Kennedy Monkey-Wrenches Government Contracting

Yesterday I wrote that “Senator Kennedy Slips Another Mickey Finn Into Defense Authorization.” Today, the Washington Post takes notice, below. Excerpt from my post yesterday:

By a party-line vote of 51-44 (three Republicans joining the Democrats- Warner, Snowe and Spector), Kennedy’s amendment S3058 requires Defense Department contractors to offer benefits equal to DOD employees, and requires hiring of contractors to provide cost savings. According to the Congressional Quarterly (subscription required):

“Kennedy, D-Mass., amendment no. 3058 to the Levin, D-Mich., substitute amendment no. 2011. The Kennedy amendment would bar the Defense Department from hiring contractors unless they offer health care and retirement benefits that match or exceed what the agency offers its employees. It also would require contractors to demonstrate that they can save the government 10 percent of personnel-related costs for performance or $10 million.”)

I’ve not yet found further details of the amendment. They are usually presented as insert a word or phrase here and delete one there, which requires quite a bit of research and analysis, but you can be sure that the cost implications are significant. [I've got it now, and it's even worse than the Congressional Quarterly summary. It's below the fold at Read More.]

Defense civilian employees belong to the Federal Employees Health Benefits Program, which according to the Office of Personnel Management provides for retirement and survivor health benefits as well, with approximately 72% of premium subsidized by DOD. The retirement savings Thrift program operates like a 401(k), but with a required 1% contribution by the employer and up to several percent more at the discretion of the specific agency.

Most contractors pass their internal contract costs on to the government, so the net effect is an added cost to taxpayers. But, additionally, there will be an added cost to other consumers of contracting companies’ goods or services as benefits across the workforce are normally pretty uniform.

The other portion of Kennedy’s amendment, requiring certain levels of cost savings in contracting, especially in the absence of mitigating language for critical needs, is another hindrance on the effective management of our defense.

Here’s what the Washington Post has to say today:

The fight is over a long-standing Bush administration effort to put large numbers of federal jobs up for competition with the private sector. The idea is to determine whether federal work is being performed in the most efficient manner and, if not, whether the jobs should be turned over to the private sector….

Those provisions would apply across the government. Because the amendment was part of a large bill authorizing fiscal 2008 funding and programs for the military, some outsourcing requirements applied only to the Defense Department….

The Defense Department also would be required to issue guidelines "for ensuring that consideration is given to using federal government employees on a regular basis" for new work and for work currently done by contractors.

During a brief debate, Sen. John Thune (R-S.D.) protested the amendment, saying it would "cause the A-76 process to become so cumbersome and expensive that it would effectively eliminate the ability of the federal government to conduct any future A-76 [outsourcing] competitions."…

"This provision goes way beyond what they have ever done before," said Colleen Preston, senior vice president at the Contract Services Association. "The fact that it is in the House and Senate bill is going to be a real killer."

Stan Z. Soloway, president of the Professional Services Council, predicted fewer companies would compete for federal work. "At a time when Congress is pressing for competition everywhere else, it is ironic that they would kill competition in areas that could benefit from it," he said.

If you have a business or experience with government contracting, or association with a think-tank, you might think about quickly contacting your congressman and senator to express your opinion. The House and Senate versions of the Defense Authorization bill is now going into conference, and the time is very short to affect this monkey-wrench into the effective management of both government and private businesses serving us, the taxpayers and citizens.

The full text of the Kennedy amendment is below the fold at Read More. It’s long, and complicated, but not so arcane that anyone with sense can’t figure out what an undue burden it will be.

KENNEDY AMENDMENT SA 3058
TEXT OF AMENDMENT
SA 3058. Mr. KENNEDY (for himself, Mrs. McCaskill, Mr. Lieberman, Ms. Mikulski, Mr. Akaka, Mr. Brown, and Mr. Dodd) submitted an amendment intended to be proposed to amendment SA 2011 proposed by Mr. Nelson of Nebraska (for Mr. Levin) to the bill H.R. 1585, to authorize appropriations for fiscal year 2008 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe military personnel strengths for such fiscal year, and for other purposes; which was ordered to lie on the table; as follows:
At the end of title III, add the following:
SEC. 358. MODIFICATION TO PUBLIC-PRIVATE COMPETITION REQUIREMENTS BEFORE CONVERSION TO CONTRACTOR PERFORMANCE.
(a) Comparison of Retirement System Costs.—Section 2461(a)(1) of title 10, United States Code, is amended—
(1) in subparagraph (F), by striking “and” at the end;

(2) by redesignating subparagraph (G) as subparagraph (H); and

(3) by inserting after subparagraph (F) the following new subparagraph (G):

“(G) requires that the contractor shall not receive an advantage for a proposal that would reduce costs for the Department of Defense by—

“(i) not making an employer-sponsored health insurance plan (or payment that could be used in lieu of such a plan), health savings account, or medical savings account, available to the workers who are to be employed to perform the function under the contract;

“(ii) offering to such workers an employer-sponsored health benefits plan that requires the employer to contribute less towards the premium or subscription share than the amount that is paid by the Department of Defense for health benefits for civilian employees of the Department under chapter 89 of title 5; or

“(iii) offering to such workers a retirement benefit that, in any year, costs less than the annual retirement cost factor applicable to civilian employees of the Department of Defense under chapter 84 of title 5; and”.
(b) Conforming Amendments.—Such title is further amended—
(1) by striking section 2467; and

(2) in section 2461—

(A) by redesignating subsections (b) through (d) as subsections (c) through (e); and

(B) by inserting after subsection (a) the following new subsection (b):
“(b) Requirement to Consult DOD Employees.—(1) Each officer or employee of the Department of Defense responsible for determining under Office of Management and Budget Circular A-76 whether to convert to contractor performance any function of the Department of Defense—
“(A) shall, at least monthly during the development and preparation of the performance work statement and the management efficiency study used in making that determination, consult with civilian employees who will be affected by that determination and consider the views of such employees on the development and preparation of that statement and that study; and

“(B) may consult with such employees on other matters relating to that determination.
“(2)(A) In the case of employees represented by a labor organization accorded exclusive recognition under section 7111 of title 5, consultation with representatives of that labor organization shall satisfy the consultation requirement in paragraph (1).
“(B) In the case of employees other than employees referred to in subparagraph (A), consultation with appropriate representatives of those employees shall satisfy the consultation requirement in paragraph (1).
“(C) The Secretary of Defense shall prescribe regulations to carry out this subsection. The regulations shall include provisions for the selection or designation of appropriate representatives of employees referred to in subparagraph (B) for purposes of consultation required by paragraph (1).”.
(c) Technical Amendments.—Section 2461 of such title, as amended by subsection (a), is further amended—
(1) in subsection (a)(1)—

(A) in subparagraph (B), by inserting after “2003” the following: “, or any successor circular”; and

(B) in subparagraph (D), by striking “and reliability” and inserting “, reliability, and timeliness”; and

(2) in subsection (c)(2), as redesignated under subsection (b)(2), by inserting “of” after “examination”.
SEC. 359. BID PROTESTS BY FEDERAL EMPLOYEES IN ACTIONS UNDER OFFICE OF MANAGEMENT BUDGET CIRCULAR A-76.
(a) Eligibility to Protest Public-Private Competitions.—Section 3551(2) of title 31, United States Code, is amended to read as follows:
“(2) The term ‘interested party’—
[Page S12167]
“(A) with respect to a contract or a solicitation or other request for offers described in paragraph (1), means an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract; and

“(B) with respect to a public-private competition conducted under Office of Management and Budget Circular A-76 with respect to the performance of an activity or function of a Federal agency, or a decision to convert a function performed by Federal employees to private sector performance without a competition under Office of Management and Budget Circular A-76, includes—

“(i) any official who submitted the agency tender in such competition; and

“(ii) any one individual who, for the purpose of representing the Federal employees engaged in the performance of the activity or function for which the public-private competition is conducted in a protest under this subchapter that relates to such public-private competition, has been designated as the agent of the Federal employees by a majority of such employees.”.
(b) Expedited Action.—
(1) IN GENERAL.—Subchapter V of chapter 35 of such title is amended by adding at the end the following new section:
“SEC. 3557. EXPEDITED ACTION IN PROTESTS OF PUBLIC-PRIVATE COMPETITIONS.
“For any protest of a public-private competition conducted under Office of Management and Budget Circular A-76 with respect to the performance of an activity or function of a Federal agency, the Comptroller General shall administer the provisions of this subchapter in the manner best suited for expediting the final resolution of the protest and the final action in the public-private competition.”.
(2) CLERICAL AMENDMENT.—The chapter analysis at the beginning of such chapter is amended by inserting after the item relating to section 3556 the following new item:

“3557. Expedited action in protests of public-private competitions.”.
(c) Right to Intervene in Civil Action.—Section 1491(b) of title 28, United States Code, is amended by adding at the end the following new paragraph:
“(5) If an interested party who is a member of the private sector commences an action described in paragraph (1) with respect to a public-private competition conducted under Office of Management and Budget Circular A-76 regarding the performance of an activity or function of a Federal agency, or a decision to convert a function performed by Federal employees to private sector performance without a competition under Office of Management and Budget Circular A-76, then an interested party described in section 3551(2)(B) of title 31 shall be entitled to intervene in that action.”.
(d) Applicability.—Subparagraph (B) of section 3551(2) of title 31, United States Code (as added by subsection (a)), and paragraph (5) of section 1491(b) of title 28, United States Code (as added by subsection (c)), shall apply to—
(1) a protest or civil action that challenges final selection of the source of performance of an activity or function of a Federal agency that is made pursuant to a study initiated under Office of Management and Budget Circular A-76 on or after January 1, 2004; and

(2) any other protest or civil action that relates to a public-private competition initiated under Office of Management and Budget Circular A-76, or to a decision to convert a function performed by Federal employees to private sector performance without a competition under Office of Management and Budget Circular A-76, on or after the date of the enactment of this Act.
SEC. 360. PUBLIC-PRIVATE COMPETITION REQUIRED BEFORE CONVERSION TO CONTRACTOR PERFORMANCE.
(a) In General.—The Office of Federal Procurement Policy Act (41 U.S.C. 403 et seq.) is amended by adding at the end the following new section:
“SEC. 43. PUBLIC-PRIVATE COMPETITION REQUIRED BEFORE CONVERSION TO CONTRACTOR PERFORMANCE.
“(a) Public-Private Competition.—(1) A function of an executive agency performed by 10 or more agency civilian employees may not be converted, in whole or in part, to performance by a contractor unless the conversion is based on the results of a public-private competition that—
“(A) formally compares the cost of performance of the function by agency civilian employees with the cost of performance by a contractor;

“(B) creates an agency tender, including a most efficient organization plan, in accordance with Office of Management and Budget Circular A-76, as implemented on May 29, 2003, or any successor circular;

“(C) includes the issuance of a solicitation;

“(D) determines whether the submitted offers meet the needs of the executive agency with respect to factors other than cost, including quality, reliability, and timeliness;

“(E) examines the cost of performance of the function by agency civilian employees and the cost of performance of the function by one or more contractors to demonstrate whether converting to performance by a contractor will result in savings to the Government over the life of the contract, including—

“(i) the estimated cost to the Government (based on offers received) for performance of the function by a contractor;

“(ii) the estimated cost to the Government for performance of the function by agency civilian employees; and

“(iii) an estimate of all other costs and expenditures that the Government would incur because of the award of such a contract;

“(F) requires continued performance of the function by agency civilian employees unless the difference in the cost of performance of the function by a contractor compared to the cost of performance of the function by agency civilian employees would, over all performance periods required by the solicitation, be equal to or exceed the lesser of—

“(i) 10 percent of the personnel-related costs for performance of that function in the agency tender; or

“(ii) $10,000,000; and

“(G) examines the effect of performance of the function by a contractor on the agency mission associated with the performance of the function.
“(2) A function that is performed by the executive agency and is reengineered, reorganized, modernized, upgraded, expanded, or changed to become more efficient, but still essentially provides the same service, shall not be considered a new requirement.
“(3) In no case may a function being performed by executive agency personnel be—
“(A) modified, reorganized, divided, or in any way changed for the purpose of exempting the conversion of the function from the requirements of this section; or

“(B) converted to performance by a contractor to circumvent a civilian personnel ceiling.
“(b) Requirement to Consult Employees.—(1) Each civilian employee of an executive agency responsible for determining under Office of Management and Budget Circular A-76 whether to convert to contractor performance any function of the executive agency—
“(A) shall, at least monthly during the development and preparation of the performance work statement and the management efficiency study used in making that determination, consult with civilian employees who will be affected by that determination and consider the views of such employees on the development and preparation of that statement and that study; and

“(B) may consult with such employees on other matters relating to that determination.
“(2)(A) In the case of employees represented by a labor organization accorded exclusive recognition under section 7111 of title 5, consultation with representatives of that labor organization shall satisfy the consultation requirement in paragraph (1).
“(B) In the case of employees other than employees referred to in subparagraph (A), consultation with appropriate representatives of those employees shall satisfy the consultation requirement in paragraph (1).
“(C) The head of each executive agency shall prescribe regulations to carry out this subsection. The regulations shall include provisions for the selection or designation of appropriate representatives of employees referred to in paragraph (2)(B) for purposes of consultation required by paragraph (1).
“(c) Congressional Notification.—(1) Before commencing a public-private competition under subsection (a), the head of an executive agency shall submit to Congress a report containing the following:
“(A) The function for which such public-private competition is to be conducted.

“(B) The location at which the function is performed by agency civilian employees.

“(C) The number of agency civilian employee positions potentially affected.

“(D) The anticipated length and cost of the public-private competition, and a specific identification of the budgetary line item from which funds will be used to cover the cost of the public-private competition.

“(E) A certification that a proposed performance of the function by a contractor is not a result of a decision by an official of an executive agency to impose predetermined constraints or limitations on such employees in terms of man years, end strengths, full-time equivalent positions, or maximum number of employees.
“(2) The report required under paragraph (1) shall include an examination of the potential economic effect of performance of the function by a contractor on—
“(A) agency civilian employees who would be affected by such a conversion in performance; and

“(B) the local community and the Government, if more than 50 agency civilian employees perform the function.
“(3)(A) A representative individual or entity at a facility where a public-private competition is conducted may submit to the head of the executive agency an objection to the public private competition on the grounds that the report required by paragraph (1) has not been submitted or that the certification required by paragraph (1)(E) is not included in the report submitted as a condition for the public private competition. The objection shall be in writing and shall be submitted within 90 days after the following date:
“(i) In the case of a failure to submit the report when required, the date on which the representative individual or an official of the representative entity authorized to pose the objection first knew or should have known of that failure.

“(ii) In the case of a failure to include the certification in a submitted report, the date on which the report was submitted to Congress.

“(B) If the head of the executive agency determines that the report required by paragraph (1) was not submitted or that the required certification was not included in the submitted report, the function for which the public-private competition was conducted for which the objection was submitted may not be the subject of a solicitation of offers for, or award of, a contract until, respectively, the report is submitted or a report containing the certification in full compliance with the certification requirement is submitted.[Page S12168]
“(d) Exemption for the Purchase of Products and Services of the Blind and Other Severely Handicapped Persons.—This section shall not apply to a commercial or industrial type function of an executive agency that—
“(1) is included on the procurement list established pursuant to section 2 of the Javits-Wagner-O’Day Act (41 U.S.C. 47); or

“(2) is planned to be changed to performance by a qualified nonprofit agency for the blind or by a qualified nonprofit agency for other severely handicapped persons in accordance with that Act.
“(e) Inapplicability During War or Emergency.—The provisions of this section shall not apply during war or during a period of national emergency declared by the President or Congress.”.
(b) Clerical Amendment.—The table of sections in section 1(b) of such Act is amended by adding at the end the following new item:
“Sec. 43. Public-private competition required before conversion to contractor performance.”.
SEC. 361. PERFORMANCE OF CERTAIN WORK BY FEDERAL GOVERNMENT EMPLOYEES.
(a) Guidelines.—
(1) IN GENERAL.—The Under Secretary of Defense for Personnel and Readiness shall prescribe guidelines and procedures for ensuring that consideration is given to using Federal Government employees on a regular basis for new work and work that is performed under Department of Defense contracts and could be performed by Federal Government employees.

(2) CRITERIA.—The guidelines and procedures prescribed under paragraph (1) shall provide for special consideration to be given to contracts that—

(A) have been performed by Federal Government employees at any time on or after October 1, 1980;

(B) are associated with the performance of inherently governmental functions;

(C) have been performed by a contractor pursuant to a contract that was awarded on a noncompetitive basis, either a contract for a function once performed by Federal employees that was awarded without the conduct of a public-private competition or a contract that was last awarded without the conduct of an actual competition between contractors; or

(D) have been performed poorly by a contractor because of excessive costs or inferior quality, as determined by a contracting officer within the last five years .

(3) DEADLINE FOR ISSUANCE OF GUIDELINES.—The Secretary of Defense shall implement the guidelines required under paragraph (1) by not later than 60 days after the date of the enactment of this Act.

(4) ESTABLISHMENT OF CONTRACTOR INVENTORY.—The Secretary of Defense shall establish an inventory of Department of Defense contracts to determine which contracts meet the criteria set forth in paragraph (2).
(b) New Requirements.—
(1) LIMITATION ON REQUIRING PUBLIC-PRIVATE COMPETITION.—No public-private competition may be required for any Department of Defense function before—

(A) the commencement of the performance by civilian employees of the Department of Defense of a new Department of Defense function;

(B) the commencement of the performance by civilian employees of the Department of Defense of any Department of Defense function described in subparagraphs (B) through (D) of subsection (a)(2); or

(C) the expansion of the scope of any Department of Defense function performed by civilian employees of the Department of Defense.

(2) CONSIDERATION OF FEDERAL GOVERNMENT EMPLOYEES.—The Secretary of Defense shall, to the maximum extent practicable, ensure that Federal Government employees are fairly considered for the performance of new requirements, with special consideration given to new requirements that include functions that—

(A) are similar to functions that have been performed by Federal Government employees at any time on or after October 1, 1980; or

(B) are associated with the performance of inherently governmental functions.
(c) Use of Flexible Hiring Authority.—The Secretary may use the flexible hiring authority available to the Secretary under the National Security Personnel System, as established pursuant to section 9902 of title 5, United States Code, to facilitate the performance by civilian employees of the Department of Defense of functions described in subsection (b).
(d) Inspector General Report.—Not later than 180 days after the enactment of this Act, the Inspector General of the Department of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on the compliance of the Secretary of Defense with the requirements of this section.
(e) Definitions.—In this section:
(1) The term “National Security Personnel System” means the human resources management system established under the authority of section 9902 of title 5, United States Code.

(2) The term “inherently governmental function” has the meaning given that term in section 5 of the Federal Activities Inventory Reform Act of 1998 (Public Law 105-270; 112 Stat. 2384; 31 U.S.C. 501 note).
(f) Conforming Repeal.—The National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) is amended by striking section 343.
SEC. 362. RESTRICTION ON OFFICE OF MANAGEMENT AND BUDGET INFLUENCE OVER DEPARTMENT OF DEFENSE PUBLIC-PRIVATE COMPETITIONS.
(a) Restriction on Office of Management and Budget.—The Office of Management and Budget may not direct or require the Secretary of Defense or the Secretary of a military department to prepare for, undertake, continue, or complete a public-private competition or direct conversion of a Department of Defense function to performance by a contractor under Office of Management and Budget Circular A-76, or any other successor regulation, directive, or policy.
(b) Restriction on Secretary of Defense.—The Secretary of Defense or the Secretary of a military department may not prepare for, undertake, continue, or complete a public-private competition or direct conversion of a Department of Defense function to performance by a contractor under Office of Management and Budget Circular A-76, or any other successor regulation, directive, or policy by reason of any direction or requirement provided by the Office of Management and Budget.
SEC. 363. PUBLIC-PRIVATE COMPETITION AT END OF PERIOD SPECIFIED IN PERFORMANCE AGREEMENT NOT REQUIRED.
Section 2461(a) of title 10, United States Code, is amended by adding at the end the following new paragraph:
“(4) A military department or defense agency may not be required to conduct a public-private competition under Office of Management and Budget Circular A-76 or any other provision of law at the end of the period specified in the performance agreement entered into in accordance with this section for any function of the Department of Defense performed by Department of Defense civilian employees.”.