Department of Labor: Better Cost Assessments and Departmentwide Performance Tracking Are Needed to Effectively Manage Competitive Sourcing Program
Published: 2008-11-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Competition between federal and private organizations to provide services--referred to as "competitive sourcing"--can be one way to help achieve greater efficiency in government. Under guidance from the Office of Management and Budget (OMB), competitive sourcing has been implemented at various executive branch agencies over the years. As required under the Consolidated Appropriations Act, 2008 and directed by House Report 110-231, this report examines the use of competitive sourcing at the Department of Labor (DOL). Specifically, GAO examined the comprehensiveness and reliability of DOL's performance and cost assessments in accordance with OMB and DOL guidance as well as the impact of competitive sourcing on certain DOL workers. To address these issues, GAO reviewed relevant statutes, guidance, reports and personnel actions; and interviewed OMB and DOL officials and 60 DOL staff, grouped by role, in four locations.
section_title: What GAO Found
paragraphs: DOL first began conducting public-private competitions as part of its competitive sourcing program in fiscal year 2004, and since that time, it has set up performance and cost reporting systems to monitor progress in meeting the goals of competitive sourcing--that is, to obtain high-quality services at a reasonable cost and to achieve outcomes that represent the best deal for the taxpayer. For the most part, we found that DOL's policies and procedures were followed in conducting competitive sourcing activities; however, a number of weaknesses inhibit DOL's ability to reliably and comprehensively assess whether competitive sourcing achieves the outcomes promised. DOL lacks a departmentwide process for tracking and addressing deficiencies and recommendations for improvements that are identified in postcompetition accountability reviews. Though consistent with OMB guidance, DOL excluded a number of substantial costs in its reports to Congress--such as the costs for precompetition planning, certain transition costs and staff time, and postcompetition review activities--thereby understating the full costs of this contracting approach. DOL's savings reports are not reliable: a sample of three reports contained inaccuracies, and others used projections when actual numbers were available, which sometimes resulted in overstated savings. Because of these and other weaknesses, DOL is hindered in its ability to determine if services are being provided more efficiently as a result of competitive sourcing. Moreover, though not a representative sample of DOL personnel, in GAO's interviews with 60 employees involved with five competitions (including employees who assisted with competition activities, as well as employees whose positions were affected by the competitions), most said that they were dissatisfied with how the competitive sourcing process was implemented and that it had a negative impact on morale. Overall, DOL's competitions have resulted in few job losses or salary reductions. Among the 314 workers who experienced a personnel action, 263 were reassigned to new positions with the same title and pay or were promoted. In addition, of the 16 workers who were demoted, 14 were able to retain their same grade or pay. At the same time, certain groups have been impacted more than others. For example, though small in numbers, all 22 of those who were either demoted or laid off were African-American, while 10 of the 15 workers who were promoted were Caucasian. OMB recently issued new guidance that directs agencies to use a variety of tools to manage their commercial activities, including--but not limited to-- competitive sourcing. However, unless agencies are required to comprehensively track all the costs associated with competitive sourcing, it will be difficult to assess which tool may provide the best outcome in terms of efficiency in the management of commercial activities.

section_title: Letter
paragraphs: Since 1955, the federal government has encouraged competition between  federal and private sector organizations to provide specific services—an  initiative referred to as “competitive sourcing.” Since 2001, competitive  sourcing has been one of the key elements of the President’s Management  Agenda, implemented under guidance from the Office of Management and  Budget (OMB) in Circular No. A-76. Over the years, GAO has reported on a  number of issues related to competitive sourcing at various executive  branch agencies, including the extent to which there are plans and  guidance to help agencies implement the competitive sourcing program  effectively and whether savings are likely to be achieved.
The Department of Labor (DOL) began conducting public-private  competitions in fiscal year 2004. From fiscal years 2004 through 2007,  DOL held 28 competitions involving 1,029 full-time equivalent (FTE)  government positions designated as commercial, such as training  specialists, information technology specialists, and maintenance  mechanics. DOL planned to compete nearly 700 additional FTEs during  fiscal years 2008 and 2009; however, these plans have been put on hold  pursuant to federal law. Given that DOL employees have won all but three  of the competitions DOL has held, Congress is interested in determining  whether competitive sourcing has achieved increased efficiency or cost  savings at DOL. In addition, since competitive sourcing may also result in  government employees being reassigned or losing their jobs, Congress  expressed concern over DOL’s implementation of this initiative and its  implications for the federal workforce.
As required under the Consolidated Appropriations Act, 2008 and as  directed by the House Committee on Appropriations, this report examines  the use of competitive sourcing at DOL. The House Committee on  Appropriations directed that we review the extent to which DOL has  established a reliable and comprehensive system to track costs, savings,  and the quality of work performed by contractors, as well as DOL’s  adherence to the principles adopted in 2002 by the Commercial Activities  Panel chaired by the Comptroller General. In response, as agreed with  your staffs, this report addresses the following:  1.  The extent to which DOL established a reliable and comprehensive  system to assess the quality of work performed as a result of  competitive sourcing. 2.  The comprehensiveness and reliability of DOL’s assessments of the  savings and costs associated with competitive sourcing.  3.  The implications of competitive sourcing for certain DOL worker  populations, such as women and minorities.
To address these issues, we focused on DOL’s competitive sourcing  activities from fiscal years 2004 through 2007, including all 28  competitions DOL conducted during this period. We examined relevant  statutes, regulations, and OMB guidance on competitive sourcing, DOL  internal policies and guidance on competitive sourcing, competition  announcements, annual reports to Congress, GAO reports, and related  documents. We interviewed DOL officials, OMB officials, representatives  from the American Federation of Government Employees (AFGE), two  private sector companies, and the president of a leading national private  sector trade association representing over 300 companies. To assess the  quality of work performed as a result of competitive sourcing, we  examined all 18 of DOL’s initial postcompetition accountability reviews  (PCAR) conducted as of July 2008 and evaluated the structure and content  of these reviews according to DOL and OMB policy. To assess DOL’s  savings and cost reports, we interviewed the agency officials responsible  for preparing these reports and reviewed the process they used to compile  them. To assess the accuracy of the reports, we reviewed the documents  from all 18 initial PCARs and conducted more detailed analyses of the  calculations for a simple random sample of three reports for competitions  with initial PCARs completed between 2006 and 2007 and interviewed  agency officials knowledgeable about these reports. Due to this limited  sample size, no inferences can be made about the accuracy of savings and  cost reports across all of DOL’s competitions. To identify the implications  of competitive sourcing for certain DOL worker populations, we analyzed  DOL’s demographic data on overall departmentwide personnel and  compared it with the demographic data for all DOL employees who  experienced a personnel action as a result of competitions conducted  during fiscal years 2004 through 2007. We also obtained a range of  employees’ perspectives on the competitive sourcing process by  conducting group interviews with 60 DOL managers and employees who  either assisted with competition activities or whose positions were  affected by five competitions in four locations throughout the United  States. We assessed the reliability of the savings, cost, and demographic  data by reviewing information about the systems that produced the data  and interviewing agency officials knowledgeable about these systems. We  determined that the data were sufficiently reliable for the purposes of our  report. For a more detailed discussion of our methodology, see appendix I.
We conducted this performance audit from October 2007 to September  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Federal agencies rely on a mix of public and private sector sources to  perform a wide variety of commercial activities, such as information  technology, building maintenance, property management, and logistics.  Competitive sourcing is the term used to describe the strategy under  which agencies use competitions between public and private sector  organizations to identify the most cost-effective provider of commercial  activities. In 2001 and 2002, the Comptroller General convened a  Commercial Activities Panel to study the policies and procedures  governing competitive sourcing. This panel included officials from federal  agencies, federal labor unions, and private industry. The panel  unanimously approved a set of 10 principles (see sidebar), and a  supermajority of two-thirds of the panel members adopted an additional  set of recommendations that they believed would significantly improve the  government’s policies and procedures for making competitive sourcing  decisions. tht me performed y either the  public or the privte ector, wold permit  public nd privte rce to prticipte  in competition for work crrently  performed in-house, work crrently  contrcted to the privte ector, nd new  work, content with thee principle. dollars by taking advantage of competitive forces. Further, in July 2008,  OMB issued a memorandum on commercial services management  recognizing that agencies should improve the operation of their  commercial functions using a variety of techniques—such as business  process re-engineering efforts and strengthened oversight of contractors— in addition to competitive sourcing.
subsections: section_title: Competitive Sourcing Process
paragraphs: Inherently governmental activities  Fnction thre o intimtely relted to the  public interet tht they reqire performnce  y federl government employee. Thee  fnction normlly fll into two ctegorie: the  exercie of overeign government authority or  the eablihment of procedre nd  process relted to the overight of  monetry trsaction or entitlement.
The first step in the competitive sourcing process is for agencies to  determine which activities are suitable for competition. In accordance  with the Federal Activities Inventory Reform Act of 1998 (FAIR Act) and  OMB Circular No. A-76, federal agencies categorize all of the activities  performed by their employees as either inherently governmental (not  subject to competitive sourcing) or commercial (potentially subject to  competitive sourcing). OMB Circular No. A-76 then directs agencies to  further categorize their commercial activities according to six “reason  codes,” with only one code signifying suitability for competitive sourcing  that year. Agencies are allowed considerable discretion in how they  categorize their activities, subject to review by OMB.
Once the annual inventory is complete, agencies then select which  activities will be competed and begin planning the associated  competitions. In this stage, agencies separate the selected activities into  groups and develop a full description of each group—called a “statement  of work”—that will serve as a guide to potential bidders on what will be  required by the final contracts or letters of obligation. Agencies also  develop quality assurance plans and cost estimates to be used as standards  against which to evaluate the performance of the winning service provider  and the cost savings achieved by the competition. agencies also develop an in-house bid, or “tender,” under which agency  employees will perform the work if the in-house government bid wins the  competition. The staffing plan identified in the in-house agency bid is  referred to as a “most efficient organization” (MEO). The MEO is not  usually a representation of the incumbent organizational structure “as is,”  but more commonly, it reflects a smaller, restructured version of the  incumbent government organization doing the work.
A streamlined competition  implified  competition process tht mused with  ctivitie of 65 or fewer FTE, reqiring less  ly nd docmenttion th  ndrd competition. In-housid for  tremlined competitionbased on  the incent “as” orgniztion, bugencie re encoged to develop   more efficient orgniztion.
Generally, the lowest cost provider that is technically acceptable is  awarded the contract, but factors other than cost may be considered in  some circumstances. If a contractor (private sector service provider) wins  the competition, certain federal worker protections are required, such as  the right to “first refusal” in which the private sector service provider  winning the competition generally must first offer any new employment  openings under the contract to qualified government employees who were  (or who will be) adversely affected as a result of the awarding of the  contract. If the in-house government service provider wins the  competition, other federal worker protections apply, such as those  governing grade and salary retention rights. competitive process to used when more  thn 65 FTE re involved (but mused when fewer thn 65 re involved).  Bid re reqired to inclde quality control  pl, nd gencie re reqired to develop  pl to measure the winning ervice  provider’ performnce. In-housid for  ndrd competition re to inclde  mot  efficient orgniztion (MEO) nd more  detiled ly nd docmenttion thfor  tremlined competition.
Once the competition is complete and the letter of obligation or contract is  awarded, agencies are required to monitor the performance of the winning  service provider on an ongoing basis and must report findings to both  Congress and OMB, regardless of whether the winner is the in-house  government service provider or a private sector service provider. For  example, federal law requires agencies to submit annual reports to  Congress on competitions announced and completed. In addition, OMB  Circular No. A-76 and other guidance directs agencies to monitor  postcompetition performance of the winning service provider and to track  the actual costs of the performance. (See appendix III for more details.)
section_title: Competitive Sourcing at DOL
paragraphs: Within DOL, the Office of Asset and Resource Management is responsible  for planning and conducting the FAIR Act inventories of commercial and  inherently governmental activities. It is also responsible for managing  DOL’s competitive sourcing program, including the planning, monitoring,  and evaluation of potential opportunities to improve effective and efficient  program delivery at DOL. For example, this office coordinates the PCAR  for each competition. According to DOL policy and procedures, an initial  PCAR is normally conducted by an independent review official after the  first full year of performance following a competition, with annual PCARs  thereafter for the duration of the contract, in order to meet formal review  and inspection requirements in OMB Circular No. A-76 and the Federal  Acquisition Regulation. The competition process at DOL is illustrated in  figure 1.
Beginning in fiscal year 2004, DOL’s strategy for identifying and selecting  work activities for competitive sourcing competitions involved starting out  small in scope and gradually expanding its efforts over time. DOL’s first  competitions in fiscal year 2004 involved mostly small groups of FTEs  within a single DOL office (see table 1). By fiscal year 2007, DOL had  expanded its public-private competitions to include functions involving a  greater number of FTEs across multiple DOL offices. In addition, the  number of private sector bids decreased over time. For a complete listing  of DOL’s fiscal year 2004 through 2007 competitive sourcing competitions,  see appendix V.
section_title: DOL Has Established a Performance Assessment System but Does Not Track Deficiencies or Recommendations for Improvement Departmentwide
paragraphs: DOL has made progress developing a system to assess the performance of  winning service providers in its competitive sourcing program. DOL’s  system, as outlined in its policy and procedures issued in 2005, directs  DOL offices to ensure that (1) records are maintained for independent  review of the competition, (2) all assessments contain criteria to measure  performance, and (3) lessons learned are reported. In our review of all  assessments conducted as of July 2008, we found that these policies and  procedures generally were followed and that these assessments provide  key information for DOL policymakers to evaluate the effectiveness of its  competitive sourcing program. However, we found that DOL lacks a  departmentwide process for tracking and addressing deficiencies and  recommendations for improvement.
subsections: section_title: DOL’s System for Assessing Performance Shows Progress
paragraphs: In 2005, DOL issued policy and procedures for conducting PCARs—DOL’s  system for monitoring performance in accordance with OMB Circular No.  A-76 and the Federal Acquisition Regulation. We examined all of DOL’s  initial PCARs completed as of July 2008 (18 total), and we found that  DOL’s policy and procedures generally were followed in conducting the  reviews. Most initial PCARs were completed in a timely manner and most  records were maintained for review. Criteria to measure performance  were established for half of the competitions, and the majority of initial  PCARs included lessons learned.
subsections: section_title: Most Initial PCARs Completed in a Timely Manner
paragraphs: According to DOL policy and procedures and DOL officials, initial PCARs  are normally conducted approximately 1 year after the first full year of  performance for each competition. As of July 2008, we found that DOL had  completed 18 of these reviews, based on the 21 competitions that were  completed during fiscal years 2004 through 2006. Of the 3 competitions  that did not have an initial PCAR, one case involved a fiscal year 2005  competition that, according to DOL officials, had been delayed in  implementation. The initial PCAR for this competition was later completed  in September 2008. The second case was DOL’s very first fiscal year 2004  competition to be won by a private sector service provider, and at the  time, DOL had not yet issued the policy and procedures for conducting  PCARs. In the last case, the contract was terminated a few months before  the initial PCAR was expected to be completed.
In addition to calling for initial PCARs, DOL’s policy also calls for annual  PCARs thereafter. As of August 2008, we found that DOL had completed  two annual follow-up reviews of the 14 cases where 1 year or more had  elapsed since the initial PCAR. In 4 cases, implementation of the  competitions had been terminated. In the remaining 10 cases, the follow- up reviews were still pending; in 6 cases, 2 or 3 years had elapsed since the  initial PCAR was completed. A senior DOL official explained that DOL  interpreted OMB guidance as calling for follow-up reviews only for certain  standard competitions. However, as noted by OMB officials, OMB’s  guidance states that all competitions should still be reviewed as part of the  agency’s management oversight activities (unless otherwise exempted by  law). Thus, in all of these cases, follow-up PCARs should be completed  annually in accordance with DOL’s policy for performance monitoring.
section_title: Most Records Maintained for Review
paragraphs: Following issuance of DOL’s policy and procedures in 2005, DOL officials  generally maintained the records needed for conducting PCARs, but this  was not the case at the outset of DOL’s competitive sourcing program.  Independent review officials noted that they were unable to fully assess  four competitions completed in fiscal year 2004 because of missing  documentation. For example, these reviewers noted that records such as  the initial solicitation and public announcement of the competition,  backup cost information, and the performance decision were missing.  DOL officials explained that these fiscal year 2004 competitions were the  department’s first under its competitive sourcing program and that they  experienced a learning curve. They said that the missing files for all of  these competitions have been recovered and corrective actions such as  recreating the files have been taken. The independent review officials for  all four PCARs also noted that the files had been recreated for each of  their competitions. Subsequent reviews of other competitions completed  in fiscal years 2005 through 2007 did not cite similar problems.
section_title: Criteria to Measure Performance Established for Half of the Competitions
paragraphs: According to the PCARs, criteria to measure performance had been  established for half of the competitions reviewed. OMB Circular No. A-76  calls for quality assurance and quality control plans to be established to  assist agencies with monitoring the performance of winning service  providers for standard competitions. Although OMB Circular No. A-76  does not specify a requirement for streamlined competitions, DOL’s policy  and procedures call for streamlined competitions to establish quality  assurance plans or, at a minimum, abbreviated work requirements, with  quality control plans optional in some cases. Of the 18 initial PCARs  completed as of July 2008, we found that independent reviewers identified  a lack of quality assurance plans in nine cases and a lack of quality control  plans in seven cases (all of which were streamlined competitions). In three  of the nine cases lacking quality assurance plans, reviewers noted the  difficulty in assessing the performance of a winning service provider  without any kind of general standards or requirements that may be used to  measure performance. In addition, in one case that had established a  quality control plan, the independent review official commented that the  service provider who had won the competition was not utilizing the quality  control plan.
section_title: Majority of Initial PCARs Reported Lessons Learned
paragraphs: The majority of the 18 initial PCARs completed as of July 2008 reported  information on lessons learned: 13 provided this information, but the  remaining 5 did not. OMB Circular No. A-76 calls for agencies to allocate  resources to effectively apply a clear, transparent, and consistent  competition process based on lessons learned and best practices. DOL  policy and procedures also state that reporting lessons learned in a  competition should be documented in each PCAR. Yet, a senior DOL  management official stated that DOL considers providing lessons learned  in a PCAR to be a best practice, rather than a requirement, and that the  “lessons learned” often can be found elsewhere in the body of the review.  However, in three initial PCARs, reviewers noted specifically that there  were no lessons learned identified or reported in any part of the reviews.  In one other follow-up PCAR, the reviewer noted that lessons learned  were not formally documented, but the in-house organization has  effectively applied lessons learned after the competition decision.
section_title: DOL Lacks a Departmentwide Process for Tracking and Addressing Deficiencies and Recommendations for Improvement
paragraphs: DOL does not ensure that deficiencies identified and recommendations  made in initial PCARs are tracked and followed up on at a departmentwide  level. Instead, DOL relies on an ad hoc process. As a result, DOL is  hindered in its ability to systematically monitor performance trends and  determine if the winning service providers are performing more efficiently  than the prior service providers.
OMB Circular No. A-76 directs agencies to maintain a database to track the  execution of competitions through completion of the last performance  period (or cancellation of the competition), and to post best practices and  lessons learned. In addition, guidance on internal controls from OMB,  GAO, and others typically points out that taking a more systematic  approach to identifying weaknesses and needed improvements enhances  the accountability and effectiveness of an agency’s programs. For  example, OMB Circular No. A-123 directs agencies and individual federal  managers to take systematic and proactive measures to identify needed  improvements and to take corresponding corrective action to improve the  accountability and effectiveness of their programs. OMB Circular No. A- 123 also directs agencies to carefully consider whether systemic  weaknesses exist that adversely affect internal control across  organizational or program lines. With respect to internal controls, GAO  has issued standards which state that assessing the quality of performance  over time is a key aspect of internal control monitoring in a government  agency and that managers need to compare actual performance to planned  or expected results throughout the organization and analyze significant  differences. In addition, GAO’s Commercial Activities Panel report states  that methods to track success or deviation from objectives are required to  ensure accountability.
All of DOL’s 18 initial PCARs completed as of July 2008 contained  recommendations for improvements for each of their competitions. The  recommendations included suggestions such as modifying the  performance work statement to more accurately reflect the workload of  the winning service provider, developing educational briefings, and  providing an example of a completed PCAR in DOL’s policy and  procedures for conducting performance reviews. But DOL does not track  such recommendations at the departmentwide level. According to a senior  DOL official in the Office of Asset and Resource Management, it is the  responsibility of each individual DOL office—such as the Mine Safety and  Health Administration or the Office of Administrative Law Judges—to  document and respond to deficiencies and recommendations noted in the  initial PCARs. Information about whether any deficiencies have or have  not been addressed is maintained only at the individual office level.
At our request, DOL officials from individual offices were able to provide  information for a sample of six competitions that described how they had  followed up on some of the issues reported in the initial PCARs. For  example, DOL officials stated that after tracking the findings from one  PCAR, they decided to conduct a follow-up work management study that  provided a blueprint for undertaking a series of programmatic and quality  assurance surveillance improvements. Senior DOL officials also told us  that they have an executive steering committee, with members from its  competitive sourcing, human resources, and labor management relations  offices, that meets weekly to discuss items that need to be adjusted in  competitive sourcing competitions. However, as one DOL senior  management official acknowledged, they do not always follow up on all of  the problems that they keep on file. Thus, DOL’s ad hoc system does not  currently take a systematic approach to identifying weaknesses and  needed improvements to enhance the effectiveness and accountability of  its competitive sourcing program across the organization, as called for by  OMB guidance and GAO internal control standards.
section_title: DOL Competitive Sourcing Cost Reports Are Not Comprehensive or Reliable
paragraphs: DOL’s savings reports for competitive sourcing, while adhering to OMB  guidance, exclude a number of substantial costs and also are unreliable.  OMB’s guidance directs agencies to exclude certain costs associated with  the competitions, such as some staff costs and costs incurred before the  competition’s announcement. These costs can be substantial. In addition,  DOL’s savings reports are unreliable for a number of reasons. For  example, we found cases of inflated savings reports due to calculation  errors, the use of projections rather than actual costs, and the use of  baseline costs that were inaccurate and misrepresented actual savings.
subsections: section_title: Savings Reports Are Not Comprehensive
paragraphs: DOL’s savings reports to Congress are not comprehensive because they  exclude substantial costs associated with the competition process.  Although these reporting practices conform to OMB’s guidance for  competitive sourcing, reporting costs in this way does not  comprehensively assess competitive sourcing as a tool to manage a  particular commercial activity, compared with other possible management  tools.
The Consolidated Appropriations Act, 2004, established a requirement for  all executive agencies to report on their competitive sourcing efforts for  the prior fiscal year. As part of this law, Congress requires agencies to  report  the incremental cost directly attributable to conducting the  competitions, including costs attributable to paying outside  consultants and contractors;  an estimate of the total anticipated savings, or a quantifiable  description of improvements in service or performance, derived from  completed competitions; and  actual savings, or a quantifiable description of improvements in service  or performance, derived from the implementation of competitions  completed after May 29, 2003.
In its oversight role for competitive sourcing, OMB issues a yearly  memorandum providing guidance to agency heads on how to develop this  report. From 2004 through 2007, these memos have directed agencies to  exclude certain costs that are associated with the competition process  (see table 2).
OMB officials told us that their policy directs agencies to exclude certain  costs because these costs reflect what would be incurred as part of an  agency’s typical management responsibilities. For example, OMB directs  agencies to exclude the costs of precompetition planning and agency staff  time spent on competition activities, as these activities can help the  agency identify and correct performance gaps and improve efficiency and  should be taking place whether or not the agency is conducting any  competitions. Additionally, OMB officials explained that transition costs  associated with competitions should be excluded because such costs also  occur with other management processes, such as new program re- engineering and separation payments provided to employees who are  displaced by a downsizing. Similarly, they explained that the costs  associated with conducting PCARs should be excluded because these  reviews help organizations identify and correct performance gaps in their  work groups and should be considered as part of normal business  operations. OMB officials commented that they do not believe that  excluding these costs has a major impact on an agency’s ability to  determine the cost-effectiveness of competitive sourcing as a management  tool.
However, because OMB’s guidance directs agencies to exclude certain  costs, the full cost associated with DOL’s competitive sourcing program is  not transparent. Since 1990, we have reported that improvements in the  completeness and accuracy of savings reports of competitive sourcing  could help present a more comprehensive picture of program costs and  benefits and help determine the most cost-effective use of resources. For  example, in our reviews of the competitive sourcing programs at DOD and  USDA’s Forest Service, we recommended that these agencies improve the  way they account for and report costs associated with their competitive  sourcing programs.
In this review, we found similar issues with the comprehensiveness of  DOL’s savings reports. Specifically, DOL reported a total of $15.7 million in  savings and $4.3 million in competition costs for all of its completed  competitions for fiscal years 2004 through 2007. While DOL reported these  savings in conformance with OMB guidance, we found that the excluded  costs attributable to competitive sourcing over this period were  substantial, and—importantly—it is not clear that these costs would be  incurred when using a commercial management tool other than  competitive sourcing.
For example, consistent with OMB guidance, DOL excluded costs  attributable to the time in-house staff spent on assisting with competition  activities (staff not dedicated to central oversight of DOL’s competitive  sourcing program). While these staff are already paid by the government,  their time spent away from regular work duties represents a cost that is  attributable to the competition process. We were not able to obtain  specific estimates on the number of hours that such staff members spent  on competition activities, since DOL does not require its offices to record  this information. However, employees in one office who were at the GS-12  level or higher estimated that they worked a total of 2,263 hours on one  competition. Including these staff costs would have doubled the costs  reported by DOL for this competition. Employee responses in our  interviews suggest that the amount of time employee staff spent assisting  on competitions varied greatly, with some staff members spending little, if  any, time on competition activities and others who reported spending one- quarter to one-half of their total working time over the course of a year.
According to OMB’s guidance, agencies should also exclude costs incurred  during the preliminary planning phase of a competition, such as the use of  contractors, as well as other costs that are directly related to the conduct  of the competition (see table 2). DOL employed private sector consultants  to conduct precompetition planning, including feasibility studies before  the competition phase, and to conduct PCARs following the competition.  DOL also employed private sector consultants for other activities related  to competitive sourcing, such as to conduct business and industry  analyses to determine the likelihood of generating private sector offers  and to review the government positions open for bidding to determine if  they had been appropriately designated during the FAIR Act inventory  process.
In addition, OMB guidance does not require agencies to include many of  the transition costs directly associated with generating savings from  competitive sourcing activities, such as the costs of voluntary separation  payments and system re-engineering costs. For example, according to  DOL data, in calendar year 2006, 14 employees were provided voluntary  incentive payments due to competitive sourcing that totaled $350,000.  Including these costs would have increased total completed competition  costs by 32 percent for the year. In addition to these costs, one  competition utilized a newly re-engineered process to decrease total staff  hours and to help generate a reported $3.3 million in savings from fiscal  year 2005 to fiscal year 2007. The costs of full-time staff hours spent on the  re-engineering process were not shown as costs of competitive sourcing,  and DOL did not have information on the amount of staff time used.
Finally, OMB guidance does not require agencies’ savings reports to  include the costs of monitoring performance after the winning service  provider begins its activities. However, we found that the PCARs are often  conducted by contractors or consultants to monitor competitive sourcing  performance for DOL and that they represent a cost in addition to normal  federal employee and contractor oversight costs. DOL spent a total of  $126,614 on PCARs conducted by consultants as of July 2008.
section_title: DOL Savings Reports Are Not Reliable
paragraphs: In addition to excluding costs, DOL’s savings reports are unreliable. We  reviewed the process DOL uses to compile its reports for a sample of  competitions. We found a number of calculation errors in the sample; we also  found cases where DOL used projections rather than actual costs to estimate  savings or used a baseline that was inaccurate and overstated savings.
subsections: section_title: Calculation Errors
paragraphs: We randomly selected three competitions for review to determine the  accuracy and reliability of DOL’s savings reports. While not necessarily  representative of all DOL competitions, these three savings reports  contained inaccuracies—with two of the three containing significant  errors that inflated the reported savings achieved through those  competitions. For example, in the first competition, won by a private  sector service provider, DOL reported $2.7 million in savings from fiscal  year 2005 through fiscal year 2007. This savings figure did not include  contract administration costs that are directed to be included according to  OMB guidance. By excluding these costs, DOL overstated its savings by  about $185,000 per year, or 25 percent. In the second competition, DOL  used an incorrect cost value that excluded some employee wage costs  when calculating savings. This error inflated the reported savings by  almost $169,000, or 22 percent, for fiscal year 2006. In the third  competition, though the inaccuracy was less significant, DOL reported a  full year’s worth of savings for fiscal year 2006, even though the new  provider was not phased in until 7 months into the new fiscal year. DOL  officials stated that the savings estimate was an interim figure that was  used before the actual costs were updated for fiscal year 2008.
section_title: Use of Projections in Savings Estimates
paragraphs: DOL used projections—rather than actual costs—to report $9.3 million of  its $15.7 million in savings to Congress, even though OMB guidance  specifies that calculating savings based on actual costs rather than  projections is preferred. OMB guidance states that agencies may use  projections as an interim estimate but that the actual numbers should be  used as soon as they are available.
Savings reports based on projections can be less accurate than reports  using actual numbers because projections use average salaries for  employees estimated during the competition, as well as projected staffing  and hours that do not always reflect true personnel costs. Projections also  exclude “retained pay,” which is pay to employees who receive grade  demotions but keep their original pay due to worker protections. By using  projections, these costs are excluded from competition savings reports but  would be included if actual costs were used. For example, in one  competition won by the in-house agency (MEO), 8 of the 9.3 full time  employees in the MEO received retained pay after the competition. In  total, a DOL review noted that retained pay for these employees caused  the actual personnel costs to be 45 percent higher than the original  estimated costs for the MEO. By using projections rather than actual  values in estimating savings, DOL excluded the higher actual personnel  costs for fiscal years 2004 and 2005, even though actual numbers were  available.
section_title: Inaccurate Baseline
paragraphs: Of the 18 initial PCARs that we reviewed, 8 noted that organizational or  workload changes had occurred. For example, in one instance, a DOL  office lost 45 FTE positions in fiscal year 2006 due to budgetary reasons,  with 8 of these lost positions designated for an activity being competed  and that, at the time, was in the source selection phase. This reduced the  designated FTEs for this competition from 32 to 24. As noted in the PCAR,  the private sector service provider who won this competition was chosen  on the basis of the smaller 24-employee demand. However, the final  savings figure—the difference between the original government provider  and the winning private sector service provider—was calculated using the  baseline cost of the original 32 FTE service provider. A senior DOL official  that we spoke with stated that the original baseline was used because the  private sector service provider was doing the same level of work that the  government service provider had been doing before. However, as noted in  the PCAR, actual workload data was not available for this competition.  Because of this, it cannot be known for certain if the same level of work  was being performed. Using the baseline of 32 FTEs, rather than 24 FTEs,  increased reported savings by almost $2.7 million over the 5-year  performance period.
Vacancies within agency workgroups also increased reported savings,  though it is unclear if these savings should be attributed to competitive  sourcing efforts. For example, in five competitions, the in-house  government bid won the competition by maintaining its original “as-is”  work group organization, and no anticipated future savings were reported  because, according to DOL officials, the staff structure did not change.  However, in two of the competitions, savings were later reported. In one  of these competitions, employee retirements and a decrease in  organization workload resulted in vacancies that caused staff wages to be  46 percent lower than those originally projected, and DOL reported  savings of $64,000 for fiscal year 2005 and $86,000 for fiscal year 2006. In  the second competition, savings of $26,000 were recorded for 1 year, partly  due to a vacant position. In addition to staffing vacancies after the  competition, vacancies that occur before a competition can inflate  reported savings, as the baseline used to calculate savings is determined  by the government service provider’s budgeted staffing levels for the year  of the planned competition. For example, the same competition discussed  previously that reported $3.3 million in savings because of a re-engineered  process that decreased workload and required staffing hours, did not  change its actual staffing levels at the time of the competition due to pre- existing, budgeted vacancies. Thus, the savings figures based on full  staffing levels were inflated.
In three separate PCARs, as well as in our interviews with DOL employees,  DOL staff were identified as inappropriately contributing to the work  assigned to the winning bids, and in some cases, this resulted in  overestimating the savings achieved by the competitions. In one case, the  bid was won by a private sector contractor, yet the independent reviewer  determined that a DOL employee was performing some of the work, noting  that “a government employee is assisting a [private sector service  provider] employee for up to1-2 hours per day and could total up to 500  hours on an annual basis. The service provider is being supplemented with  the government workforce at this time.” DOL officials stated that the  government employee was no longer assisting the private sector service  provider and that a workload study was being conducted to help address  this problem. Additionally, in two cases, staff who were not part of the  MEO were found to be contributing to the work assigned to the MEO. For  example, in one case, the PCAR indicated that non-MEO workers were  found contributing to work within the MEO and that DOL had not included  these costs. DOL savings estimates were based on the cost of only the  MEO staff; thus, though the non-MEO staff costs were not available,  including these costs would have decreased the reported savings of the  competition.
section_title: DOL’s Competitions Rarely Resulted in Lost Jobs or Lower Salaries, but Employees Report Negative Impacts on Morale
paragraphs: DOL’s competitions reportedly had negative impacts on morale, even  though they rarely resulted in lost jobs or salary reductions for DOL  workers. Of the 28 competitions DOL held during fiscal years 2004 through  2007, 23 resulted in formal job changes (that is, changes reflected in  personnel actions) for DOL employees—most often, reassignments to  different positions at the same or higher salary levels. Many of the workers  experiencing personnel actions have been minorities and women. DOL  management stated that they made their best efforts to treat well those  employees who were involved in the process, in adherence with the  Commercial Activities Panel principles; nevertheless, employees we spoke  with reported negative impacts on morale.
subsections: section_title: Most Affected Personnel Were Reassigned but Kept Their Same Salary Level
paragraphs: In 23 of the 28 competitive sourcing competitions conducted by DOL  during fiscal years 2004 through 2007, personnel actions affected the jobs  of a total of 314 DOL employees. Most often, the affected employees were  reassigned to new DOL positions. About 79 percent (248 workers) were  reassigned to new positions at the same federal grade and salary level (see  fig. 2). For example, a worker who was a GS-13 safety and occupational  health specialist before the competition was reassigned as a GS-13 safety  and occupational health specialist after the competition, but was placed  under a different agency management structure designed as part of the  winning in-house bid (MEO). Another 15 workers were promoted to a  higher federal grade with entitlement to any associated salary increases.  Of the 16 workers who were demoted to a lower federal grade, 5 retained  their same grade and 9 retained their same salaries that they had before  the competition, due to grade and pay retention provisions. All the  remaining workers left DOL, including 29 who left voluntarily, either  through retirement or through a nonretirement separation with an  incentive payment, and 6 who were laid off from the agency through a  reduction in force.
section_title: Many Affected Personnel Were African-Americans, Women, and Older Workers
paragraphs: Of the 314 DOL workers who were affected by personnel actions due to  competitive sourcing during fiscal years 2004 through 2007, 47 percent  were African-Americans, 60 percent were women, and 89 percent were 40  years old or older—much higher proportions than their representation in  the general DOL working population overall. It may be that these  population groups more frequently hold the commercial positions eligible  for competition compared with the general DOL population. However,  DOL does not tabulate demographic data by OMB’s list of FAIR Act  function code categories for commercial activities, and the data were not  readily available. Thus, we were unable to determine if this could be an  underlying cause.
Although DOL does not routinely track the demographic characteristics of  those affected by competitive sourcing decisions, agency officials were  able to gather these data from various sources in response to our request.  A comparison of these data with the demographic profile of DOL  personnel overall shows that African-Americans comprised about 47  percent of affected workers, compared with 23 percent of the overall DOL  working population. Similarly, Native Americans comprised a greater  proportion of the affected workers compared with the overall DOL  working population. In contrast, the proportions of affected Caucasian,  Hispanic/Latino, and Asian/Pacific Islander workers were lower than their  representation in the general DOL working population (see fig. 3).  Moreover, among those affected, African-Americans experienced more  negative impacts. All 16 workers who were demoted, and all 6 workers  who were laid off, were African-American. In contrast, of the 15 workers  who were promoted, 10 were Caucasian, 3 were African-American, 1 was  Hispanic/Latino, and 1 was Asian/Pacific Islander.
Similarly, 60 percent of affected workers were women, compared with 50  percent of the DOL working population. Likewise, 89 percent of affected  workers were age 40 or over, compared with 75 percent of DOL workers  overall, mostly due to the impact of those over age 50. (See fig. 4.)
section_title: Selected Employees’ Views on Implementation and Morale Issues
paragraphs: Although DOL management stated that they made their best efforts to treat well  those employees whose positions were competed in the competitive sourcing  process, almost all DOL employees we spoke with who assisted with  competition activities, and whose positions were affected by the competitions,  reported that the competitive sourcing process has had a negative impact on  morale. The Commercial Activities Panel principles include, among other  things, that agencies should base their competitions on a “clear, transparent,  and consistently applied process” and ensure that, when competitions are held,  they are conducted as “fairly, effectively, and efficiently as possible.”  According to DOL management officials, extensive efforts were made to adhere  to these principles. DOL issued a guidebook describing how the process  worked, and management officials said they made every effort to find a job for  all those affected by a competition. Employees were offered reassignments,  voluntary early retirement options, separation incentives, and other services for  career transition. However, most employees we interviewed said that they were  either dissatisfied or very dissatisfied with how DOL has implemented the  competitive sourcing process (see fig. 5). Though not a representative sample  of all those involved in the process, these interviews included employees who  were responsible for assisting with competition activities, as well as employees  whose positions had been competed.
In general, the employees we interviewed said that the process has harmed  morale. For example, some noted that it has led to a lack of trust between  staff and management and that these effects appear to be long-lasting.  They told us that competitive sourcing had taken away the job security  that federal employment used to provide and that this change has harmed  the morale of current employees, as well as the agency’s ability to recruit  future employees. Some said that even though employees may have ended  up benefiting from competitive sourcing, many were still unhappy about  having been subjected to the process. They noted that they felt they must  have done something wrong for their jobs to have been selected for the  competition. Others said that they were no longer in positions that they  had been trained for or wanted. Several said that if their jobs were  competed again, they would leave the agency.
Among those reporting that they were satisfied or very satisfied with the  process, several commented on the improved efficiency and effectiveness  of the organization after the competition. For example, the employees  responsible for overseeing the competition in one location noted that the  competition had an overall positive impact on the organization because  the winning MEO incorporated a better balance of personnel and  resources than what had existed before. According to these employees,  they met their goals, saved some money, and came up with a better  organization afterward. However, others we spoke with commented that  employees are not as willing to put in the extra effort needed to provide  high-quality work. For example, some DOL employees told us that the job  was still being done but that loyalty and effort has decreased. Moreover,  even employees who said they were satisfied with the process noted that  there were negative impacts on morale.
section_title: Conclusions
paragraphs: As the Commercial Activities Panel report describes, the government’s  goal for competitive sourcing is to obtain high-quality services at a  reasonable cost and to achieve outcomes that represent the best deal for  the taxpayer. DOL has conducted public-private competitions under its  competitive sourcing program for 4 years and has set up performance and  cost reporting systems to track its progress in meeting such goals. Yet  these systems have a number of weaknesses, and unless these weaknesses  are addressed, they will continue to inhibit DOL’s ability to reliably and  comprehensively assess whether the cost of the work performed by the  winning service providers—whether in-house government service  providers or contracted private sector service providers—achieves the  savings promised through the competitive sourcing process.
Under OMB’s new Commercial Services Management guidance, agencies  are encouraged to use the tool that provides the best value and the most  efficient process to manage its commercial activities. However, without a  better system to track deficiencies and improvements departmentwide and  identify all the costs associated with competitive sourcing, it will be  difficult to assess whether competitive sourcing truly provides the best  deal for the taxpayer. To accurately determine which management tool is  most cost-effective in performing a certain activity, agencies need a full  accounting of the costs and performance.
Previous GAO reports have cited problems at other federal agencies— DOD and USDA’s Forest Service, in particular—because they did not  develop comprehensive estimates for the costs associated with  competitive sourcing. This report identifies similar problems at DOL. To  enhance the transparency surrounding their estimates of savings from  competitive sourcing, federal agencies need to track all costs—including  planning costs, transition costs, postcompetition monitoring, and the labor  costs of all staff who participate in competitions.
We found that DOL does not ensure that identified deficiencies and  recommendations are tracked and followed up on at a departmentwide level.  Without such departmentwide tracking, DOL is hindered in identifying and  monitoring agencywide competitive sourcing performance trends, reliably  determining whether all deficiencies or recommendations for improvement  have been addressed, or determining whether the new organization is working  more efficiently. Moreover, if DOL continues to conduct more competitions  that involve multiple DOL offices, the ability to track competitions  departmentwide will become increasingly important.
We also found that in a sample of three of DOL’s savings reports to  Congress, all three contained errors that overstated the savings achieved  through competitive sourcing, two of which were significant. Without  reliable savings assessments, policymakers do not have the information  that they need to determine the effectiveness of competitive sourcing.
section_title: Recommendations for Executive Action
paragraphs: We are making four recommendations.
In the interest of providing agency decision makers and policymakers with  more complete information on the total costs associated with competitive  sourcing, we recommend that in addition to the current cost reports that  OMB requires agencies to prepare, the Director of OMB should:  require agencies to systematically report all costs associated with  competitive sourcing, including regular FTE staff wages for time spent on  planning and conducting competitions, as well as all other precompetition,  transition, and implementation costs, including postcompetition  monitoring or accountability reviews.
To improve the reliability and comprehensiveness of DOL’s performance  assessments and savings estimates in its competitive sourcing program, we  recommend that the Secretary of Labor take the following three actions:  implement a consistently applied, departmentwide system to track  identified deficiencies and recommendations for improvement in each  of the competitions and the program overall;  implement a system to track the full costs associated with managing  DOL’s commercial management activities, including—but not limited  to—all costs associated with competitive sourcing; and    develop and implement a review process to ensure the accuracy of  competitive sourcing savings reports to Congress.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Office of Management and Budget  and the Department of Labor for review and comment. Both agencies  provided written comments on a draft of our report which are reprinted in  appendixes VI and VII, respectively. These agencies also provided us with  technical comments that we incorporated, as appropriate.
OMB concurred with our conclusion that all agencies can maximize savings  and performance benefits by ensuring appropriate internal controls are in place  to monitor results but questioned the need for reporting all costs associated  with competitive sourcing. OMB stated that certain costs are not necessarily  unique to competitive sourcing and would not have a significant impact on the  amount of savings. However, as the examples in this report and past GAO  reports demonstrate, the lack of complete and accurate savings reports for the  competitive sourcing program results in agencies not having a comprehensive,  transparent picture of all the costs and benefits associated with the program.  Moreover, while not unique to competitive sourcing, some costs could  nevertheless vary across the myriad of management tools for improving the  delivery of commercial services. Even if OMB does not expect a significantly  different result in savings achieved by including these additional costs, agencies  need a full accounting of all of the costs associated with competitive sourcing  in order to enhance the transparency of their savings estimates and accurately  determine if competitive sourcing truly provides the best deal for the taxpayer.  OMB stated that it would work with the transition team so the next  administration will be fully informed about the costing policies for competitive  sourcing as it considers our recommendation.
DOL acknowledged that improving cost assessments and performance tracking  can provide better tools for managing their competitive sourcing program and  agreed with our recommendation to implement a departmentwide system to  track identified deficiencies and recommendations for improvement, as well as  our recommendation to develop and implement an internal review process to  ensure the accuracy of savings reports. However, DOL expressed concerns  about our recommendation to implement a system to track full costs related to  competitive sourcing in the absence of governmentwide guidance from OMB to  do so. While we recognize that DOL is subject to OMB guidance on reporting  costs, we continue to maintain that federal agencies like DOL need to track all  costs associated with competitive sourcing—whether they are reported or  not—so they can accurately determine if competitive sourcing is the most cost- effective tool for managing certain commercial activities. This is a separate  issue from our recommendation that the Director of OMB require federal  agencies to report all costs associated with competitive sourcing. We maintain  that tracking all costs would enhance the transparency surrounding the  estimates of savings from competitive sourcing and provide for accountability  in connection with sourcing decisions—one of the principles of the  Commercial Activities Panel.
We are sending copies of this report to interested congressional committees,  the Director of the Office of Management and Budget, the Secretary of Labor,  and other interested parties. In addition, the report will be available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions regarding this report, please  contact me at (202) 512-7215 or scottg@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix VIII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: As required unde directed by the House Committee on Appropriations, this report examines  the use of competitive sourcing at the Department of Labor (DOL). The  House Committee on Appropriations directed that we review the extent to  which DOL has established a reliable and comprehensive system to track  costs, savings, and the quality of work performed by contractors, as well  as DOL’s adherence to the principles adopted in 2002 by the Commercial  Activities Panel chaired by the Comptroller General. In response, GAO’s  review focused on the following:  r the Consolidated Appropriations Act, 2008, and as  1.  The extent to which DOL has established a reliable and comprehensive  system to assess the quality of work performed as a result of  competitive sourcing. 2.  The comprehensiveness and reliability of DOL’s assessments of the  savings and costs associated with competitive sourcing. 3.  The implications of competitive sourcing for certain DOL worker  populations, such as women and minorities.
To address these issues, we examined relevant statutes, regulations, and  guidance on competitive sourcing, Office of Management and Budget  (OMB) guidance, DOL internal policies and guidance on competitive  sourcing, annual reports to Congress, DOL Inspector General reports, GAO  reports, and related documents. We interviewed DOL officials and  employees, OMB officials, two private sector companies, and the president  of a leading national private sector trade association representing over 300  companies. We also met with representatives from the American  Federation of Government Employees (AFGE)—a union representing  600,000 federal and D.C. government workers nationwide and overseas— and employee representatives to AFGE from DOL. We focused on DOL’s  competitive sourcing activities from fiscal years 2004 through 2007. There  were no DOL competitive sourcing activities in 2008 for us to review  because the Consolidated Appropriations Act, 2008 prohibited funds fr that act from being used for carrying out competitions under OMB  Circular No. A-76 until 60 days after this report is provided to the  Committees on Appropriations for the House of Representatives and the  Senate.
To address the first issue, we examined all 18 of DOL’s postcompetition  accountability reviews (PCARs) completed as of July 2008 for the 28  competitions conducted from fisc interviewed DOL officials, together with one performance review  contractor selected by DOL, about their processes for conducting the  PCA acc  policy. In addition, we selected a group of six  PCARs to evaluate the extent to which DOL management had followed up  and addressed the deficiencies and suggestions for improvement that we ide simple random sample of 3 PCARs from among the 13 initial PCARs  completed between 2006 and 2007, plus a nonrandom sample of three  a significant findings and recommendations that were not present in the  three random PCARs selected.  al years 2004 through 2007. We  Rs, and we evaluated the structure and content of the review ording to DOL and OMB ntified in each of these reviews. The six PCARs were com itional PCARs completed between 2004 and 2 005 that had examples of  To address the second issue, we interviewed DOL officials responsible for  completing these assessments and reviewed the process they used to  complete the savings and cost reports. To assess the accuracy of DOL’s  reports, we reviewed DOL’s annual reports to Congress, all 18 of DOL’s  PCARs completed as of July 2008, and the cost records for the private  contractors involved in assisting with the competition process and  completing the PCARs. We reviewed the documents from all 18 initial PCAR and conducted more detailed analyses of the calculations provided in the cos reports for the same 3 randomly selected initial PCARs completed between  2006 and 2007, as described above. We chose to focus our sample on PCARs  completed during 2006 and 2007 to ensure that the most recent, full reco were available for analysis. We examined the savings and costs for these three rds  competitions, including the contract billing for the private sector consultants  employed by DOL during the competition, and compared the results to the  amounts reported in DOL’s annual reports to Co ngress. We did not examine  the accuracy of the reports for the remaining DOL competitions. Due to this  limited sample size, our findings should not be used to make inference all of DOL’s competitions. Finally, we obtained anecdotal evidence of the  ome staff spent on competitive sourcing activities  number of hours that s during our group interviews with staff members involved in assisting competitions (see below).   with the  To address the third issue, we analyzed DOL’s demographic data on total  personnel departmentwide and on personnel who experienced personnel as a result of the competitive sourcing process. We did not assess the  demographic characteristics of DOL personnel by OMB’s list of the Federal  Activities because DOL does not tabulate demographic data in that way and the data were  not readily available. To obtain employee views on the process and impacts on  morale, we conducted group interviews with 60 DOL employees affected by competitive sourcing competitions in four locations: Arlington Heights,  Beckley, West Virginia; San Francisco, California; and Washington, D.C.  selected the four group interview locations in order to obtain perspectives fro range of geographic locations and from competitions of different sizes. On ce the  four locations were determined, we selected five competitions as our focus: one  large competition that affected personnel at all four sites (though mostly  personnel in D.C.); one smaller competition in D.C.; and three additional  competitions—one that affected a large number of personnel at each of the thr sites outside of D.C. (see table 3).
section_title: Appendix II: DOL’s Categorization of Commercial Activities
paragraphs: Once agencies have designated all their activities as either inherently  governmental or commercial, OMB Circular No. A-76 requires agencies to further categorize their commercial activities according to six “reason  codes” labeled A through F. Only one category—Reason B—signifies  suitability for competitive sourcing that year. For example, in fiscal year  2006, DOL categorized about 20 percent of its total full-time employees  (FTE) as Reason B: suitable for a streamlined or standard competition  (see table 5).
section_title: Appendix III: Required Reporting and Monitoring for Competitive Sourcing
paragraphs: Section 647(b) of Division F of the Consolidated Appropriations Act, 2004 requires agencies to report their competitive sourcing activities to Congress at the end of each calendar year. These reports are to include the total numb er of competitions announced and completed; the incremental costs directly attributable to conducting those competitions; and the savings—both actual  and anticipated—derived from such competitions. In addition, OMB Circular  sts  No. A-76 outlines the requirements for monitoring the performance and co service provider following a competitive sourcing competition,  of the winning whether the winner is the in-house government service provider or a service  provider from the private sector. (See table 6.)
Division F of the  Consolidated  Appropriations Act,  2004 (Pub. L. No.  108-199 (2004)) and  OMB Memorandum  M-08-02 (October 31,  2007)
Completed at the end of  each calendar year. general description of competitive sourcing process; and  itions.
OMB Circular No. A- Completed by  76 (Revised May 29,  2003) and OMB  Memorandum for the  President’s  Management Council:  Validating the Results  of Public-Private  Competition (April 13,  2007)
Regardless of the selected ser performance period, as  determined by the agency. monitor performance for all performance periods stated  implement the quality assurance surveillance plan;  retain the solicitation and any other documentation from  the streamlined or standard competition as part of the  competition file;    maintain the currency of the contract file, consistent with  the Federal Acquisition Regulation;  record the actual cost of performance by performance  period; and    monitor, collect, and report performance information,  consistent with the Federal Acquisition Regulation.
The April 13, 2007 OMB Memo also directs agencies to have  a plan in place to independently validate results on a  reasonable sampling of covered competitions.
section_title: Appendix IV: Po Review Checklist
paragraphs: DOL’s Office of Asset and Resource Management is responsible for  coordinating the PCARs of the winning service providers, in accordance  with OMB guidance and the Federal Acquisition Regulation. The following checklist specifies preaudit or review actions that DOL policy and  procedures direct officials to document as part of the PCAR. (Note that  not all items included in the checklist are applicable for all competitions.)
section_title: Appendix V: List of DOL Competitive Sourcing Competitions, Fiscal Years 2004 through 2007
subsections: section_title: Agencies involved
paragraphs: Location  (State)
Personnel  actions resulted.  PCAR  completed.  Implementation  terminated in  May 2007.
Personnel  actions resulted.  No PCAR  completed.  Ongoing.
Personnel  actions resulted.  PCAR  completed.  Ongoing.
Personnel  actions resulted.  PCARs  completed.  Ongoing.
Personnel  actions resulted.  PCARs  completed.  Ongoing.
Personnel  actions resulted.  PCARs  completed.  Ongoing.
Personnel  actions resulted.  PCAR  completed.  Implementation  terminated in  May 2007.
No personnel  actions. PCAR  completed.  Ongoing.
Location  (State)
Number of  FTEs in study el  Personn actions res PCAR  completed.  Implementatio terminated in  May 2007. ulted.
Personnel  actions res PCAR  completed.  Implementatio terminated ind.
May 2007.
No personnel  actions. PCAR  completed.  Ongoing.
No personn actions. PCAR  completed.  Ongoing.
Personnel  actions res PCAR  completed.  Implementatioulted. terminated in May 2007.
Personnel  actions resulted.  No PCAR  completed as of  July 2008.  O ngoing.
P actions resulte PCAR  completed.  Ongoing. d.
Personnel  actions resulte PCAR  completed.  Ongoing. d.
Location  (State)
Personnel  actions resulted.  PCAR  completed.  Ongoing.
Personnel  actions result PCAR  completed.  Ongoing. ed.
Personnel  actions resulted.  PCAR  completed.  Ongoing.
Personnel  actions resul PCAR  completed.  Ongoing. ted.
Personnel  actions res No PCAR  completed  becaus implementat ion  was terminated  in May 2007.ulted.  d.
Personnel  actions resulte No PCAR  completed  July 2008.  Ongoing.
Location  (State)
Personnel  actions resulted.  No PCAR  completed as of  July 2008.  Ongoing.
Personnel  actions  No PCAR  completed as of  July 2008  because  implementation  of competitio was  suspended. resulted.
Personnel  actions resulted.  No PCAR  completed as of  July 2008  because  implementation  of competition  was  suspended.e, f Personnel  actions resulted.  No PCAR  completed as of  July 2008  because  implementation  of competition  was  suspended.
No personnel  actions. No  PCAR  completed  because  contract was  terminated in  May 2007.
ILAB    MSHA  OALJ   OASAM  OASP   OCFO  OLMS  OSBP   OSHA  OWCP  VETS   WB e of Administrati e of the Assistant Se e of the Assistant S e of the Chief Fin e of Labor Mana e of Small Business cretary for Administration and Manag nal Safety and Health Administration  fter the first full year of performance followi Thus, for competitions completed in fiscal year 2007, PCARs normally would be co than the end of September 200; however, as noted, several have been suspende ng a competi nducted no later  d.  tion.
In six instances, the implementation of completed competitions involving MHSA FT terminated to comply with Pub. L. No. 110-2, §6602 (2007).
Competitions”  are included h r d competition , §6602 (2007). h Pub.
section_title: Appendix VI: Comments from the Office of Management and Budget
section_title: Appendix VII: Comments from the Department of Labor
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Bill J. Keller, (Assistant Director),  Kristy L. Kennedy, Margie K. Shields, Nicholas L. Weeks, Jeffrey W.  Weinstein, Doreen S. Feldman, Alexander G. Galuten, William T. Woods,  and Jessica S. Orr made significant contributions to this report.
section_title: Related GAO Products
paragraphs: Department of Defense: Department of Defense Pilot Authority for  Acquiring Information Technology Services under OMB Circular A-76.  GAO-08-753R. Washington, D.C.: May 29, 2008.
Defense Management: DOD Needs to Reexamine Its Extensive Reli on Contractors and Continue to Improve Management and Oversight.  GAO-08-572T. Washington, D.C.: March 11, 2008.  orest Service: Better Planning, Guidance, and Data Are Needed to  F Improve Management of the Competitive Sourcing Program.   GAO-08-195. Washington, D.C.: January 22, 2008.
Federal-Aid Highways: Increased Reliance on Contractors Can Pose  Oversight Challenges for Federal and State Officials. GAO-08-198.  Washington, D.C.: January 8, 2008.
Department of Homeland Security: Risk Assessment and Enhanced  Oversight Needed to Manage Reliance on Contractors. GAO-08-142T.  Washington, D.C.: October 17, 2007.
Defense Budget: Trends in Operation and Maintenance Costs and  Support Services Contracting. GAO-07-631. Washington, D.C.:   May 18, 2007.
Implementation of OMB Circular No. A-76 at Science Agencies.   GAO-07-434R. Washington, D.C.: March 16, 2007.
Competitive Sourcing: Greater Emphasis Needed on Increasing  Efficiency and Improving Performance. GAO-04-367. Washington, D.C.:  February 27, 2004.
Competitive Sourcing: Implementation Will Be Challenging for Federal  Agencies. GAO-03-1022T. Washington, D.C.: July 24, 2003.
Competitive Sourcing: Implementation Will Be Key to Success of New  Circular A-76. GAO-03-943T. Washington, D.C.: June 26, 2003.
Commercial Activities Panel: Improving the Sourcing Decisions of the  Government; Final Report. GAO/A03209. Washington, D.C.: April 30, 2002.
Competitive Sourcing: Challenges in Expanding A-76 Governmentwide.  GAO-02-498T. Washington, D.C.: March 6, 2002.
DOD Competitive Sourcing: Effects of A-76 Studies on Federal  Employees’ Employment, Pay, and Benefits Vary. GAO-01-388.  Washington, D.C.: March 16, 2001.
DOD Competitive Sourcing: Some Progress, but Continuing Challenges  Remain in Meeting Program Goals. GAO/NSIAD-00-106. Washington,  D.C.: August 8, 2000.
DOD Competitive Sourcing: Savings Are Occurring, but Actions Are Needed to Improve Accuracy of Savings Estimates. GAO/NSIAD Washington, D.C.: August 8, 2000. -00-107.
OMB Circular A-76: DOD’s Reported Savings Figures Incomplete and Inaccurate. GAO/GGD-90-58. Washington, D.C.: March 15, 1990.