition is not necessarily the only tool that you have 

available as a manager. 

One of the issues surrounding this is the presence of relatively 

low-powered incentives in government, and I think that is where 

DOD started out this spring, in terms of its arguments on behalf 

of personnel reform; the notion being that give us some tools that 

we can use on a day-to-day basis to promote higher performance. 

I guess my general reaction is this is a tool that needs to be very 

carefully used because of its repercussions throughout government 

on government morale, and its kind of reinforcing effects on whether or not or doubts among Federal employees that they do, in fact, 

have the tools with which to compete. 

I think there are an awful lot of Federal employees out there who 

are saying give us the training, give us the staffing, give us the resources so that we can do the jobs that we came here to do. In that 

regard, you bring competition in on a unit, you have to, at some 

level, deal with that general sense that there are not enough resources out there. 

Senator VOINOVICH. Mr. Tiefer, would you like to comment? 

Mr. TIEFER. Thank you, Mr. Chairman. 

49

Dr. Gansler has noticed that I am concerned about the streamlining process and that I have a question about the government 

breaking units so they get them under the 65 level and other shifts 

in it. I can’t claim originality on these. I read the GAO report that 

was provided today, and I listened to Comptroller General Walker’s 

testimony. And as he said in his section entitled, ‘‘Potential Issues 

with Streamlined Cost Comparison Process,’’ there used to be—

well, he says: 

‘‘First, the prior version of the circular contained an express prohibition on dividing functions so as to come under the 65 FTE limit 

for using a streamlined process. The revised circular contains no 

such prohibition. We are concerned that in the absence of an express prohibition, agencies could arbitrarily split activities, entities 

or functions to circumvent the 65 FTE ceiling applicable to the 

streamlined process,’’ and then goes on to comment about the elimination of the 10-percent conversion differential. 

There is a reason why a procurement professional, such as the 

Comptroller General or myself, is worried about this. Splitting 

things in order to come under the limit is tactic, No. 1 for speeding 

things through the procurement process. The Comptroller General 

has seen this everywhere else in procurement, as have I. That is 

the problem. 

Senator VOINOVICH. Dr. Camm. 

Mr. CAMM. Let me just comment on a couple of things that Dr. 

Light said. I agree with him that, as we get into this, the debate 

is going to move towards the question of how to define the inventory, and I actually welcome that. Because I think if we can get 

agreement on an improved competition process through A–76, then 

we can move on to what is a much more difficult question. And 

that is which activities really do belong within the government and 

which should be taken care of by an outside provider. 

I have been privileged to be present at many of the discussions 

inside different agencies about how that decision is made, and I 

look forward to improvements in the process that is used, because 

the processes I have observed in a number of different settings are 

not reassuring. 

I think there is a lot of misunderstanding about what core competency means, there is a lot of misunderstanding about what inherently governmental means, there is a lot of misunderstanding 

about what the risks are that are present when you are using an 

internal, as opposed to an external source. We need a lot of learning on the part of our government decisionmakers about this, because this is a strategic decision that has to be made, and I think 

Dr. Light is right. I think the focus will be moving in that direction. We need to be prepared to keep an eye on that. 

I also agree, and I guess it has been said several times, but let 

me emphasize that the secret to the success of this whole program 

is going to lie in its implementation. I have spent a lot of time in 

several parts of DOD helping people go through these competitions, 

and so I have a special appreciation for the challenge that they 

face. 

You are asking people who have full-time jobs to take on an additional job they have never had before—and in all likelihood, one 

they won’t have again in the foreseeable future—a very difficult 

50

thing. They are going to be doing things that their commercial 

counterparts do every day for a living, and so they are very good 

at it. These people are frightened, and they need help. 

I think that there are lots of things that could be recommended 

to empower these people. I think we can put together what in the 

Air Force was called a central tiger team that could go from one 

location to the next. Experts can come in and provide a very clear 

way of executing an A–76 study from the government point of view. 

We can provide just-in-time training. There is a nice program in 

place which has been recommended at the Defense Acquisition University, that could apply throughout the government. There is 

nothing special about Defense. Just before one of these studies, the 

program trains the people who are going to be involved in exactly 

how the study runs. It is a simple thing to do, and I think it will 

be quite effective to try. 

And I think Federal employees can benefit from analytic support 

from third parties. Unless we spend the money to do that, we are 

going to be in big trouble. I appreciate Ms. Styles’ comments that, 

on the one hand, we want to get the cost of these competitions 

down, but on the other hand, if we want them to run right. As Dr. 

Gansler has suggested, if you want to do this right, it is not going 

to be cheap, and we shouldn’t do it on the cheap. 

Senator VOINOVICH. Thank you very much. Senator Lautenberg. 

Senator LAUTENBERG. Thanks very much, Mr. Chairman, and 

thank all of you for your interesting testimony. I am not going to 

try to create condition, but I can tell you that several hours in the 

room would probably be a good way to get to understand what it 

is precisely that we are talking about here because there is no 

magic that says competition—I think you, Mr. Chairman, said 

something about it—being the driver always for the best result. 

Look at the management of some of our great companies that 

used to exist, I might add, about how they competed for capital dollars, how they competed for wealth and how they competed for position and the kind of chicanery that crept in there to try and make 

it look like it was straight old competition. Well, it was not. 

And I come from the management school, and I really do buy 

into the training of the people that we have, insisting that there 

be some criteria for performance given to them and discussed with 

them. 

We found in my first 18 years here, when I was very involved 

in the superfund, the development of this program, the management of these huge projects, is that too often the management really did not get to the people who had to do the job and let them understand what was required of them, and we tend to permit those 

things to slip by in government because of the magnitude of the 

job, the growth of the responsibility, the growth of our country, the 

demographic growth. I mean, look at what has happened. We put 

on maybe 100 million people in the last 25 or 30 years, and there 

are a lot of services required. So it is complicated. 

And I do not say you have to keep everybody on the Federal payroll that you started with, but Professor Gansler, I am curious 

about one thing, do you support tenure as a mark of appropriateness on the college campus? 

51

Mr. GANSLER. I have to tell you, Senator, I, for most of my life, 

was either in industry, mostly in industry, and served two terms 

in the government, and during that period I chaired an advisory 

board at the University of Virginia and another one at the University of Maryland, and frankly I was against tenure. Now, I have 

it. [Laughter.] 

There are some advantages, but clearly I think, in the long run, 

it is not a good idea. Personally, I don’t think it is a good idea. 

Senator LAUTENBERG. Therefore, then, if one takes a sabbatical, 

do not come back or something like that? 

Mr. GANSLER. No, I think you should measure an individual on 

their performance, and if they do a good job, they should keep their 

jobs. I believe the same thing should be true for the government 

workforce, as well as for the private sector. The difference is, in the 

private sector, I had more flexibility than I did in the government 

when I had government workers working for me. 

Senator LAUTENBERG. Yes. How do the others of you feel about 

tenure on the campus? I am just curious. Dr. Camm, do you——

Mr. CAMM. Well, I don’t have tenure. My company doesn’t believe 

in it, and I think it——

Senator LAUTENBERG. They believe in it, but they just do not enforce it. 

Mr. CAMM. Well, we don’t have tenure, and I think we are better 

for it. I think it makes it a more interesting place to work. 

Senator LAUTENBERG. Yes. My company did not have any tenure 

either, and we got up to 45,000 employees and started with zero, 

and capital, just good will handed down by our parents, and that 

was it. We had no—the company is called ADP, Automatic Data 

Processing, and in business now, 50 years, and I am one of the 

three founders, and the other two guys are in better shape than I 

am. So that tells you something about what hard work does. 

But the fact of the matter is, if there is an incentive, and I do 

not quite know how we do it in government. You cannot just do it 

with plaques, and little hors d’oeuvres and a glass of Diet Coke. 

That is not quite enough. But I will tell you, and I am a firm supporter of the workforce generally in the government, and I see that 

when they are asked to do things, when there is leadership, they 

perform as no other workforce that I have seen. And, again, we had 

a very successful one, and I know lots of people in the private 

world. And I am considered a Hall of Famer in information processing. I had to do that to match Bill Bradley’s Hall of Fame and 

reputation in similar things—— [Laughter.] 

But the fact of the matter is that I was a pioneer in outsourcing. 

That is what that began, and I really believe in it, but what do you 

outsource? You do not outsource jobs, you outsource assignments, 

and here we start talking about it as outsourcing jobs. I would prefer another look at things. 

So, when I look at what has happened—and this is what worries 

me—I have a particular focus on the FAA and where it belongs. 

Again, I think it is like the fifth branch of the military, and I cannot believe, and I am sorry that Ms. Styles is not here, that the 

President would veto a bill that takes care of essential air service, 

advances the technology and FAA, etc., because we passed, with 

52

the help of 11 Republicans, a bill to restrict FAA to inherently government because I have looked at other situations. 

In Great Britain, since privatization, near misses or other problems have increased by 50 percent. That is near misses in the area. 

Delays caused by air traffic control have increased by 20 percent, 

and the story goes on. Debt service has increased by 80 percent. 

Canada’s privatized system has run up a $145-million deficit just 

in the past year, and I worry about what happens when you buy 

security on the cheap, and that is what you have got when you are 

up there, and there is a labor dispute. I mean, we can talk about 

strike prohibitions here, but when you turn it out to an employer, 

you cannot say, and, remember, they are not allowed to strike. It 

is impossible. 

So the review is an excellent one, and I thank each one of you 

for your contribution, especially my good friend, the Chairman 

here, who has an earnest view of the responsibility to employees, 

but also responsibility to the constituents in the government, and 

I salute that. 

I thank you very much. 

Senator CARPER. Is there going to be a second round of questions? Do you have some questions? 

Senator VOINOVICH. No, I think we will conclude with yours. 

Senator CARPER. All right. 

Senator VOINOVICH. Because we are past the 12 o’clock hour. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. I apologize for not being here earlier to hear 

your testimony. Others of my colleagues and I are working with 

things on the floor, and we have constituents that are in and trying 

to meet with us, and so I apologize for having missed your testimony.

OPENING PREPARED STATEMENT OF SENATOR CARPER 

Thank you, Mr. Chairman. I think we would all agree that the goal of any effort 

to encourage public-private competitions for Federal work should be to ensure that 

the people best able to do the work win the competition, regardless of whether they 

are Federal employees or from the private sector. I am concerned, however, that the 

administration’s competitive sourcing initiative, at the very least, sends the message 

that most work is better handled by the private sector. 

As a former governor who has some experience managing a public workforce, I 

can appreciate the President’s desire to fix the competitive sourcing process. The old 

process took too long and probably prevented qualified contractors who could have 

saved the Federal Government money from competing for work. That said, the new 

process laid out in revised OMB Circular A–76 probably makes it more likely that 

private sector bidders will be awarded Federal contracts, even if that is not in our 

best interests. While I am concerned that some of the new time limits for publicprivate competitions laid out in the revised rules may not give Federal employees 

enough time to put forward their best bid, I am most concerned with aspects of the 

rules that could unfairly tilt the process in the private sector’s favor. 

First, requiring agencies to decide a competition based on ‘‘best value’’ instead of 

cost could be positive if it allows agencies to contract out in situations in which the 

private bidder is more expensive initially but could save them money in the long 

run. However, I think it should be made clear that cost should be the main item 

agencies look at when deciding who wins a competition. 

Also, while I would generally look on increased competition as a good thing, I do 

not think it is a good idea to dramatically expand the number of Federal jobs eligible for competition. There are certain jobs, such as air traffic control and food inspection, that I think should not be competed under any set of rules. I am concerned 

53

that the revised rules could classify too many sensitive jobs as ‘‘commercial’’ in nature and led to irresponsible outsourcing decisions. 

Finally, while they have been moderated somewhat in recent months, I would 

argue that the administration’s competitive sourcing goals are arbitrary and will 

force agency managers to compete jobs even when they might not think doing so 

is the best thing to do. 

In closing, I will point out that, if we are going to increase public-private competition, we must also increase the resources made available for contracting management and oversight. Federal employees forced to bid for their jobs under tight 

timelines need to get enough resources to be able to make their best offer. Perhaps 

more importantly, agencies must also be capable of monitoring contractors to ensure 

that they are providing taxpayers good service. 

Thank you, Mr. Chairman, for holding this important hearing and thank you Administrator Styles and Comptroller General Walker for your work on this issue.

Senator CARPER. I have a summary of what you have said, but 

I probably will not have a chance to read your testimony. Let me 

just ask each of you, when I walk out of here, I do not know if I 

will ever see you fellows, again, but I want to thank you for having 

come today and shared your thoughts with us. 

Just take a minute, what would you like for me to take out of 

this hearing that you think will be most valuable to us as we go 

through our deliberations? 

Mr. CAMM. What I would suggest is that A–76 should be considered as an integral part of the strategic management of the Federal 

workforce and that Federal workers must recognize that they are 

part of a broader economy where competition drives the way the 

workforce works. 

When we use the word ‘‘human capital,’’ and we use it repeatedly 

without thinking about what it means, it means you carry a basket 

of skills with you wherever you go. We need to make sure that the 

workers in the Federal workforce have the basket of skills they 

need, whether they stay in the Federal workforce or go someplace 

else. 

A–76 is an integral part of that because it trains them in what 

competition is, and it makes them skilled and useful if they decide 

to go somewhere else. So I would hope that you would remember 

A–76 as being an integral part of that strategic human capital 

planning process. 

Senator CARPER. Thanks. Mr. Tiefer. 

Mr. TIEFER. What I think we have seen today is, let us put it 

this way, already this year the issue of outsourcing has been handled a number of times by appropriation riders because last year 

that is how it was handled, by an anti-quota provision that became 

Section 647 on the omnibus appropriation because there is a great 

deal of support in Congress for not having numerical targets for 

outsourcing, and although there was some modification today, Ms. 

Styles implicitly adheres to a 15-percent near-term and 50-percent 

long-term target, the same targets we have been seeing previously 

this year for what should be put through the competition process, 

and it is a streamlined process. 

And so the up-shot is you are going to be seeing plenty more of 

those appropriation rider votes the rest of the year because we are 

still stuck with numerical targets. 

Senator CARPER. Thank you. Dr. Light. 

Mr. LIGHT. I would say that the thing that I would emphasize 

is that we have a workforce that does the job for the Federal GovVerDate 0ct 09 2002 14:48 Jan 13, 2004 Jkt 088936 PO 00000 Frm 00057 Fmt 6633 Sfmt 6601 C:\DOCS\88936.TXT SAFFAIRS PsN: PHOGAN
54

ernment that is much larger than just civil servants. If you add up 

the contractors, and the grantees, the military personnel and Federal civil servants, we have a workforce in the Federal Government 

of about 12.5 million employees. 

What we ought to be thinking about is how to make sure they 

are all performing well, how to make sure they all have the tools 

to succeed, and how to get on with this very difficult issue of how 

you sort who does the job. We are dealing with terms here, commercially available, and inherently governmental, that were first 

applied in the 1950’s, and I think we are well beyond the sort of 

environment in which we invented this system that we use now for 

sorting jobs. It is just not up to snuff, I would argue, for managing 

the kind of workforce we have and managing the kinds of functions 

that we perform. 

Senator CARPER. Thanks, Dr. Light. Dr. Gansler. 

Mr. GANSLER. I would first of all point out, that there have been 

lots and lots of examples, thousands of examples of competitive 

sourcing. And what they show is when it is done right, that the 

benefits of, first, improved performance, and then lower cost, are 

really very important and worth it for the government, for the appropriate portions of the government, that are doing work that is 

not inherently governmental. 

On the other hand, I think it is equally important to recognize 

that we have a really great workforce, the people are very dedicated. It is not the people that we are trying to attack here. It is 

the system that basically has a monopoly environment and that no 

matter who wins the competition—the government or the private 

sector—there is a significant improvement in performance and a 

significant reduction in cost. 

And so we need to move in that direction, as the Chairman said, 

for 100 percent of the workforce, and this means a high-quality, 

performance-oriented, excellent workforce. That is the direction 

that we really need to move in across the board. Competition is one 

way to do that in those sectors where we have non-inherently governmental work. 

Senator CARPER. Could I have one more minute? 

Senator VOINOVICH. Sure. 

Senator CARPER. Governor Voinovich and I were governors once 

in an earlier life, and I recall debates in the way we awarded construction contracts. We used to award them on lowest bid, and if 

the——

I like to run. I go back and forth to Delaware every day, and I 

am a runner. And sometimes when I run, I run by a high school 

that is not too far from our house. And the school, I see them replacing the windows of the school, and I am reminded of the contract that was let in one of our schools where they were rehabbing 

an older school, and they let the contract out to the lowest bidder 

for replacing the windows. It turned out the company did not know 

what they were doing, did a lousy job, a couple of years later had 

to replace the windows, but we awarded the bid on the lowest possible cost, not best value. 

I remember the governor’s house down in Dover. It is an old 

house, in fact, over 200 years old. It is the oldest governor’s mansion in America. And I remember we had to replace the patio 

55

around the house, George, and the folks that came in to do the masonry work won it on the lowest bid, the lowest cost, but as it turns 

out the work that they did had to be basically ripped up and replaced within a year—not best value. 

Somewhere inherent in this debate is the question of awarding 

bids who work on the lowest cost versus best value—my last question is to ask you your thoughts on either approach. 

Mr. CAMM. The government wants to move towards the use of 

performance-based contracting. This is standard policy in the Department of Defense. It is spreading to the rest of the government 

as well. They have learned this from the commercial sector. 

In the commercial sector, you cannot do performance-based contracting successfully unless you are also doing best-value competition. The reason for that is that you don’t want to rely in a performance-based contract on the minimum cost offeror. And so I 

would say that, because we have this policy of pursuing performance-based contracts, we have to recognize that it has to be 

matched to a sourcing policy based on best value. That is true for 

private-private competitions; it is true for public-private competitions. 

I am very concerned that right now Congress does not allow the 

Department of Defense to use best-value in public-private competitions. I think we are going to run into trouble down the road, because the Department of Defense is pursuing these performancebased arrangements. DoD is going to get poor providers, and they 

are not going to work. So I am quite concerned about it. 

Senator CARPER. Thank you. Mr. Tiefer. 

Mr. TIEFER. Senator Carper, the new A–76 makes a change I 

think in the wrong direction in the area that you are talking 

about—I discuss it on Page 13 of my written testimony—in that 

you now can have a competition, a public-private competition of a 

certain kind, a specialized kind, in which, a trade-off kind it is 

called, in which they not only have gone away from lowest cost, but 

there is not even a requirement, there was in the draft, and it was 

taken out in the final, there is not even a requirement of a ‘‘quantifiable’’ basis for choosing the private contractor. 

Now, the history that you described is your classic correct executive perspective, which is the movement, the evolution from pure 

cost comparisons to best value, and it is a classic correct analysis, 

but at least there should be a quantifiable basis, and that, for the 

choice, and now that has been taken out even of the final. 

Senator CARPER. Thank you. 

Dr. Light and Dr. Gansler, we have about 6 minutes to go in a 

vote that is underway, so I will just ask you to use about a minute 

apiece, if you would. 

Mr. LIGHT. Yes, I agree with Frank Camm on this issue. The 

problem is that we have an environment that is so distrustful right 

now between the people making the decisions about outsourcing or 

competitive sourcing and the people who are involved in actually 

the target or the emphasis of this that I don’t see how we can create a political environment in which we could allow for a best-value 

competition. 

I don’t see why, I mean, on the surface, you would like to get 

away from price as the consideration here because it is entirely 

56

conceivable that a private contractor could do a job better at a 

higher price or that a Federal unit could do the job better at a 

higher price. You get better value, but the politics of this are just 

so extreme right now, and the anxiety in the workforce so extreme 

that I just don’t see how we get there. 

Maybe if we do this work on defining terms more carefully so 

that we could bring a quantitative position to bear on it, perhaps. 

Senator CARPER. Thank you. 

Mr. GANSLER. I think we must use best value. It is clearly the 

objective here has to be to improve performance at lower cost. It 

is the improved service that is really the objective, and if you don’t 

use best value, what you get is cheap service, and that is not acceptable service, as far as I am concerned. 

The answer has to be to move towards best value. It will be more 

difficult because it becomes more subjective in some ways, but even 

the performance is measurable in most cases, and you should be 

able to use that the same way you and I do when we go out shopping in the stores. We don’t buy the cheapest, we buy something 

that is the best value. 

Senator CARPER [presiding]. My wife says I buy the cheapest. 

[Laughter.] 

I tell her I am looking for the best value. That is what we ought 

to be looking for, I think, for our taxpayers. 

But you are good to come here and share your time and your 

thoughts with all of us. 

Senator Voinovich has gone to vote, and I probably ought to go 

join him or I am going to miss this opportunity. 

Thank you very much, and the Committee stands adjourned. 

[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] 

(57)

A P P E N D I X 


88936.008
58


88936.009
59


88936.010
60


88936.011
61


88936.012
62


88936.013
63


88936.014
64


88936.015
65


88936.016
66


88936.017
67


88936.018
68


88936.019
69


88936.020
70


88936.021
71


88936.022
72


88936.023
73


88936.024
74


88936.025
75


88936.026
76


88936.027
77


88936.028
78


88936.029
79


88936.030
80


88936.031
81


88936.032
82


88936.033
83


88936.034
84


88936.035
85


88936.036
86


88936.037
87


88936.038
88


88936.039
89


88936.040
90


88936.041
91


88936.042
92


88936.043
93


88936.044
94


88936.045
95


88936.046
96


88936.047
97


88936.048
98


88936.049
99


88936.050
100


88936.051
101


88936.052
102


88936.053
103


88936.054
104


88936.055
105


88936.056
106


88936.057
107


88936.058
108


88936.059
109


88936.060
110


88936.061
111


88936.062
112


88936.063
113


88936.064
114


88936.065
115


88936.066
116


88936.067
117


88936.068
118


88936.069
119


88936.070
120


88936.071
121


88936.072
122


88936.073
123


88936.074
124


88936.075
125


88936.076
126


88936.077
127


88936.078
128


88936.079
129


88936.080
130


88936.081
131


88936.082
132


88936.083
133


88936.084
134


88936.085
135


88936.086
136


88936.087
137


88936.088
138


88936.089
139


88936.090
140


88936.091
141


88936.092
142


88936.093
143


88936.094
144


88936.095
145


88936.096
146


88936.097
147


88936.098
148


88936.099
149


88936.100
150


88936.101
151


88936.102
152


88936.103
153


88936.104
154


88936.105
155


88936.106
156


88936.107
157


88936.108
158


88936.109
159


88936.110
160


88936.111
161


88936.112
162


88936.113
163


88936.114
164


88936.115
165


88936.116
166


88936.117
167


88936.118
168


88936.119
169


88936.120
170


88936.121
171


88936.122
172


88936.123
173


88936.124
174


88936.125
175


88936.126
176


88936.127
177


88936.128
178


88936.129
179


88936.130
180


88936.131
181


88936.132
182


88936.133
183


88936.134
184


88936.135
185


88936.136
186


88936.137
187


88936.138
188


88936.139
189


88936.140
190


88936.141
191


88936.142
192


88936.143
193


88936.144
194


88936.145
195


88936.146
196


88936.147
197


88936.148
198


88936.149
199


88936.150
200


88936.151
201


88936.152
202


88936.153
203


88936.154
204


88936.155
205


88936.156
206


88936.157
207


88936.158
208


88936.159
209


88936.160
210


88936.161
211


88936.162
212


88936.163
213


88936.164
214


88936.165
215


88936.166
216


88936.167
217


88936.168
218


88936.169
219


88936.170
220


88936.171
221


88936.172
222


88936.173
223


88936.174
224


88936.175
225


88936.176
226


88936.177
227


88936.178
228


88936.179
229


88936.180
230


88936.181
231


88936.182
232


88936.183
233


88936.184
234


88936.185
235


88936.186
236


88936.187
237


88936.188
238


88936.189
239


88936.190
240


88936.191
241


88936.192
242


88936.193
243


88936.194
244


88936.195
245


88936.196
246


88936.197
247


88936.198
248


88936.199
249


88936.200
250


88936.201
251


88936.202
252


88936.203
253


88936.204
254


88936.205
255


88936.206
256


88936.207
257


88936.208
258


88936.209
259


88936.210
260


88936.211
261


88936.212
262


88936.213
263


88936.214
264


88936.215
265


88936.216
266


88936.217
267


88936.218
268


88936.219
269


88936.220
270


88936.221
271


88936.222
272


88936.223
273


88936.224
274


88936.225
275


88936.226
276


88936.227
277


88936.228
278


88936.229
279

Æ


88936.230