[Senate Hearing 108-244] [From the U.S. Government Publishing Office] S. Hrg. 108-244 THEN AND NOW: AN UPDATE ON THE BUSH ADMINISTRATION'S COMPETITIVE SOURCING INITIATIVE ======================================================================= HEARING before the OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE of the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS FIRST SESSION __________ JULY 24, 2003 __________ Printed for the use of the Committee on Governmental Affairs U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2004 88-936 PDF For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas Michael D. Bopp, Staff Director and Chief Counsel Joyce Rechtschaffen, Minority Staff Director and Chief Counsel Amy B. Newhouse, Chief Clerk ------ OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE GEORGE V. VOINOVICH, Ohio, Chairman TED STEVENS, Alaska RICHARD J. DURBIN, Illinois NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois FRANK LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire MARK PRYOR, Arkansas Andrew Richardson, Staff Director Marianne Clifford Upton, Minority Staff Director and Chief Counsel Cynthia Simmons, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Durbin............................................... 1 Senator Voinovich............................................ 12 Senator Lautenberg........................................... 14 Senator Akaka................................................ 17 Senator Carper............................................... 52 WITNESSES Thursday, July 24, 2003 Angela Styles, Administrator, Office of Federal Procurement Policy, Office of Management and Budget........................ 20 Hon. David Walker, Comptroller General, U.S. General Accounting Office......................................................... 23 Jacques Gansler, Ph.D., School of Public Affairs, University of Maryland....................................................... 39 Paul C. Light, Senior Fellow, The Brookings Institution.......... 42 Charles Tiefer, Professor of Law, University of Baltimore........ 44 Frank Camm, Ph.D., Senior Analyst, RAND.......................... 45 Alphabetical List of Witnesses Camm, Frank, Ph.D.: Testimony.................................................... 45 Prepared statement........................................... 190 Gansler, Jacques, Ph.D.: Testimony.................................................... 39 Prepared statement with an attachment........................ 93 Light, Paul C.: Testimony.................................................... 42 Prepared statement........................................... 159 Styles, Angela: Testimony.................................................... 20 Prepared statement with an attachment........................ 57 Tiefer, Charles: Testimony.................................................... 44 Prepared statement........................................... 175 Walker, Hon. David: Testimony.................................................... 23 Prepared statement........................................... 81 Appendix Letter from Senator Lieberman, dated July 24, 2003, sent to Joshua Bolton.................................................. 5 Prepared statements submitted for the Record from: Federally Employed Women (FEW)............................... 202 Colleen M. Kelley, National President, National Treasury Employees Union............................................ 207 Bobby L. Harnage, Sr., National President, American Federation of Government Employes, AFL-CIO................. 215 William Dougan, President, Forest Service Council, National Federation of Federal Employees, International Assn of Machinists & Aerospace Workers AFL-CIO..................... 243 Stan Soloway, President, Professional Services Council....... 249 The President's Management Agenda, Executive Office of the President, Office of Management and Budget, Fiscal Year 2002... 259 Questions and Responses for the Record from: David M. Walker, Comptroller General of the United States.... 274 Administrator Styles......................................... 278 THEN AND NOW: AN UPDATE ON THE BUSH ADMINISTRATION'S COMPETITIVE SOURCING INITIATIVE ---------- THURSDAY, JULY 24, 2003 U.S. Senate, Oversight of Government Management, the Federal Workforce, and the District of Columbia Subcommittee, of the Committee on Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 9:43 a.m., in room SD-342, Dirksen Senate Office Building, Senator George V. Voinovich (Chairman of the Subcommittee) presiding. Present: Senators Voinovich, Akaka, Durbin, Carper, and Lautenberg. Senator Voinovich. I would like to welcome everyone here to the Subcommittee on the Oversight of Government Management, the Federal Workforce, and the District of Columbia's hearing to discuss the past, present and future of the Bush Administration's competitive sourcing agenda. Senator Durbin has indicated to me that he is in the midst of a markup in the Judiciary Committee, and I would like to accommodate him and give him an opportunity to make his opening statement before I make my statement as Chairman of the Subcommittee. Any objection to that Senator Lautenberg? Senator Lautenberg. Not really. [Laughter.] Senator Voinovich. Senator Durbin. OPENING STATEMENT OF SENATOR DURBIN Senator Durbin. Thanks for the vote of confidence, Mr. Chairman, and my colleague, Senator Lautenberg. Thank you all for joining us today, and thanks for convening this morning's hearing to examine the complex and controversial topic of competitive sourcing initiative being advanced by the administration. I want to thank the Chairman for his willingness to hold this first Senate hearing on this topic since the publication of the rewritten OMB Circular A-76 in May. I have heard from a lot of my constituents who are proud Federal public servants, dedicated to their chosen professions, who expressed their growing apprehension about what the administration's plans might do to their jobs. Federal employees are concerned that agencies are conducting competitions simply to meet quotas, not because there are valid reasons to believe the private sector could do the work more efficiently. Federal employees are concerned under the rewritten rules the definition of what is inherently governmental has evolved into a stringent test that is specified under Federal law by adding inappropriate modifiers or conditions, and they are concerned as well that even when A-76 competitions are adequately performed, careful analysis cannot establish that decisions have been beneficial and cost-effective. They are concerned that outsourcing decisions will not be based on merit or cost savings, but on OMB mandates, and because of the unprecedented magnitude of OMB's quotas, the variability of the agency's to fulfill their missions will be put at risk. Numerous questions need to be asked and answered. Do the agencies have the resources to carry out fair and equitable competition? Have Federal agencies lost the capability to effectively perform their missions due to over outsourcing? How will current competitive sourcing quotas affect capabilities, and how are we going to monitor this to make sure that the private sector is doing the job and doing it well? Mr. Chairman, I note you have raised the issue of human capital implications. If there is one issue that has been the hallmark of your Senate career, it is your dedication to professionalism and improving the Federal workforce. It strikes me that it will be just about as formidable as the perils of Sisyphus to make any headway in tackling the human capital challenge by trying to recruit and retain the best and brightest Federal workforce, when in the same breath, these Federal workers are being told, ``Oh, by the way, over the next few years, one out of four jobs could disappear into the private sector. How are you going to maintain morale and interest in aspiring to Federal service with that hanging over the Federal workforce.'' It is no wonder there is real concern about morale among the Federal workforce. How can we possibly expect peak performance when those we entrust with meeting missions on the front line are consumed with concerns about whether their career is at stake on any given day because of an OMB order. This is a real Catch-22. In an effort to meet these quotas, Federal agencies may not have the personnel in place to even handle the competitions. I would like to make the rest of this statement part of the record, Mr. Chairman, and thank you of raising this issue. [The prepared statement of Senator Durbin follows:] PREPARED OPENING STATEMENT OF SENATOR DURBIN Thank you, Mr. Chairman, for convening this morning's hearing to examine the complex and controversial topic of the Competitive Sourcing Initiative being advanced by the Administration. I applaud your willingness to hold this first Senate hearing on this subject since the publication of the rewritten OMB Circular A-76 in May. I also appreciated your interest and participation in a similar hearing I chaired in March 2002 on the issue of ``Who's Doing Work for the Government?: Monitoring, Accountability and Competition in the Federal and Service Contract Workforce.'' I have heard from many of my constituents who are proud Frderal public servants dedicated to their chosen professions but who express their growing apprehension about what this Administration's plans for competing jobs may do to their livelihoods. Federal employees are concerned that agencies are conducting competitions simply to meet quotas, not because these are valid reasons to believe that the private sector could do the work more effectively. Federal employees are concerned that under the rewritten rules, the definition of what is an ``inherently governmental'' function has been morphed with a more stringent test than specified under Federal law by adding inappropriate modifiers or conditions. Federal employees are concerned that even when A-76 competitions are adequately performed, careful analysis cannot establish that decisions have been beneficial and cost-effective. Federal employees are concerned that outsourcing ``decisions'' will not be made based on merit or cost savings, but on OMB's mandates and the lack of agency familiarity with the A-76 process. And because of the unprecedented magnitude of OMB's quotas, the very ability of agencies to fulfill their missions will be put at risk and tens to hundreds of thousands of civil servants will be displaced. Numerous questions need to be asked and answered. Are OMB's quotas justified by considered research and sound analysis, and are they consistent with the mission of the agencies? Are internal agency quotas so jusitified? Do the agencies have the resources to carry out fair and equitable competitions? Have Federal agencies lost the capability to effectively perform their missions due to over-outsourcing? How will current competitive sourcing quotas affect their capabilities? How are we monitoring and evaluating the costs and the quality of services being performed in the private sector under contract with the Federal Government? Do the current rules and practices ensure that in- house talent gets a fair opportunity to compete for their jobs? Mr. Chairman, I note that you have raised the issue of human capital implications of this effort. It strikes me that it will be just about as formidable as the perils of Sisyphus to make any headway in tackling the ``human capital'' challenge by trying to recruit and retain the best and brightest to the Federal workforce when in the very next breath they're being told that, ``oh, by the way, over the next few years one out of every four jobs could potentially disappear into the private sector.'' It's no wonder there's angst and anguish capturing headlines like this one from June 10th's edition of The Washington Post: ``Cuts Sap Morale of Parks Employees'' with the subhead of ``Many Fear Losing Jobs to Outsourcing.'' How can we possibly expect peak performance when those whom we entrust with meeting agency missions on the front line are consumed with concerns about the continuation of their careers? At what point do efforts to study whether to privatize become counterproductive and disruptive to government operations? It also strikes me that we have a Catch-22. In an effort to meet these quotas, Federal agencies may not have the personnel in place to even handle the competitions. As they bump up against what are now even tighter deadlines, they may end up just directly concerting the work to the private sector or using streamlined processes that may not provide essential protections. We really don't have a trove of solid, agency-by-agency information about the costs and performance of work that is being performed for the government under contract. I have long been interested in whether we have a good system (or any system at all) to measure and account for these costs, determine if there are savings, and oversee the work that is being done with Federal funds. It's been my impression that some of my colleagues have been just hidebound to outsource, without regard to either the price tag or the performance. Their motivation is to reduce the size of the Federal workforce--at any cost. When I have suggested amendments--arguing that we had to save money, they rejected them. They told me that's not the point--we have to turn some lights out in some Federal buildings. I'd like to know whether that's still driving the outsourcing fervor. During the last Congress, joined by over two dozen colleagues, I introduced legislation to try to get a better handle on this situation. I am putting the finishing touches on similar legislation to be introduced shortly. Mr. Chairman, I'd like to share a draft with you with the hope that you could join me in making this a bipartisan effort. The TRAC Act would require Federal agencies to track the costs and savings from contracting out. It also calls for a comparative study of wages and benefits, conducted by the Office of Personnel Management and the Department of Labor to get better information. GAO has indicated that since contractors have no oblication to furnish the necessary data, it is difficult to assess this. The bill provides a reasonable opportunity for Federal agencies to make substantial progress in carrying out the tracking requirements before enforcement remedies like suspension of further outsourcing would be invoked. I am concerned that decisions to shift work to the private sector be made fairly, not arbitrarily; that public-private competition is fostered; and that we have a reliable system in place to track costs and performance of work being performed with Federal funds by the private sector under these contracts. In sessence, real accountability and true transparency. I also hope that we can get an answer to another important question about whether OMB is paying any attention to a Congressional directive prohibiting the use of arbitrary numerical quotas in its push to privatize work performed by Federal employees. I'm referring to Section 647 of Division J of the FY03 Omnibus Appropriations (P.L. 108-7) signed into law on February 20 of this year. Specifically, bill language stated that L``[N]one of the funds made available in this Act may be used by an agency of the executive branch to establish, apply, or enforce any numerical goal, target, or quota for subjecting the employees of the executive agency to public-private competitions or for concerting such employees or the work performed by such employees to private contractor performance under the Office of Management and Budget Circular A-76 or any other administrative regulation, directive, or policy unless the goal, target, or quota is based on considered research and sound analysis of past activities and is consistent with the stated mission of the executive agency.'' (emphasis added) and conference report language provided that: L``If any goals, targets, or quotas are established following `considered research and sound analysis' under the terms of this provision, the conferees direct the Office of Management and Budget to provide a report to the Committees on Appropriations no later than 30 days following the announcement of those goals, targets, or quotas, specifically detailing the research and sound analysis that was used in reaching the decision.'' I would like to note for the record that this morning, our full Committee's Ranking Member, Senator Joe Lieberman, is sending a letter to OMB Director Joshua Bolten seeking answers to vital questions about the Administration's compliance with this particular provision and the reporting responsibilities. I ask unanimous consent that a copy of Senator Lieberman's letter be made a part of the record of this proceeding, and that the record be left open to permit inclusion of the Administration's response. Mr. Chairman, I think today's hearing will be an opportunity to probe these and other issues. I thank you again for scheduling it and welcome our distinguished witnesses. Senator Durbin. I believe that we need to get to the bottom of this. If the goal here is to outsource, to save the taxpayers money, and to provide better services, then this conversation is an important one. If the goal is simply the elimination of the Federal workforce and reduction of that workforce, then, frankly, I think it is wrong-headed. It is going to destroy the morale of many of those who were involved in the workforce today. I would like to note for the record this morning our full Committee Ranking Member, Senator Lieberman, is sending a letter to OMB Director Josh Bolten seeking answers to vital questions about the administration's compliance with the appropriation provision and reporting responsibilities, and I ask unanimous consent that a copy of Senator Lieberman's letter be made part of the record, and the record be left open for an inclusion of the administration's response. Senator Voinovich. Without objection. [The letter of Senator Lieberman follows:] [GRAPHIC] [TIFF OMITTED] T8936.001 [GRAPHIC] [TIFF OMITTED] T8936.002 [GRAPHIC] [TIFF OMITTED] T8936.003 [GRAPHIC] [TIFF OMITTED] T8936.004 [GRAPHIC] [TIFF OMITTED] T8936.005 [GRAPHIC] [TIFF OMITTED] T8936.006 [GRAPHIC] [TIFF OMITTED] T8936.007 Senator Durbin. Thank you very much, Mr. Chairman. OPENING STATEMENT OF CHAIRMAN VOINOVICH Senator Voinovich. Thank you. I think everyone realizes that in August 2001, President Bush introduced his management agenda, with the goal of creating a citizen-centered, results-oriented and market-based Federal Government. The five governmentwide initiatives of the President's management agenda are (1) strategic management of human capital, (2) competitive sourcing, (3) improved financial performance, (4) expanded electronic government, and (5) budget and management performance integration. The administration also created an Executive Branch management scorecard to weave a results-based management approach into the fabric of Federal programs. As a former chief executive of the City of Cleveland, and the State of Ohio, I applaud President Bush for having the foresight to design a strategic, comprehensive and integrated plan to reform Federal Government operations. It was long overdue. The administration did not simply issue a press release describing high-minded management goals. Rather, they have sought to implement the management agenda vigorously, and it is having a positive effect. For example, the Economic Development Agency of the Department of Commerce requested a $15-million increase over the President's FY 2003 request. OMB recognized EDA as an ``effective'' agency, focused on results in internal management improvement, therefore increased its budget. This type of analysis should be undertaken for every agency. It shows somebody is paying attention to whether we are getting something done. Despite significant turnover in the senior ranks, OMB has been able to maintain its focus on improving management. I recently met with Clay Johnson, the new Deputy Director for Management of OMB. I was impressed by his vision and encouraged by his stated willingness to partner with Federal employee groups, and that he has been meeting on a regular basis with them, which is important to the success of any program in this area. One of the five pillars of the President's management agenda, competitive sourcing, has come under a hail of criticism from Federal employees, their unions, and Members of Congress of both parties. As far as I know, it is the only element of the Management Agenda to generate such opposition. Resistance is based, in part, on the administration's goal of competing with the private sector the activities of almost one- quarter of the Federal Government's nonpostal civilian workforce. To many, these goals seem arbitrary and lack a firm analytical basis. The potential job loss feared as a result of this initiative is doubtless another major cause for concern, particularly among our unions. On March 6, 2002, I participated in a Governmental Affairs Committee hearing, chaired by Senator Durbin, that examined competitive sourcing. During that hearing, I voiced my concerns with several aspects of the initiative, many of which I still have. My chief concern is that the administration's original, across-the-board goals failed to take into account the unique mission and circumstances at each agency. In other words, competitive sourcing goals were not being driven by an agency's strategic human capital plan. Without proper strategic planning, competitive sourcing could be as damaging to the Federal workforce as the Clinton Administration's indiscriminate downsizing initiative. OMB is now working to establish competitive sourcing goals on an agency-by-agency basis. This is a great improvement, and I would like to hear more about this shift today. Second, I am concerned that senior managers may decline to make the necessary investment in their Federal employees, and indeed decide to conduct a competition with the private sector. OMB must make sure that even when Federal activities are being competed, Federal employees are given the professional development and empowerment to do the best job they possibly can. In other words, we must do everything we can to make sure our Federal workforce is competitive; evaluate our agencies and recognize here are some wonderful people. With upgrading their skills, they can get the job done. Third, I am concerned that competitive sourcing may dissuade good people from seeking Federal employment. I have devoted much time and energy to improving the Federal service and have worked with leading public policy experts to examine how we can do a better job of attracting new talent to government. Competitive sourcing could be at variance with this goal. Although roughly 75 percent of the Federal workforce would not be subject to competition, the knowledge that many Federal jobs could shift to the private sector might stifle recruiting efforts at a time when the Federal Government needs the right people to address our many significant challenges and replace the large number of baby boomers who are going to retire this decade. A student at Harvard's Kennedy School of Government, when I was there, mentioned this exact concern, and I am interested to learn if OMB has thought of a way to address this possible unintended consequence. We do not want young people thinking about a career in government and then seeing everything compete. They will ask why should I go there and instead consider employment and go someplace else. Fourth, I am worried about the ability of each Federal agency to conduct public-private competitions and the resources associated with these efforts. I think Senator Durbin referenced that. Until this initiative began, most agencies had little experience conducting public-private competitions. Additionally, it is my impression that many acquisition offices are overworked and understaffed. Holding agencies accountable to competition goals before they have the capacity to conduct such competition is unfair. The government needs a robust acquisition workforce now more than ever. Without strong contract oversight, the government will be hard-pressed to realize the savings generated by competition and ensure that contractors are meeting their goals. In addition, the need to conduct competitions must not cause unplanned cutbacks in other areas of agencies' operations. It was reported recently in the Washington Post that the National Park Service postponed maintenance in order to pay for an 18-month privatization study by consultants. This type of trade-off is unacceptable. OMB must provide adequate resources for agencies to conduct competitions without putting their operations or service at risk. Fifth, I have a specific concern regarding the recently revised A-76 guidelines. While I support the effort to streamline and improve the public-private competition process, I am troubled by the requirement that the government's most efficient organization is subjected to a recompetition every 5 years. This may have yet another unintended consequence: Federal employees may believe that there is always another job competition just around the corner, which could weaken morale. I ask OMB to reconsider this provision. Finally, the tremendous anxiety this initiative has caused Federal employees lies partly, I believe, in the failure of OMB to fully explain the purpose of competitive sourcing. I take Ms. Styles at her word, that the initiative is not part of an ideological crusade against Federal employees. If I believed it was, I would be completely opposed to it. Rather, the purpose is to increase the efficiency of certain Federal operations through competition. This idea has merit. But the management shortcomings I have noted must be addressed, and the reasons and implementation for this initiative must be communicated more effectively to Federal employees, their unions, and Members of Congress. All of this could be done without an act of Congress. To the administration's credit, they have made improvements to the competitive sourcing initiative since the hearing in March 2001. We appreciate the fact that someone was listening. I am encouraged that OMB is now working with agencies on a case-by-case basis to make sure that the infrastructure to properly conduct public-private competitions. It is my understanding that Ms. Styles is going to announce additional modifications to the initiative today, which I will let her describe. These additional changes could go a long way towards reassuring skeptics that this initiative is being carried out in a careful, methodical manner and not with an arbitrary, one- size-fits-all approach. Federal employees deserve to know the administration's plan for competitive sourcing. I intend to ensure that this initiative is soundly managed, and I will continue to conduct oversight towards that end. I would now like to yield to the Senator from New Jersey for his remarks, and thank you for being here this morning, Frank. OPENING STATEMENT OF SENATOR LAUTENBERG Senator Lautenberg. Thanks very much, Mr. Chairman. I think my absence of a couple years sabbatical I took may make people forget who I was and the fact that I am the junior member of the Committee puts me in a position that I do not really like. I had the fear that somehow or another I was going to be outsourced, that I was at the tail end of the senior list. [Laughter.] But, Mr. Chairman, you know we have a relationship that is treasured, I think, by both of us, respect, because I know how sincere you are about your responsibilities to your job and know that you, in your former career, exhibited the same kind of concerns for people. While you ran things with as tight a hand as you could do it, the taxpayers were treated fairly as well. I thank you for holding this hearing. The administration's desire to privatize these vast swathes of the Federal workforce is fraught with controversy and needs a great deal of scrutiny by Congress. Now, I would like to say at the outset that I think there are jobs that could well be done outside of the government workforce, but I would tell you, having had 30 years in the corporate world, having built a company that I and two others started with nothing and now employs 40,000 people in an outsourcing business, and now having been in government 19 years--18\1/2\, who is counting--and the fact is that I am able, I think, to make comparisons between the folks who are working for government and those who work in the private sector. I will take a minute more on my own background because it sets the condition for me to examine these things. (A) the company was not a unionized company. We were very careful about how we treated our employees. Everybody was made a partner through the stock options or stock purchase plans, and they worked hard, enormous hours, and rarely could a holiday be taken by all of the employees because our work had to be turned out on a daily cycle. Then, I come to government, and I see the same kind of loyalty, same kind of energy, but not the same kind of paychecks and not the same opportunity for advancement that I saw with people in the corporate world. (B) is that when our greatest growth took place, it took place when there was relatively full employment, and people were hard to find, and we siphoned off a part of the office operation and did it for our clients--over 400,000 of them. The company is a great American story about three poor boys who started the company, today, 45,000 employees. When the president of the company--and forgive this immodesty--when the president of the company talks to the employees, it is immediately translated into 10 languages. So the breadth is there, and it was all done with an understanding that the most important ingredient we had were not the programs, not the name, because the name itself did not carry it, but it was the output. And I see in my office, and I know I speak for lots of other people here, the kind of staffing, the kind of dedication, the kind of zeal for the job that you just do not see in the private sector, and I do not know where we are going with this. So, ultimately, when I look at this and think about today's hearing, about people, individuals, who work for our government and who pay their taxes. Civil servants are the backbone of our government, and we have to remember that the skills, the talent, and the professionalism of the men and women in the Federal workplace are the best in the world. If there are malingerers, there are malingerers in every part of the economic world, and I saw it in my own company, and I have seen it here, but that is human nature. It does not mean that people who work for government are people who are trying to escape responsibilities. It means that they are--most of them, 98 percent, perhaps--are hardworking, committed people, and they are here in the morning, and they are here at night. The overwhelming majority of our civil servants are truly dedicated to their jobs, and many of them could make more money in the private sector, and I do not want my staff to hear this, but they work in government because they see public service as a higher calling, and the ability to make more money outside was just a passing thing. It is crucial that we all hold civil servants accountable for the jobs they do. There are jobs and activities that should be moved from the public sector to the private sector. As a former businessman, I salute that review. But I must say that I am concerned about the administration's announced intention to compete 127,500 Federal jobs within the next year. I am particularly concerned about setting an arbitrary quota and impossible deadline for privatization, and then deliberately withholding from agencies the financial resources they need to conduct the public/private competitions. I get the impression that the administration has determined in advance the way these competitions always should go, and that is to the private sector. And we heard Grover Nordquist, who is a senior adviser to the administration, paid or otherwise, I am not sure, but the fact is that he does render advice that government should be squeezed down, and we should try to eliminate 850,000 jobs. And with all due respect, many of us here in the Congress disagree when we look at how stretched we are militarily right now, wish we had more people, asking the people who are serving to go way beyond the call of duty, those who are reservists to be called on maybe for a weekend every other week and for a couple of weeks of summertime, away from home a year-plus, away from family, away from jobs. We ask so much, and the military, in my view, compares very favorably, let us say, to the FAA, which I see as a fifth branch of the military. And with all due respect, many of us here see anomalies. For instance, it struck me as ludicrous that we would federalize baggage screening at airports, then turn air traffic control over to the lowest bidder. Talk about security on the cheap, that is really backwards. So I offered an amendment to the FAA reauthorization bill to prevent that. Eleven Republicans voted with me--and that is not an easy job for a Republican, George. Eleven Republicans voted with me on an amendment which the Senate adopted 56 to 41 to keep FAA in the Federal employment structure. Last week, the Washington Post ran an article about the administration's attempt to privatize the job of the archaeologists who protected cultural heritage contained, found in our national parks. John Ehrenhard, director of the Southeast Archeological Center, put it this way: ``We do what is in the best interests of the public, which is not always in the best interests of some developer. It may not make the most sense economically, but we are the government, and we can't be bought.'' And I think those are wise words, and we should contract out where it makes sense, but not because there is an ideology that says they would like to cripple the government. Many people correctly point out that taxpayers are owners of the Federal Government and deserve the most effective and efficient government possible. And I agree, but I would also point out that Federal employees do pay taxes also. They have invested even more than their taxes. They have invested their working lives. They deserve to be treated fairly and with respect, and doing so will maximize all taxpayer values. And I find it such a challenge, when I look at a report that is GovernmentExec.com, issued on July 11. The writer writes, ``Nearly a million and a half in performance bonuses went to political appointees in 2002, according to the Office of Personnel Management, and one House Democratic leader is raising a question about the Bush Administration's use of bonuses at a time when the administration is seeking to hold down pay raises for rank-and-file Federal employees. The cash awards were sent to 470 political appointees.'' There is something that just does not ring true here. We have got over 6 percent of our people unemployed, we lost nearly 2.5 million jobs in the last couple of years, and now we want to farm out these people who have been good, loyal people, to say there is going to be competition for your job, and you may be put out of work. And we will have someone performing services, and what do we do if there is a strike, a labor difficulty with a company out there that is providing some of the replacements? I think there are serious questions and, Mr. Chairman, I thank you for the opportunity to make the statement, and I look forward to hearing from our witnesses. Senator Voinovich. Thank you, Senator Lautenberg. Senator Akaka. OPENING STATEMENT OF SENATOR AKAKA Senator Akaka. Thank you very much, Mr. Chairman. Good morning to you and good morning to our panel. I want to thank you, Chairman Voinovich, for having this hearing today. It is certainly a step in the direction of dealing with some of the issues that will be facing us quickly concerning our workforce and for continuing the Committee's interests in issues affecting the Federal workforce and the management of agencies. Ms. Styles, I want you to know that I really appreciate your time and your effort you have spent on these issues over the past several years, and I would also like to thank Mr. Walker for his tremendous dedication, and I say that because I have been working with him, also, and I want to thank our witnesses for your testimony this morning. Mr. Chairman, no one disputes the importance of a government that is both cost-effective and accountable. Agencies require the appropriate tools and skilled personnel to meet their missions. It is in that light that we should examine what work is best performed by government employees and which could be performed by the private sector. And when I say that, I want to, again, think about what Senator Lautenberg mentioned, as a person who has been on both sides, and deeply on both sides, and can certainly share his experiences. As agencies make their contracting decisions, we should ask what impact outsourcing will have on the Federal workforce. With a number of the current Federal workforce eligible for retirement, we should take steps now to fill the void that they will leave, and that is something that we need to work on immediately and take care of. We cannot expect our young people to work for the government if they believe their work will be subject to outsourcing, nor should we accept policies that will instill fear and distrust among current employees. While the contracting debate is not new, the administration's contracting and other management proposals have attracted congressional attention. There is growing bipartisan concern that too much government work has been contracted out already. We should encourage, and I want to stress that, we should encourage, not discourage, employment with the Federal Government. We should tear down barriers that stand in the way of promoting the Federal Government as an employer of choice. We should ensure that Federal managers, employees, their unions and associations, Congress, Office of Personnel Management, and Office of Management and Budget work together to determine what is inherently governmental. Contracting policies should be fair to Federal workers, should be transparent, and in the best interests of the public. We have a strong and effective Federal workforce and should put to rest, once and for all, the faults, stereotype of the inefficient government bureaucrat. Let me touch, briefly, on the newly revised A-76 process for public-private competitions. Mr. Walker and Ms. Styles are familiar with my concerns over what I see as a lack of fairness and transparency in the revised rules for A-76 competitions. Under the revised A-76 process, government work could be contracted out, even if the work could be performed more efficiently by Federal employees. Moreover, the revision sets unrealistic deadlines for conducting public-private competitions that could push government work out the door to the private sector as fast as possible and may not give Federal workers a fair chance to compete. Unlike the private sector, Federal workers are required to compete for their jobs every 5 years and are prevented from competing for contracted-out work. True competition should be cost-effective and must promote trust. Federal workers should be provided with sufficient funds and personnel to compete. Revising the government's contracting process without improving contract management will likely result in hollow victories. Mr. Chairman, I thank you again for holding today's hearing. I thank our witnesses again for their time today, and I look forward to their thoughts and suggestions on the new A- 76 process and other contracting issues. Mr. Chairman, I would ask that a copy of my full statement be included in the record. Senator Voinovich. Without objection. Thank you, Senator Akaka. [The prepared opening statement of Senator Akaka follows:] PREPARED OPENING STATEMENT OF SENATOR AKAKA Good morning. I want to thank Chairman Voinovich for holding today's hearing which continues this Subcommittee's interest in issues affecting the Federal workforce and the management of agencies. Ms. Styles, I sincerely appreciate the time and effort you have spent on these issues over the past several years. I would also like to thank Mr. Walker for his tremendous dedication, and I thank our witnesses for their testimony this morning. No one disputes the importance of a government that is both cost- effective and accountable. Agencies require the appropriate tools and skilled personnel to meet their missions. It is in that light that we should examine what work is best performed by government employees and which could be performed by the private sector. As agencies make their contacting decisions, we should ask what impact outsourcing will have on the Federal workforce. With a large number of the current Federal workforce eligible for retirement, we should take steps now to fill the void that they will leave. We cannot expect young people to work for the government if they believe their work will be subject to outsourcing. Nor should we accept policies that will instill fear and distrust in current employees. While the contracting debate is not new, the administration's contracting and other management proposals have attracted congressional attention. There is growing bipartisan concern that too much government work has been contracted out already. For example:LThe Fiscal Year 2003 Omnibus appropriations bill prohibits the use of funds to impose outsourcing goals, targets, or quotas at Federal agencies without thorough analysis. LThe Senate-passed Department of Defense Appropriations bill includes a bipartisan amendment requiring the Department to achieve a 10 percent cost savings before work is contracted out. LThe House--by a vote of 362 to 57--passed legislation to restrict contracting out in the National Parks Service. We should encourage--not discourage--employment with the Federal Government. We should tear down barriers that stand in the way of promoting the Federal Government as an employer of choice. We should ensure that Federal managers, employees, their unions and associations, Congress, the Office of Personnel Management, and the Office of Management and Budget work together to determine what is inherently governmental. By involving all parties within the Federal Government we are better able to forge contracting policies that are fair to Federal workers, transparent, and in the best interest of the public. We can do all of this and still ensure efficient and cost effective government contracting. We already have a strong and effective Federal workforce. We ought to put to rest, once and for all, the false stereotype of the inefficient government bureaucrat. As the Comptroller General has said repeatedly, poor contract management costs the government billions of dollars. These deficiencies can be improved by ensuring that the government has the employees, skills, and technologies to determine costs for both government and contracted out activities over the long-term. Let me touch briefly on the newly revised A-76 process for public- private competitions. Mr. Walker and Ms. Styles are familiar with my concerns over what I see as a lack of fairness and transparency in the revised rules for A-76 competitions. Under the revised A-76 process, government work could be contracted out even if the work could be performed more efficiently by Federal employees. Moreover, the revision sets unrealistic deadlines for conducting public-private competitions that could push government work out the door to the private sector as fast as possible and may not give Federal workers a fair chance to compete. Unlike the private sector, Federal workers are required to compete for their jobs every 5 years and are prevented from competing for contracted out work. True competition should be cost-effective and promote trust. Federal workers should be provided with sufficient funds and personnel to compete. Revising the government's contracting process without improving contract management will likely result in hollow victories. Mr. Chairman, thank you again for holding today's hearing. I thank our witnesses for their time today, and I look forward to hearing their thoughts and suggestions on the new A-76 process and other contracting issues. Senator Voinovich. I would like to introduce the witnesses testifying today. Sitting on the first panel is the Hon. Angela Styles, the Administrator of the Office of Federal Procurement Policy of the Office of Management and Budget, and the Hon. David Walker, Comptroller General of the United States and head of the General Accounting Office. Our second panel consists of Dr. Jacques Gansler, a former Under Secretary of Defense during the Clinton Administration, now with the School of Public Policy at the University of Maryland; Dr. Paul Light is a senior fellow at The Brookings Institute and has testified before my Subcommittee many times before; Charles Tiefer, a professor of law at the University of Baltimore; and Dr. Frank Camm, a senior analyst at RAND. If you will, I would like all of the witnesses to stand and be sworn in. [Witnesses sworn en masse.] Senator Voinovich. Let the record show that the answers are an affirmative of at least four of our witnesses. I would like to note that many other groups, including the American Federation of Government Employees, the Professional Services Council, and the Federally Employed Women requested the opportunity to testify before the Subcommittee today. Although the Subcommittee could not accommodate everyone's request, we feel that this hearing will produce a balance and substantive discussion. And without objection, I will leave the hearing record open for 1 week to allow any, and all, interested groups to submit their views for the official hearing record. Without objection, that will be the case. We are very fortunate to have Ms. Styles here, and I second Senator Akaka's compliment of the time and effort that you have put into this effort. Comptroller General Walker, I want to say thank you for everything that you have done for this Committee and this Subcommittee. Without your input over the last couple of years, the significant changes that we made in the Federal workforce would not have occurred, and so I welcome both of you here today, and I appreciate your patience. Ms. Styles, you have heard some comments from us today, and I am anxious to hear your testimony. TESTIMONY OF ANGELA STYLES,\1\ ADMINISTRATOR, OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET Ms. Styles. Thank you very much. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Styles with an attachment appears in the Appendix on page 57. --------------------------------------------------------------------------- I appreciate the opportunity to be here today to update you on the administration's competitive sourcing initiative. We are making significant progress towards public-private competition---- This initiative asks people to make very hard management choices, choices that affect real jobs that are held by dedicated and loyal career civil servants. But the fact that public-private competition and our initiative require hard choices and a lot of hard work, makes it one that can, and is, affecting fundamental real and lasting changes to the way we manage the Federal Government. The clincher here for us is the taxpayer. Competitive sourcing strives to focus the Federal Government on its mission, delivering high-quality services to our citizens at the lowest possible cost. I would like to spend a few minutes addressing four issues that I know are of particular concern to you: The use of numerical targets, communication with employees and the unions, the recompetition requirements of the new circular, and the effect of competitive sourcing on our ability to recruit Federal employees. First, the use of numerical targets. Attached to my testimony, you will find a report released by OMB today that contains an extensive discussion about the history of competitive sourcing and the use of numerical targets. Most significantly, you will note that we have changed our management scorecard to eliminate the use of governmentwide numerical targets for the measurement of success. Second, you have expressed concerns about communications with the employees and employee unions. I can tell you that the most challenging part of my job is effective communication. I spend the vast majority of my day, explaining to people that competitive sourcing is about a commitment to management excellence. It is a commitment to ensuring that our citizens are receiving the highest-quality service from their government, without regard to whether that job is being done by dedicated Federal employees or the private sector. In spite of our extensive efforts, there is a tremendous amount of disinformation and confusion. Two examples have been mentioned here this morning: One, is maintenance at the Park Service. There were several press reports out dealing with Mount Rainier in Washington State and maintenance of the Park Service and funds being taken away from maintenance activities to actually run competitions at Mount Rainier. There are no public-private competitions planned in the near future, there are no public-private competitions planned at the current time at Mount Rainier, so those reports were erroneous. There was also a recent press report dealing with archaeologists. I have spent a lot of time researching the archaeologists that were mentioned in the Washington Post last week. The more research I have done, the more I have found out that these are not actually just archaeologists. These are technicians, these are people running computer databases. They are actually based in a Federal building in downtown Lincoln, Nebraska. They are not actually in a national park. They are not actually out in the field doing archeological work. They are running computer databases. They are publishing and writing newsletters. So I think it is a little bit different than has been articulated. We are constantly, as you look at those examples, fighting a flurry of erroneous propaganda about competitive sourcing. Unlike our past reforms that are focused on outsourcing, unlike other past reforms that have focused on outsourcing, privatization or downsizing through arbitrary FTE cuts, competitive sourcing is a review process that asks two very important questions: Should we reorganize for greater efficiency, and might a different provider, a local government, a nonprofit organization that employs disabled members of our society or a private business be better able to provide this service at a lower cost? Third, you have expressed concerns about the recompetition procedures in the circular. Specifically, our new circular does not assume that one competition or review of a function will ensure that the function is efficiently organized for the next 50 years. The concept here is that relevant procurement statutes and regulations require the private sector to recompete for government work every 3 to 5 years. Competition and recompetition reduces costs and ensures that we are receiving the maximum benefit of private sector innovation. The policy in the circular applies this concept to commercial work performed by government employees, with a significantly less-stringent time frame: Every 5 to 8 years. There are also clear procedures for requesting a deviation from this generous time frame, and I can tell you that we will grant any deviation that is requested and supported. The practical reality of the situation, from my perspective, is there has not been one, not a single recompetition of a government function employed by Federal employees in the 55-year history of this circular. The reality is that we have well over 400,000 commercial positions, positions that the agencies have designated as open to competition, but have never been tested, reviewed or even competed one time. For a Federal employee that fears recompetition of a function that they have recently won and competed for, I think they are fearing a very distant and tenuous possibility. As a matter of practical reality, it will be quite a while before we even start thinking about recompeting functions won by government employees in the first round of competition. Finally, you have expressed concerns about the effect of competitive sourcing on our ability to recruit Federal employees. Clearly, competitive sourcing poses challenges for government personnel who perform commercial activities. These providers must critically examine their current processes and figure out how they can improve the delivery of services. Answers may not come easily, but they are ones which our taxpayers are owed and ones which efficient private-sector service providers ask themselves routinely. Despite the difficulty of this task, we have every reason to believe our workforce is up to the challenge. Historically, the government wins over 50 percent of these public-private competitions. The high success rate should give employees confidence that they can, and do, compete effectively in head- to-head competition with the private sector. The revised circular recognizes the talents of the Federal workforce, the conditions under which the workforce operates, and the importance of providing the workforce with adequate training and technical support during the competition process to ensure that they can effectively compete. In particular, the revised circular seeks to ensure that the agency provider has the resources available to develop a competitive agency offer. As an example--and this is one of my best recent examples-- the Department of Energy competed the graphics function at their headquarters. Before the competition, this was a 13- person operation for graphics at DOE headquarters. Through the competitive process, the incumbent government provider, and the in-house organization, determined they could do the same job with six people. By sharpening their pencils and reorganizing the function, the Federal employees won against the private sector. Importantly, through managed attrition, there were no involuntary separations. Though small in number, this competition exemplifies the benefits of competitive sourcing. From this very small competition, DOE was estimating $635,000 in annual savings. The employees won, but through competition, we were able to save $635,000 a year for a 13-person operation. Even when the commercial sector is chosen to perform the activity, there are usually a very small number of involuntary separations--8 percent, according to one study that is listed in the report that I have attached to my prepared statement today, and 3.4 percent, according to another report. The percentage, I believe, should remain very small. In conclusion, while there is a certain comfort level in maintaining the status quo, our taxpayers cannot afford, nor should they be asked, to support a system that operates at an unnecessarily high cost because many of our commercial activities are performed by agencies without the benefit of competition. For this reason, the administration has called upon the agencies to transform their business practices, and we have provided the tools for them to meet this objective in a responsible, fair and reasoned manner. This concludes my statement. Senator Voinovich. Thank you very much. Comptroller General Walker. TESTIMONY OF HON. DAVID WALKER,\1\ COMPTROLLER GENERAL, U.S. ACCOUNTING OFFICE Mr. Walker. Thank you, Mr. Chairman, Senator Akaka, Senator Lautenberg, and other Members of the Subcommittee. It is a pleasure to be back before you, this time on the important issue of competitive sourcing. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Walker appears in the Appendix on page 81. --------------------------------------------------------------------------- If I might, Mr. Chairman, I assume my entire statement will be included for the record. Senator Voinovich. Without objection. Mr. Walker. Thank you, and therefore I will summarize some highlights. Let me say at the outset, that this is a highly complex and controversial topic. It has been for years, and it is likely to remain so for a number of years. But let me also say that I have had the pleasure to work with Angela Styles on this complex and controversial topic over the last couple of years, and that in my mind there is no question that she is a dedicated, capable and caring public servant trying to balance the various issues here. She is only one member of the administration, and obviously there are not necessarily always uniform views, but I wanted to say that as part of the record. I think the critical points are as follows: First, our Nation faces a number of major trends and challenges that have no boundaries. Second, our Nation faces large and growing budget deficits and fiscal imbalances for a variety of reasons. Tough choices will be required in defining what the government's proper role is in the 21st Century, how the government should do business in the 21st Century and, in some cases, who should do the government's business in the 21st Century. Competitive sourcing is a tool. It is a means to an end. It is not an end in and of itself. It is not a panacea. It is something that clearly has implications from the standpoint of cost and quality. It also is important, not just what you do, but how you do it and when you do it, in order to address the very human elements and the issues that all of you Senators have talked about--the interaction between our desire to maximize economy, efficiency and effectiveness, at the same point in time being able to attract and retain a high-quality and high-performing workforce. I think we need to keep in mind that sourcing has to be a strategic decision. It could be outsourcing, it could be in- sourcing or, in many cases, it could be co-sourcing which, quite frankly, is frequently the case: Furthermore, even if the decision is to outsource, it is critically important that the government have enough qualified and capable public servants to manage cost, quality and performance of those activities that have been contracted out, and if we do not, everybody is going to be in trouble. And, in fact, we have several agencies--NASA, DOE, DOD, just to name three--that are on our high-risk list because of failure to do just that. As you know, the Congress has been concerned with this issue for a number of years, and therefore asked me to chair a Commercial Activities Panel, comprised of top-level individuals with a variety of perspectives. The Panel met for over a year, conducted a number of hearings, both in Washington and outside of Washington, came up with a report where there was unanimous agreement on 10 sourcing principles, and there was a supermajority agreement on a variety of other recommendations. Based upon the review of my staff and myself, it appears as if the revised Circular is generally consistent with the 10 principles that were unanimously agreed to by the Commercial Activities Panel. However, there are certain areas of concern, and there are certain omissions, some of which go beyond the principles, to the other recommendations that a supermajority of the Panel recommended. Those concerns are noted in my statement. I will mention a few at this time: The new Circular provides for expedited time frames for conducting these competitions. In order for that to occur, Federal employees are going to have to have financial and technical assistance to be able to compete effectively and for the system to be fair, not only in reality, but in perception. There are also several concerns with regard to the streamlined competitions which, as you know, are for under 65 full-time equivalents, or FTEs. First, there is not an express provision to deal with potential unbundling by agencies of functions, activities or operations to get under the 65 number, and therefore be able to circumvent some of the other requirements; second, there is no 10-percent cost differential; third, there is no internal or external appeal right, which could leave an accountability gap. And depending upon how much activity ends up occurring under 65, it could end up being a matter of concern. And last, but certainly not least, is the Panel's recommendation on high-performing organizations, one key element that a supermajority of the Panel recommended and, that members of organized labor supported, even though we voted on the supplemental recommendations as a package. Technically they did not vote for it because they did not vote in favor of the supplemental recommendations but they expressed support for this element. It was based on the idea that we need to recognize, and as I think Ms. Styles' statement notes, and the report that she issues today notes, a vast majority of government will never be subject to competitive sourcing. Therefore it is incumbent upon all of us to figure out not only how can we make sure that these MEOs, most efficient organizations, can compete fairly and effectively, but also what can we do to try to make sure that for the vast majority of government that will never be subject to competitive sourcing, that we can improve its economy, efficiency, effectiveness, and responsiveness. And it is in that regard that a supermajority of the Panel recommended taking steps to create high-performing organizations throughout government. There is also interest in government in moving more towards pay-for-performance. However, the Federal Government, at the present point in time, and a vast majority of Executive Branch agencies, do not have modern, effective, credible and validated performance appraisal and management systems in order to make intelligent decisions on how to implement a pay-for-performance system. Therefore, Mr. Chairman, and Members of the Subcommittee, as noted at the end of my statement, OMB has recently recommended creation of a governmentwide fund for purposes of pay for performance. I would respectfully suggest we are not ready yet to implement such a governmentwide fund, and that while it is highly desirable that we end up moving forward towards pay for performance on a broader basis, we need to have the infrastructure in place in order to do it effectively and fairly and in a nondiscriminatory manner. Therefore, I would respectfully suggest that the Congress consider taking this governmentwide fund concept and making those funds available for several things: One, to provide financial and technical assistance such that most efficient organizations can compete effectively and fairly within these expedited time frames; two, that we can end up promoting high-performing organizations throughout the rest of government that will never be subject to competitive sourcing; and, three, as a subelement of both, that we provide support on a business case-basis for all of these, to be able to help agencies develop the type of systems and infrastructure that has to be in place in order to move towards more pay-for- performance-oriented structures. I think there would be many, many winners by taking that type of approach, and I think the time has come that we need to seriously consider doing that. Thank you, Mr. Chairman. I would be more than happy to answer any questions that you or the other Subcommittee Members may have. Senator Voinovich. Thank you, Mr. Walker. We are going to have 5 minutes of questioning by each of the Senators. I will try to stick to that and ask my colleagues to do the same. We will have a few rounds of questions. Ms. Styles, I am pleased to hear that the administration has decided to drop the government goals related to competitive sourcing. It is a significant change, and I commend you for going forward with it. How did you come to this decision? Ms. Styles. I think it has come over a long period of time over the past 2\1/2\ years, with experience that we have had with public-private competition, with input from the Hill. We do not want a number to be distracting from what we are really trying to do, which is provide a better service for the taxpayer at a lower cost. I think we want people to realize that we are listening to their concerns, and if the arbitrary numbers are making this controversial, then we don't want a number to make this controversial. We want this initiative to work, and I think we are willing to recognize people's concerns, to work with them to make this initiative work and to be effective. We really are committed to making this an accepted management practice at the departments and agencies. And if numbers and goals that are governmentwide are distracting us from that, then we will move away from those, and that is what we did today. Senator Voinovich. So agencies are not going to be graded on their scorecards, in terms of percentages, then? Ms. Styles. Absolutely not. There will be individual plans for each department and agency that is appropriate for that department and agency. I think a lot of those have already been negotiated and are in place. For a long time, we have had departments and agencies that are moving to yellow, well below a 15-percent number, and I think we finally decided that we had so many exceptions to that rule that it made sense to get rid of the numbers. Senator Voinovich. Thank you. From my experience, when given the opportunity in competition, I have been amazed at what the internal group can do. I have seen that over the years. I will never forget, when I was mayor of the City of Cleveland, that we considered outsourcing the garbage collection. There was a lot of ``feather bedding,'' and I will never forget, after a long negotiation, the head of the union said to me, ``Why didn't somebody suggest that we do this a long time ago?'' We eliminated one individual from the collection and reduced 50 percent the people that were working at the transfer stations. We saved a lot of money. I also had these experiences when I was governor of Ohio. So going forward with this does have some real ways of providing efficiencies to organizations. Mr. Walker, you observed the changes OMB has made, in the A-76 circular. Do you want to comment on them? Mr. Walker. Yes. They have made a number of changes in response to comments by us and others, and I think they have generally been responsive. I will say that I think it is totally appropriate that the administration has eliminated the 50-percent and the 15-percent across-the-board numbers. The Panel noted that there should not be any quotas of any type; and there should not be arbitrary goals. At the same point in time, I think that what the administration is now trying to move to, as I understand it, is considered goals, which are based upon individual facts and circumstances which can potentially end up resulting in a quantifiable target on an agency-by-agency basis in order to hold management accountable for results. So I think quotas are bad, arbitrary goals are bad, but considered goals, if they are established the right way, can be necessary and, in fact, appropriate. Ms. Styles. We provided several examples of the specific agency plans for competition to move from red to yellow on our management scorecard. It is in the report that is attached. So people can get a very good idea of the numbers we are talking about, as well as the types of functions that agencies have decided to compete, the types of functions that they decided are not appropriate for competition right now. So we are trying to give people examples of how this is working with the departments and agencies. We will have a report out by the end of September that goes through this for every department and agency and is very forthcoming in what our plans are and where we intend to go with this. Senator Voinovich. I think, as you move along, it would be beneficial to share that with this Committee. Ms. Styles. We absolutely will. Senator Voinovich. One of the things that was brought up in Comptroller General Walker's testimony is the issue of improving and giving Federal employees the tools that they need and the empowerment to do better work. I would be interested in some written information about what it is that the administration is going to be doing in order to make that happen, I am particularly interested in the area of training, and upgrading the skills of individuals. I think that in too many agencies, that does not occur, and as a result of that, they cannot take on new challenges. Unfortunately the belief is training money is available, which hurts us in terms of our recruitment. So I would like to know what you are doing to try and help the current workforce, to empower them and give them the tools and the training they need to grow in the jobs that they have. Ms. Styles. Absolutely. Senator Voinovich. We are going to use the early bird rule, for asking questions. Senator Lautenberg, I will call on you first. Senator Lautenberg. Thank you, Mr. Chairman. I want to say at the outset that I listened to each of you and am impressed with the way you have handled your respective assignments, the positions you hold regularly, but even as you make the case here. So this is not intended to be questions about you, but questions so much more about the policy that got us where we are. Because as I look at what is intended here, I get the feeling--and I know both of you have excellent professional backgrounds--I get the feeling that this is much more political than it is an exercise in efficiency. And I say that because, Ms. Styles, the fact that you say there are no arbitrary targets and so forth, but what is magic about the 65 number that can be handled at the local level, department level, up to 65 employees can have their jobs eliminated, turning toward commercialization, and why is 65 the magic number? Ms. Styles. They actually can't have their jobs eliminated. We eliminated the use of direct conversions altogether. One of the problems I saw is the old circular had a process that if it was a function of less than 10, you could directly convert that work to the private sector without determining whether it made sense or the in-house organization could perform it. And I saw agencies doing it all of the time, without a significant justification. Even if it is a small function, I just don't think that is appropriate. What we did was we took a process that has been in place for at least 6 years, that was created by the previous administration for a function that is less than 65 Federal employees. We added to that I think a lot of transparency. It is called a streamlined competition process. It is not as extensive as our full-blown competition. Senator Lautenberg. No, but it does say that, in the streamlined process, the Federal agency head can outsource Federal work for a function of 65 FTEs, and private or private bids are not necessary because the streamlined process does not require truly competitive cost comparisons; is that not correct? Ms. Styles. I do not believe that is correct. It is a competition process. There is transparency. The agency has to put a public notice out before they do it, and when they finish, and they also have to supply you, and me, and everybody else with a form that says what the private sector cost was, what the public sector cost was and explain to all of us why they made the decision. So I wanted some transparency and accountability in this. Senator Lautenberg. Well, what we will do, since we disagree here, is we will discuss this, Mr. Chairman, further, and we will have a sit-down, and we will go through that. Ms. Styles. I am very happy to supply any information you want on this process. Senator Lautenberg. Yes, I am sure. And the question about how we got here reminds me of a little song that says, ``Where did all of the money go?'' I know it is a substitute for words, but the melody is there. ``Where did all of the money go?'' The fact is that we are not struggling alone here because there is not or there has not been sufficient funds to carry out the programs as we would like to, as we would like to be more intensive training. We certainly ought to be looking at the implementation of more efficiencies, the technology applications, wherever they can be, and as far as I am concerned, though we cannot discuss this at length here, I think the money went for other purposes. And when we look at the deficit, the money is not created, the deficit is not created by the explosion of costs internally, not at all. There have not been wholesale raises, there has not been anything that says suddenly it is going to cost more to operate. It is because people like me are getting tax breaks that we do not need, and frankly I would rather have plowed back into our society to build a stronger, more harmonious society than give people who have been successful more than they already have, and they have earned it under the system. So I look at this as a political exercise, denominated by the statement that I read earlier, and that is the mission is to get rid of 850,000 employees, and let us do that. And that is as arbitrary as it gets to be. I do not understand why we do not look at what we have got, where we are going, and how we finance internal operations. And I can tell you this, that if we were to advertise for employees on the basis that they would find in the commercial world, I do not think that you would get anybody to work here. I think the fact that we have seniority systems that provide for longevity, and, yes, there are blips along the way, but the fact is that we do lots of things right. We have lots of policies that are excellent in terms of our research and things of that nature that carry on, beyond the military, beyond the law enforcement, and the money has gone into other places, Mr. Chairman. That is what I see as the biggest difficulty that precipitates this kind of thinking. Senator Voinovich. Thank you, Senator. Senator Akaka. Senator Akaka. Thank you very much, Mr. Chairman. Ms. Styles, you mentioned the rumors within the Park Service in your testimony. As the ranking member of the Senate Park Subcommittee, I am curious as to how you communicated with NPS employees to counteract these rumors. Ms. Styles. There actually is a hearing this afternoon dealing with the Park Service, where Fran Mainella, the head of the National Park Service, is testifying. We do generally leave it to the agencies. We try to provide them as much information as we can, the resources to communicate with their people, and I know that the Secretary of Interior has sent out all employee E-mails trying to explain this initiative, and I know that Fran Mainella has worked hard to fight against this initiative. But we fight against information that may be inaccurate and not correct all the time, and I think we put--I don't think we have put in enough effort, I think we put in a lot of effort, but I don't think we could ever put in enough efforts to make sure that we are communicating appropriately on this, but we do keep trying. Senator Akaka. Is OMB questioning agency decisions not to include a function on its FAIR Act inventory and under what circumstances would you do so? Ms. Styles. We are actually required by statute to review those functions and make sure that they are consistent within agencies and among agencies. So, yes, we do review, as we are required to, and I think we fulfill that role as we go through each year with the FAIR Act inventory process. Senator Akaka. Mr. Walker, you have reported, and OMB has acknowledged, severe limitations in the financial management systems throughout the Federal Government. How do these problems affect an agency's ability to determine the cost of the President's competitive sourcing initiative? Mr. Walker. They have a very real effect. And let me say that, while I know that Bobby Harnage is not going to be physically present today, he has a statement for the record, and he has a comment there that I would like to address, in response to your question. The Federal Government's financial management systems are not what they need to be. We have made a lot of progress, but we still have major challenges, especially in the Department of Defense. A vast majority of the historical A-76 competitive sourcing competition activity has been within the Department of Defense. The fact of the matter is that DOD and OMB estimate that historical savings, from A-76 competitions have ranged from 20 to 30 percent no matter who wins. Those are unaudited numbers. They are OMB and DOD's numbers. GAO has done work in this area, and we do believe that there are real cost savings. However we can't express an opinion as to whether or not that 20- to 30-percent range is reasonable because the cost accounting systems are just not of a state that we can form an opinion on it. Senator Akaka. Ms. Styles, I was pleased to receive OMB's competitive sourcing report last night and hear your testimony this morning which focused on the steps OMB is taking to institutionalize the administration's contracting out policies. The report appropriately acknowledged that now two agencies are alike. This is an important recognition, especially, as Mr. Walker notes, Federal agencies are faced with the dual challenges of implementing the revised A-76 provisions and the competitive sourcing portion of the President's management agenda. He points to the Department of Defense, as he did, which despite being the government's largest procurer of outside goods and services, has long occupied a place on GAO's high- risk list because of contract management problems. Considering that most agencies lack the knowledge base, personnel and funding to carry out outsourcing competitions, what guidance will OMB offer to the new competitive sourcing officials to ensure that an agency's competitive sourcing activities integrate with their human capital and funding needs? Ms. Styles. We actually wrote the new circular with that specific thought in mind. When we looked at competitions in the Department of Defense, I can tell you what bothered me the most was the Department of Defense will go out, they make an announcement, without a whole lot of thought about it, that we are going to compete 1,000 people at this base, and then 4 years later they decided, after they did a little work and a little planning, we are really only going to compete 100 people here. And for 4 years, there were 900 people that were very concerned about this, and there were expectations raised in the private sector about what this competition was going to look like. We want agencies to do a great deal of preliminary planning. You will see 2 pages, in a 23-page circular, that talk about preliminary planning, that before you make any public announcement of what you are doing, reengineer, understand what you do, understand the workload, understand how the private sector does this, understand what your human capital requirements are, and then make an announcement of what you are going to source. The best example I have is the Department of Education. They did it this way. They spent 2 years reengineering and planning before they made any announcements of what they were going to source, and it has worked very well. Senator Akaka. Thank you, Mr. Chairman. Mr. Walker. Mr. Chairman, can I come back on that? Senator Voinovich. Yes. Go ahead. Mr. Walker. I think the process is very important, but I think this also reinforces a point that I made before. It takes time, it takes financial and technical assistance in order to be able to make this work, and what are we going to do for the 75 percent of government that is not subject to competitive sourcing? They need to look at their people, process, technology, and environmental situations, and we need to figure out ways that we can provide them with financial and technical assistance to get that done. Senator Voinovich. Ms. Styles, I share Senator Akaka's concerns about having the people get the job done. And as you know, the acquisition workforce is facing a serious human capital challenges. It has been underscored by GAO, for instance. Twenty-two percent of the acquisition workforce is eligible to retire between now and 2005, and after 2005, 69 percent of the workforce will be eligible to retire. What strategies will OMB employ to ensure that those Federal employees responsible for conducting public-private competitions and contract management receive the tools, training, and the resources they need to do their job efficiently? In other words, one of the things that Senator Akaka and I did last year when we amended the Homeland Security Act was upgrade human capital awareness by creating chief human capital officers in each of the departments. What are you going to be doing to make sure that those human capital officers have the people to do the work within their agencies? I think the point was that you have expedited in less than 12 months that you are going to move forward with it. Well, you know, and I know, there is no way you can do that unless you have the people on board to get the job done. So I would be interested in learing more about that. The other thing is that we have not had any oversight hearings, and I am going to talk to Senator Collins about it, and particularly in the area that Dave Walker has referenced, in terms of these acquisition workforce, particularly in the Department of Defense. And I really think this is something that somebody is going to hone in on, and I would like to know what are you doing currently to respond to that. Ms. Styles. Sure. I think it is a very serious and a valid concern. Our acquisition workforce took severe cuts over the past 10 years. They have been asked to do much more with much less. I will comment, though, on the 12-month time frame, that clock doesn't start ticking until the agency decides they want it to. They do all of their preliminary planning, and once they get through preliminary planning, they decide when they want that clock to start ticking. In the human capital arena, as it relates to competitive sourcing, we recently established, with the help of the Council for Excellence in Government, a new council, a Federal Acquisition Council, and we met with groups of people from the agencies, specific people that are designated to this council. Much like the new Human Capital Officers Council, the CFO Council, CIO Council, we have one for acquisition, and we recreated it with the help of the Council for Excellence in Government. And one of our main focuses is human capital and competitive sourcing and how those two relate together. What we have asked is for the leads from the agencies--one is Scott Cameron from Interior on competitive sourcing, the other one is a career person from NASA, Tom Ludke--to get together and help us form a small group of Federal employees that will go to each agency and assess at that agency what their infrastructure is in place for competitive sourcing. I know one contact at the agency, but I do not now exactly what their infrastructure is, and who is doing this, and who is actually leading the charge below the head person. So we can take the best practices. We can understand where there are deficiencies. We can compare and share among the different departments and agencies. So we are trying to be very proactive in assessing what is working and what is not and where we have problems and what strains competitive sourcing is putting on our acquisition workforce or sometimes this isn't always in the acquisition shop, which is an interesting dynamic at the agencies. Sometimes it is within the CFO shop or a different location, and we are trying to better understand the agencies that are successful and are not, how they are working and what infrastructure is best here. Senator Voinovich. Well, one of the concerns I have is that we speak about doing some of these things, but now that agencies are starting to think about workforce in reshaping they realize they do not have the people they need. I am hopeful that when an agency comes back to OMB and says, we do not have the folks to get the job done, that it is reflected in preparing their budget requests. Because part of the problem that we have had here is that, in the last dozen or so years, we just downsized and did not replace the people who were needed. Some agencies had the wrong people. We did not have the opportunity for early separation or for early retirement. I need some reassurance to know that you are just not going through the process, and then we just do not have the people there to get the job done. I know one of the things I was impressed with in my experience on the Foreign Relations Committee, was hearing Secretary Powell talk about adding about 300 people--and I know people do not want to hear about adding people--but the State Department was riddled, and they needed people. They are moving forward. He was very excited that a lot of people are interested in going to work for the State Department. I think too often the human capital aspect of one's budget does not get the kind of attention that it ought to be getting. Ms. Styles. We will---- Senator Voinovich. In the last budget, for example, did you entertain any requests for people? Ms. Styles. Absolutely. We sit down with the agencies on a quarterly basis, and it is the relationship on competitive sourcing and the resources that are needed is maintained on a day-to-day basis, but we have designated quarterly meetings with the agencies to discuss where they are in the initiative and what their needs are. In our recent A-11 guidance to the agencies on preparing their 2005 budget, we have a very specific item called out for them to designate what their needs are in terms of resources for competitive sourcing, so we can be very clear about the costs and what the agencies' needs are in these areas. Senator Voinovich. Ms. Styles, the Commercial Activities Panel recommended limited changes to the A-76 and develop instead a FAR-type process for public-private competition. Could you describe how OMB came to the decision to incorporate those recommendations into the complete rewrite of Circular A- 76? Ms. Styles. Certainly. I was a participant on the Commercial Activities Panel, and one thing that I saw, and I think everybody on the panel saw, was that we had two different types of people. We had people who understood public-private competition and people who understood private-private competition. We had rules for private-private competition that worked very well together, and we really fundamentally needed to integrate those rules together. We took the recommendations of the panel very seriously, as we did our rewrite. We went out with a Notice for Public Comment. We received 700 comments on our draft, and we took all of those very seriously. We met and had discussions with GAO, the unions, the private sector and people that were involved before we actually came out--and the agencies, too. I sat down with every single agency for a 4-hour period, before that circular went out, to make sure I understood what the effect of these new provisions would be on their particular agency. So we spent a lot of time I think integrating the panel recommendations into our circular and working with people to make sure we understood the effects. Senator Voinovich. Mr. Walker, would you enunciate any further recommendations? We have the revised circular, and do you think there is anything that needs to be added or deleted? Mr. Walker. Well, I mentioned in my oral remarks, as well as more detailed in my written testimony, some areas that I think bear looking at. I do also have a concern, which I don't believe is in my testimony, about this recompetition 5 to 8 years down the road. My personal view is that it kind of relates to the high- performing organization issue that I talked about before. We need to have fair and effective competitions with regard to MEOs. A decision gets made. We then have to recognize that is not forever, but we ought to be incorporating the concepts of these high-performing organizations there, and only if there is a significant change in the circumstances, should we think about recompeting. I don't think it should be something that is automatic. I think it should be something that is based on facts and circumstances, but we need to have mechanisms to provide reasonable assurance that there is continuous---- Senator Voinovich. In other words, eliminate the requirement that every 5 years, if you have decided they are doing the job, then it ought to be? The real issue should be not a 5-year deadline, but whether or not they are performing. It could be in 3 years that the decision is made that they are not performing, but if somebody is getting the job done, they ought not to be forced, at the end of 5 years, Ms. Styles, to recompete. I do not think that is good public policy. Mr. Walker. It should be facts and circumstances, and I think that is what Ms. Styles said, to a certain extent---- Ms. Styles. Right. Mr. Walker. At the same point in time, I think we also have to recognize: Perceptions matter. Even though there may be a small percentage that ultimately might be recompeted, if the perception is that the rule is that you are going to be recompeted after 5 to 8 years, then perceptions matter, and that can have adverse behavioral effects, and I think we just need to be sensitive to that. Ms. Styles. I have to say, in writing that provision, it was a very difficult one to write because the private sector feels that they have to recompete every 3 to 5 years, and I thought 5 years was too short a period of time for an organization that was doing a good job, and performing well, and was a group of Federal employees. I also understood the reality of the situation, that we can write a policy that says every 5 years, but I don't think that we are really going to be able to enforce that. But that is the reason that we wrote one that essentially said, if you are a high-performing organization, you can have an extension of a period of time. I think it is a good question whether that is a long enough period of time, what other mechanism. There is a mechanism in place that even after 2 years, if you are the government organization and a private sector not performing, that you can terminate the contract. So it is not just you get it for 5 years and that is it. But as a matter of practical reality, if you get it for 5 years, generally, you continue to perform for 5 years, and people try to help you perform better if things aren't working out, whether you are a private contractor or a Federal employee. Senator Voinovich. I have just about run out of my time. Senator Lautenberg. Senator Lautenberg. Thanks, Mr. Chairman, and I will try to be short here. Ms. Styles, in looking at your statement, I am reminded that you made a specific comment, ``The revised circular eliminates direct conversions and instead provides a versatile streamlined competition process for agencies to efficiently capture the benefits of public-private competition for activities performed by 65 or fewer full-time equivalent employees.'' So that 65 is a target. I mean, why did you not say 75? Why did you not say 95? I am just curious. Ms. Styles. I think that is a fair question because it is a question of why is 65 an appropriate number for a less- extensive competition process than would be used for over 65. Senator Lautenberg. Yes. Ms. Styles. I will be honest with you. The reason we chose it is because it was the standard that had been chosen before. It was the standard that was in the old circular that had been amended in 1996 and was used. From my perspective, it was less controversial to stick with an established standard. Senator Lautenberg. Fair enough. Now, those people who are in that group, do they lose some of the benefits they might lose, in terms of a retirement program as a consequence of the streamlining? Ms. Styles. No, if they are involuntarily, I don't believe they do. Senator Lautenberg. Well, right now, if we want to terminate somebody under the Federal system, assuming that there is, first, you justify the cause, but are there not benefits that are carried out or available to someone who is leaving the service? Ms. Styles. Yes. Senator Lautenberg. The same would apply to these if they are one of the---- Ms. Styles. Absolutely, all of the procedures that are in place would be the same for both mechanisms. Senator Lautenberg. Ms. Styles, you know that my amendment to the FAA reauthorization bill, and I mentioned this earlier, passed the Senate by a vote of 56-41 on June 12. My amendment would prevent the administration from trying to outsource or privatize air traffic control people using the A-76 process. And I think we saw quite a demonstration of skill, loyalty, and determination on September 11 when the air traffic control system jumped into place to bring roughly 10,000 flights to the ground safely, to clear the skies. There was a moment of great tension and fear, and I said earlier that I regard that as kind of the fifth branch of the military because of the emergency nature of their functioning. Why is the administration so focused on privatizing the air traffic control system? Ms. Styles. We have no intention of privatizing the air traffic control system. Senator Lautenberg. But we have taken off a significant portion of them and taken them away from the inherently government protection that otherwise would be there. Ms. Styles. There are a whole cadre of people that are commercial that are exempt from competition. There are three categories of people at the FAA, generally speaking, that your amendment affects. There are the large air traffic control towers and air traffic controllers. There are the small towers, over 100 of which are run right now by the private sector with a better safety record than Federal towers at a lower cost. Senator Lautenberg. Right. Ms. Styles. There are also flight service stations as well. My understanding of your amendment is that we would not be able to look at any of these functions for public-private competition. Senator Lautenberg. Right. But it does grandfather the small airports and the services that go there. They are commercially handled now, and we are not thinking of doing anything differently. A lot of them are in remote places where it is hard to move people. Ms. Styles. We have been very clear. There are two points here. We have been very clear that all we are doing here is being what we believe is honest in our articulation of air traffic controllers as being a commercial function because some of our towers are actually in the private sector. Other countries have privatized their entire air traffic control function. Senator Lautenberg. Have you examined the consequences of that privatization in the U.K. and Canada, for instance, where the number of near misses in the air have increased---- Ms. Styles. I have not, personally, but I believe other people have. Senator Lautenberg. I am sure you have not, and I am not being critical of you, but I think any evaluation like that has to look at what happened in Canada and in the U.K., where expenses soared, where services were substantially reduced, where bailouts had to come in by those governments to further lend financial credibility. Ms. Styles. Well, we have no intention of--all we wanted to say is that it is considered commercial in other places. We consider it commercial, but we are not going to compete it. The other part is we have flight service stations. These are people that check the weather for private pilots. There are 2,700 of them across the country. Senator Lautenberg. Ask Senator Stevens how he feels about the weather forecasters up in Alaska, and you will get a pretty interesting response. What I say to you, we have passed this through the Senate. Do you know whether the administration is going to help see that this gets through the conference and leaves it to reflect the will of the Senate when, again 11 Democrats joined me and others to say that this should not be done at this point? Ms. Styles. I think we have been very clear that the President's senior advisers would recommend a veto if there is not a sunset provision for the larger towers. And if we are constrained in our ability to look at the smaller towers or the flight service stations. Senator Lautenberg. So, in effect, it says, no matter what you folks in the Senate feel, that we are going to veto the will of the Senate and abandon the check and balance that is purportedly existent between the Legislative and the Executive Branch. Thanks very much, Mr. Chairman. Senator Voinovich. Senator Lautenberg, I wish to correct a statement. You said there were 11 Democrats that joined you, but there were 11 Republicans. Senator Lautenberg. That was a terrible oversight. [Laughter.] I guess that was, you know, sometimes dreams come out--you are right--dreams come out, and you say things you do not really mean, but you would like to see happen. Senator Voinovich. Senator Akaka. Senator Akaka. Ms. Styles, your testimony states that competitive sourcing is a major component of the administration's vision of a market-based government, and therefore I would like to ask whether you would please provide us with a governmentwide estimate for the cost, an estimate of the cost of implementing the competitive sourcing component of the President's management agenda, if you will. Ms. Styles. We are certainly working--that is part of the reason we amended our guidance for the fiscal year 2005 budget is because we do not have a clear number to give you. I can give you estimates of how much it cost per person, although I have to tell you it is a double-edged sword. On one hand, you asked us to help the employees be able to compete, and on the other hand, people want us to keep the cost per position being competed low. So it is very conflicting goals here, in terms of making sure we have the resources available for our people to compete and keeping the cost of these competitions low because we get criticized on both sides of this. Senator Akaka. Talking about kinds of costs, why is there no minimum cost savings for streamlined competitions? Ms. Styles. When I took this circular to the Director at the time, when we were going through this, I had examples of competitions, and there would be one where the government offer was $3.4 million and the private sector offer was $3 million, and the government won. And I had a very hard time explaining why that was. We decided for a streamlined process to remove that cost differential in order to give agencies the flexibility that they were asking us for in doing these competitions. Senator Akaka. Mr. Walker, I liked your comment about outsourcing as being a tool and its effectiveness would depend on how and when you do it to maximize the effects. I think that will ring throughout these discussions as we go along and prove you to be right. As you know, Mr. Walker, the Commercial Activities Panel, which you chaired, recommended that Federal employees be allowed to appeal A-76 and its decisions, just as contractors may do now. I understand that GAO is considering options for addressing this so-called inequity. What is the progress of GAO's review of bid protests, and when do you expect the review to be completed? Mr. Walker. Well, first, let me note that, as I have mentioned in my testimony, that for the streamlined competitions of under 65 FTE there is not an internal appeal process or an external appeal process which I believe creates an accountability gap, which is a matter of concern. With regard to your question, Senator, we sent out a public notice seeking comments, and have received 50 comments back, some favoring us being able to consider appeals, some opposing it for various reasons. This is a high priority for us. We have a target of Labor Day. We would like to be able to come out with something the week of Labor Day, as to what our decision will be, and I hope that we can meet that time frame. Senator Akaka. Ms. Styles, as you know, bipartisan legislation has been introduced in the House to identify contractors with histories of misconduct and bar them from receiving government contracts. What disbarment programs are now in effect? Ms. Styles. We have what I believe is a rather rigorous process at the agencies for looking at the present responsibility of a contractor, whether they are financially capable, whether they are a good corporate citizen, whether they can perform, and this process is one that was established by statute and implemented by regulations, and it is pretty rigorous at most of our departments and agencies. It affords due process for the contractors to be able to make their case if there is an issue or a problem or a proposed debarment or suspension, and I think it generally works well. Senator Akaka. Mr. Walker--for my final question, Mr. Chairman--the Defense Department procures more government contracts than any other Federal agency. It is responsible for $90 billion in service contracts alone. DOD has been identified on GAO's high-risk list for contract management since 1992. At the same time, DOD's Inspector General has released a report that DOD may have paid more than $4 billion for services without first determining that the work was needed. In fact, the report found that DOD failed to enforce contract terms and made payments without determining that contract terms were met. My question is how will OMB's revisions to A-76 impact contract management challenges at DOD? Mr. Walker. Well, directly, I don't believe that they do because we are really talking about two areas that are on our high-risk list: First, current concerns with regard to inadequate procedures and practices to oversee contract management; and, second, also the acquisitions process, especially in conjunction with major weapons systems. Unless there is some intent to be able to do further outsourcing in this particular area with regard to the individuals who are performing this oversight that obviously would be a problem. We are not doing enough, if you will. As I said to you, when we contract out, we need to have an adequate number of skilled individuals to manage cost, quality, and performance of the contractors. I question whether or not we have that at DOD right now. DOD is an ``A'' on effectiveness. We are No. 1 in the world in fighting and winning armed conflicts. DOD is a ``D'' on economy, efficiency, transparency, and accountability. The general culture is get the money, spend the money; get the money, spend the money. There are not adequate checks and balances to protect the taxpayers' interests in the military industrial complex, and we have a number of recommendations that we have had for a period of time in this area. Some have been adopted and others remain to be adopted. Senator Akaka. Thank you very much, Mr. Chairman. Senator Voinovich. Thank you, Senator Akaka. We have many other questions, but in fairness to the next panel, I think that we will conclude. There are still some questions, Ms. Styles, that I would like to have answered, and I thank you for being here. You have had an opportunity to hear some of our concerns, and I would be interested in, after your hearing these concerns, if there is going to be any response to any of them that we have raised today in terms of where you are going. Senator Lautenberg. Mr. Chairman, just one comment, and I do not want to interrupt the flow, so, please, as far as I am concerned, feel free to get up. But I would say but there is another policy that could be spend the money, then get the money, and you can borrow it from places around town. Senator Voinovich. Thank you very much. Our next panel will come forward, and I think that all of you have been sworn in but for Dr. Light, if I am not mistaken. Is that right? Mr. Light. I was not sworn in with the other witnesses. [Witness sworn.] Senator Voinovich. Thank you. Let the record show--Mr. Tiefer, did you get sworn in too? Mr. Tiefer. I am sworn. Senator Voinovich. We thank you for your patience. In order for us to get some questions answered, I would like you, if possible, to see if you can share with us, within 5 minutes, your testimony, understanding that the rest of your testimony will be made a part of the record this morning. We really appreciate your being here today. It is an intellectual group of people who are going to be looking at this. Frankly, we did not bring the unions in, or the contractors and so forth because so often it turns into a very contentious debate, and hopefully we are going to get a more objective view from the four of you, in terms of what you think about the competitive sourcing initiative. So, Dr. Gansler, we will start with you. TESTIMONY OF JACQUES GANSLER, Ph.D.,\1\ SCHOOL OF PUBLIC AFFAIRS, UNIVERSITY OF MARYLAND Mr. Gansler. Thank you, Mr. Chairman. Thank you very much for inviting me here today to discuss competitive sourcing. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Gansler with an attachment appears in the Appendix on page 93. --------------------------------------------------------------------------- Let me start off, though, Mr. Chairman, by complimenting you and the rest of the Subcommittee for focusing on this really critical issue of the government workforce. It is important, complex, and I must say obviously a somewhat controversial aspect of this competitive sourcing debate. I believe everybody here can agree that the government needs a high-performance, high-quality workforce for the 21st Century. The question is will competitive sourcing help or hurt in that objective? It is my personal belief that it will help, significantly. Unfortunately, today, many Federal employees view competitive sourcing as a personal assault, an accusation that they are incompetent, lazy and only interested in secure, life- long employment. In fact, competitive sourcing is not an attack on Federal employees; it is an attack on a system that encourages government organizations to maintain a monopoly over a service sector. And whenever a monopoly exists in the public or the private sector, innovation, improvements and cost reductions are discouraged. The missing ingredient is competition. Yet, while the evidence overwhelmingly demonstrates that competitive sourcing really works, we continue to hear the statements that, for example, ``there is no data that show any benefits from competitive sourcing.'' But there actually has been an abundance of data generated; it just hasn't been made widely available. Recently, I issued a report on this existing data; I put copies of it over on the table (and it is referenced in my prepared remarks). What I found was that there was much confusion, including even on definitions, and I even heard some of them today. For example, competitive sourcing is not outsourcing, nor is competitive sourcing privatization, though it is often referred to in that way. In fact, the public sector has won, depending upon what statistics you use, 40 to 60 percent of these competitions, and the public sector has won 98 percent of the streamlined competitions. To summarize the overall results actually found, based on over 2,000 cases in the Department of Defense alone, plus hundreds of other cases at the Federal, State and local levels, when competitive sourcing is done right--and that is important, and I will come back to that--the performance improves significantly, performance improves significantly while costs go down by an average of over 30 percent. And, this result is true whether the winner is the government or the private sector. It is really important to understand that even when the award stays within the government, the performance improves significantly and the costs go down significantly. This is due simply to the shift from a monopoly environment to a competitive one. The incentives created by competition are what make the difference. Let me provide a few specifics that address what I think are the six most common misperceptions about the actual results achieved. First, performance does improve. The data at Federal, State and local levels overwhelmingly demonstrate that the performance improves dramatically, whether it is measured as customer satisfaction, system reliability, on-time delivery or whatever. These are measured results, comparing performance before and performance after the competition is introduced. Second, the savings are real. Again, the verified, comparative costs actually show an average saving of over 30 percent. And, this has been shown not to be due to low individual hourly rates, but due to productivity gains from process changes, as driven by the competitive forces, using obviously significantly fewer people, but often at higher individual hourly rates. Third, contractor costs do not increase after the award. Independent studies have found that, when best practices have been utilized, when a private-sector firm won the competition, the savings that were promised were actually realized at the end of the contract period. However, when a government organization wins the competition, there have been problems. Specifically, as was noted a few minutes ago, it has often been difficult to identify overall government costs, especially overhead costs, either before award or after performance achievement. However, you can use head count before and after as a way of making a comparison in the government, and they generally do match the reduced numbers in the government bids. Clearly, future government-cost visibility would be highly desirable. Fourth, small businesses actually benefit. Again, when best practices are utilized, the data show that small businesses do extremely well. For example, between 1995 and 2001, the Department of Defense conducted 784 public-private competitions and 79 percent of all of those awarded as contracts went to small businesses. Additionally, small business requirements for subcontracts and large awards can be even more significant to the small businesses. For example, the outsourcing of the Navy and Marine Corps Intranet, as well as the National Security Agency information technology infrastructure--these are both multi- billion-dollar awards--each had a 35-percent small business requirement. Fifth, there is a minimum impact on government employees. As I noted, even when the government wins, the data show a 20- to 40-percent reduction in the government staff. However, the independent studies of this show actual involuntary separation was only in single digits, ranging from one study that found about 8 percent to another that found around 3 percent and some that found 0 percent. This low rate of involuntary separation is due to a combination of transfers to other government positions, retirements, and voluntary separations, often to the jobs created with the winning contractor. Clearly, this issue of the workforce is an important area, and it should be a major consideration, in both the requests-for-proposal and the ensuing competition. In my report, I cover some ways in which that can be done specifically. And, finally, sixth, and of greatest importance, I would argue, is the government actually has greater control if you use competitive sourcing. In a competitive environment, the government managers have been found to have far greater control no matter who wins. If the government wins, it is now required to keep performance and cost metrics, along with the potential for competition--and I emphasize potential for competition--in 3 to 5 years in order to keep the pressure on the government workforce for continuous productivity gains. And I should emphasize that that is very similar to the normal competitive pressures that one in industry sees all of the time. So people going to work for the government or going to work for industry have the same competitive pressures at all times. While, if the contractor wins, the government manager has full of control and visibility into the performance and cost and can terminate the contract if they are dissatisfied, something the government manager cannot do with a civil service workforce. Senator Voinovich. Dr. Gansler, could you wrap up your testimony? Mr. Gansler. Sure. In fact, I just wanted to summarize the five points that I think make the difference in terms of whether or not you do it right, and I think this is critically important. The most important key to success is shifting from a monopoly to a competitive environment. Second, the competition must be for best value, not simply for cheapest. Third, even when the government contracts out the work to be performed, it does not give up any of its management responsibilities. Fourth, critical performance and cost metrics must be mutually agreed to at the beginning and monitored and reported throughout the program, and they have to be output oriented, results oriented. And, last, the government must aggressively provide the training, that you emphasized as being so necessary, to reshape and sustain the workforce and to help overcome the natural resistance to the changes that competitive sourcing brings. If one does these ``best practices,'' it is very clear that the government will gain, and the employees will be fulfilled employees working up to their full potential. Thank you very much, Mr. Chairman. Senator Voinovich. Thank you, Dr. Gansler. Dr. Light. TESTIMONY OF PAUL C. LIGHT, Ph.D.,\1\ SENIOR FELLOW, THE BROOKINGS INSTITUTION Mr. Light. It is a pleasure to be here. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Light appears in the Appendix on page 159. --------------------------------------------------------------------------- Senator Voinovich. I am glad to welcome you back, Paul. You have been a frequent visitor over the years, and we thank you publicly for all of the help that you have given us. Mr. Light. Thank you. It is a pleasure to be before you and on this panel. Jack and Frank I have known off and on for a long time, and we will have to get to know each other. I am going to leave it to Frank to talk about the quality of the data that underpin these estimates. The best research has been done by RAND, and I have a lot of confidence in their analysis of how much money gets saved and how durable the savings are, but I think the RAND analysts would say that it is a limited study, but an important contribution to the debate. Some of the data that float around here is just not very good, and that is an issue that you all may want to take on. I am going to be very brief here. I want to make one or two comments about the testimony this morning by OFPP Director Styles. I think what you are seeing here is, from a skeptic's point of view, a little bit of a sleight of hand. It is true that we are going to get rid of the arbitrary targets, and I think that is a wonderful and important step forward, but I think what you are hearing and what you see in the OMB document is that the debate is going to move upstream. The debate is going to be about what the term ``inherently governmental'' means and what the reason codes justify by way of exemptions. The appointment of a chief or a competitive sourcing officer in every department is an important step forward here, but I think the debate is now going to shift to a place where we are not going to be able to view it very closely. Instead of 25 percent of Federal jobs being eligible for competitive sourcing, I would estimate--or I can't estimate--I would argue that the goal will be to increase that number steadily by questioning the reason codes that are currently used to exempt commercially available activities from competition and by changing the definition of inherently governmental. Indeed, in the revised A-76 circular, there is an important change to the definition of what is, in fact, inherently governmental from activities which involve the discretion, the exercise of discretion of government authorities to the definition of activities that involve the ``substantial'' exercise of discretion. Now, substantiality is very much in the eye of the beholder, and I think what you are going to see here, as an important issue for oversight, is to maintain a steady focus on where the key decisions are made about eligibility. So, with all due respect to the Chairman, I do not believe that we are talking about a relatively small number of jobs in the long haul. With all due respect to my colleague and friend from GAO, who rightly argues that we need to bring these competitive pressures to bear throughout the government, if we are getting these kinds of savings, through competitive sourcing, why aren't we getting them elsewhere? I will argue that within several years, we are going to see a very large proportion of jobs that will be defined as eligible for competitive sourcing, and that is an important area for debate. Now, this Committee, this Congress may decide that it would be best to codify the definitions of inherently governmental and commercially available, rather than leaving that to the Office of Management and Budget for regulatory rulemaking. In fact, you may wish to take a look at the OFPP policy letter, which defines these terms, which I would argue to you is an utter mess, in terms of actually interpreting what these terms means. What is inherently governmental? What is commercially available? Where do you use the reason codes? And if ever there was an area where the U.S. Congress could do the Executive Branch a favor, it would be in codifying the definitions of what these terms mean, so that as we move ahead with competitive sourcing, everybody is reading from the same script, in terms of what is what. I noted with some interest and support that OMB has decided that no two agencies are created alike. Arguably, on the air traffic sourcing issue, the United Kingdom, Canada, and the United States are, in fact, enough alike to make the decision that we can make some of our air traffic control commercially available. My summary, my statement goes into the good and the bad reasons for outsourcing. I accept and embrace the notion that competitive competition can, and does have, a salutary effect on performance. I think we need to learn how to do it so that it affects all Federal agencies. I believe the way to go is possibly through pay for performance of the kind that this Subcommittee has been struggling with. I also note with some concern the use of price as a surrogate measure of things we value. Price is not a good measure of motivation. Price is not a good measure of fairness and commitment to the public service. So as we proceed with competitive sourcing by putting the emphasis on price, we need to understand not just what price measures, but what it ignores. I submit my statement for the record, and I am delighted to answer any questions that you might have. Thank you for having me. Senator Voinovich. Thank you very much. Mr. Tiefer. TESTIMONY OF CHARLES TIEFER,\1\ PROFESSOR OF LAW, UNIVERSITY OF BALTIMORE Mr. Tiefer. Thank you, Mr. Chairman. I am a professor of law at the University of Baltimore and the author of ``Government Contract Law.'' --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Tiefer appears in the Appendix on page 175. --------------------------------------------------------------------------- Mr. Chairman, you, yourself, have appropriately focused your own legislative efforts, in general, and this Subcommittee's work on workforce issues. And like other people, like your colleagues and other witnesses, I salute you for those efforts. Today, you began the hearing by expressing a half a dozen concerns about the new A-76, which I can only say were extremely well taken, well articulated, and I share them more intensely I think even than you. Your first concern was the issue of across-the-board goals. Although we are trying to think positively of the steps we have heard today from OMB, I have studied the report and the testimony that they filed, and I am unable to find the tremendous departure from across-the-board goals that they seem to be contending they have made. When I look at Page 5 of their competitive sourcing report, ``Under the scorecard approach, numerical mandates were converted to incentives,'' not eliminated, converted. ``An agency would move from a red score to a yellow score if it completed competitions for 15 percent of the total commercial positions,'' and it will move from yellow to green when it completes 50 percent of the total commercial positions. Now, earlier this year, OMB had a 15-percent near-term and 50-percent eventual target, and as of today, OMB still has a 15-percent near-term and 50-percent eventual target. It does not have an announced percentage target that varies from agency to agency; it may have fixed governmentwide percentage targets. So that concern has not been eliminated. Another concern that the Chairman appropriately expressed was that as a result of this heavy emphasis on outsourcing, managers will not be investing enough in alternatives in ways of making their existing workforce do the job better, and I combine this with concerns that several members of this panel have expressed about the A-76 innovation of this radically exalted, ``streamlined'' procedure. The streamlined procedure is a way for a manager who is trying to meet these percentage targets not to invest in his workforce, but instead just to outsource. And in particular, the streamlined procedure does away with the requirement of a most efficient organization, an in-house bid that tries to maximize the in-house resources. Instead, it is practically a direct conversion. A manager who goes by a streamlined competition not only does not have to work on producing a most efficient organization, but as Senator Akaka emphasized, it eliminates, when you do a streamlined competition, the 10-percent minimum cost differential. And there was a very interesting exchange in which Ms. Styles was asked, ``Where did that come from? Why did you get rid of the 10 percent?'' And she basically said, ``I had a conversation with my Director, and my Director insisted on it.'' Now, that is a translation. Ms. Styles is a government contracting professional. She yielded to the political directive, come up with a tool to outsource rapidly. Finally, the Chairman expressed his concern that their acquisition officers in the government are understaffed and overworked, and therefore unable to conduct full-scale, meaningful competitions, public and private. I share that. I cited the statistics. I am familiar with it from general government contract law, that the radical truncation, the cutting in half of the DOD acquisition force has produced problems in government contracting across the board, greatly decreased competition, greatly increased sole sourcing, and we are about to see what it is going to produce in the outsourcing area. It is going to produce a reliance upon streamlined, meaning nonreal competition or, if there is a full-scale competition because you are dealing with some large facility, over 65 people, that cannot even be split and broken down, which is an available tactic to avoid the 65 level. What we are about to see is that this underworked acquisition force will simply throw up its hands and say, ``Give the jobs out.'' Thank you, Mr. Chairman. Senator Voinovich. Thank you. Mr. Camm. TESTIMONY OF FRANK CAMM, Ph.D.,\1\ SENIOR ANALYST, RAND Mr. Camm. Thank you, Mr. Chairman, for your invitation to testify here today. I will be testifying on the basis of work that I did on the Commercial Activities Panel, as well as policy analysis that we have conducted at RAND, but let me be clear that I am testifying as an individual not representing views from the RAND Corporation. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Camm appears in the Appendix on page 190. --------------------------------------------------------------------------- I share your belief, Mr. Chairman, that we should treat the government's career employees with respect and appreciation. Competition affects every person's sense of self-respect throughout our society. Some Federal employees fear competition because they are convinced that they and their colleagues cannot or will not be allowed to compete successfully against an alternative commercial source. That cannot be good for morale, whether competition occurs or not. But on the other hand, thousands of other Federal employees have affirmed their self-respect by helping their Federal colleagues win public-private competitions. To me, the two critical challenges we should be thinking about here, for competitive sourcing policy, are to ensure that we properly empower our Federal employees, as has been repeated here today, and to create as level a playing field as possible for them to compete on and to prove themselves. Let me offer the following observations from the work that we have done at RAND and, to some extent, on the panel as well. Competitive sourcing is one of the best tools we have available to improve the cost effectiveness of Federal agencies. In its efforts to improve productivity since 1996, for example, the Department of Defense has consistently preferred this as the option with the best documented history of improvement. RAND analysis on the best commercial sourcing practices indicates the following conditions improved the morale of the workforce in a company when it is considering whether or not to outsource an activity. The sourcing decision process should be fair, objective and transparent enough for employees to understand the final decision. Second, the decision process should proceed rapidly. Employee morale suffers most when awaiting a decision and suffers more the longer the process takes. Third, displaced employees should be assured employment elsewhere in the firm. And, fourth, displaced employees should receive a soft landing if they leave the firm. This can occur in one of two ways. First, it can occur through formal severance or outplacement agreements with the firm if it outsources their positions. Alternatively, it can occur through criteria that are used to choose an external source that reward that source for having generous compensation benefit and training plans, as well as good opportunities for advancement. When we look in the commercial sector, well-managed out- sourcing programs displace workers who often find themselves to be better off after being outsourced. Their new employers, who specialize more than their original employers did, are often more willing to invest in their skills and more likely to give them opportunities to grow. That said, we have to recognize that individuals who have self-selected into government jobs may simply not like jobs in the private sector, even if those opportunities are better for them in the private sector. OMB's goal in the past of competing 50 percent of the positions in the commercial activities of the Federal Government has clearly raised concerns, and you all have expressed those clearly here today. Our analysis at RAND has long supported the strong empirical findings at the Center for Naval Analysis that the OMB Circular A-76 has achieved savings through competition and not through outsourcing. This simply confirms what Dr. Gansler talked about a moment ago, and we are talking about the same sources of information here. OMB's recent changes in Circular A-76 emphasized that it is a competitive sourcing program. It is not an outsourcing program. Again, I emphasize the difference that Dr. Gansler drew between these two because it is important to see it. That said, is the 50-percent goal the right goal? I think everyone here today has agreed that it is not. The fact is that there is no one right percentage that can be applied to every agency. More broadly, a reliable method does not yet exist to determine exactly where competitive sourcing is cost effective in any agency, even DOD, the agency with the most experience in the Federal Government. I would prefer an OMB policy that motivated competitive sourcing with targets that had more operational or strategic significance to Federal managers, like specific targets for cost reductions or for performance improvements. Such a policy would make it easier for people to understand that competitive sourcing is, in fact, a tool, not an end in itself. OMB has done a remarkably good job of implementing the key elements of the Commercial Activity Panel's recommendations that it can control. I generally agree with General Walker's careful delineation of differences between the panel's recommendations and OMB's new version of A-76, and I will not try to list those differences here. Rather, I would direct your attention to the extent to which the new version of A-76 captures the central elements of the panel's strong consensus on principles. Taken together as a coherent whole, these principles call for major changes in competitive sourcing policy, and OMB's recent revision of A-76 captures many of those changes in an effectively integrated manner. The changes that Ms. Styles told us about today make it even more closely matched to the panel's findings. Thank you, again, for the opportunity to testify. I look forward to answering your questions. Senator Voinovich. Thank you. There is one thing that I want to correct for the record. Mr. Tiefer, you said that reading a summary on page 5 of OMB's new report on the new definition of what is required, in terms of getting yellow and green on the scorecard is not written in percentages. In other words, this document, the Competitive Sourcing, July 2003, lays out the new scorecard criteria. ``OMB has modified the scorecard criteria. These refinements have been informed by discussions with,'' and so on, ``ensure an agency's commitment to competitive sourcing is measured against targets that reasonably reflect its unique mission and circumstances, not arbitrary or official goals.'' I just want to clear that up, and it is interesting that Dr. Light, you make the point that your concern is in the definition--this definition could open up a lot more functions because of the definition, and so we are going to look into that suggestion that you have made. Dr. Gansler, I am interested in your comment that competition is what provides the improvement in performance. If 75 percent of the workforce is not subject to competition, God help us if the only way you can improve performance is by turning to competition. I want to say that I got involved in this whole area in the beginning because I wanted to change the culture of the Federal workforce and try to build on what I did when I was in Cleveland, and when I was governor, where we aggressively pursued quality management and trained some 58,000 people in quality management. I and the union leaders had a 3-day retreat. At the end of my term we had 17 percent less employees in the State of Ohio. We did not just hack them out of there, but we did it through tools such as attrition, and we had a much better workforce because we empowered them, we gave them the tools, we increased dramatically the amount of money that we provided to train them so they could upgrade their skills. I think that the next issue after this year is over that I am going to start going back to that and identifying agencies that have quality management. Mr. Gansler. I couldn't agree with you more, Senator. Senator Voinovich. I would like to give you each an opportunity to comment on the testimony of someone else at the table. I am sure there may be some questions, there may be some differences. I would give you this chance to do that. Mr. Gansler. In the same order, I guess. The one obvious point that I would like to make about Mr. Tiefer's comments, where he said that streamlining is the same as direct conversion, the empirical data are exactly the opposite. Ninety-eight percent of the time when streamlining is used the government wins. So, if you are worried about the government trying to break up the size of competitions so that they can use streamlining, the government is likely to win more of them than, on average, what it has in the past--40 to 60 percent--under full A-76 competitions. I think that streamlining, in fact, has favored the government rather dramatically, in terms of its win ratio. Having said that, I still think the important point here is not the fact that you get a cost reduction. The really important point is that you get performance improvement at lower cost, and that is what I think the government needs. That is your high-performance workforce, and that is what we need to strive for in the 75 percent not affected by competitive sourcing, as well as in the 25 percent that are. Mr. Light. My general reaction is that I think Jack has taught me a great deal in his paper, and others have taught me a great deal about the value of competition. I think that we have got a serious problem in government playing off or pivoting off Frank Camm's comments about allowing Federal employees or giving Federal employees the tools to compete and also creating a culture in which competition is not necessarily the only tool that you have available as a manager. One of the issues surrounding this is the presence of relatively low-powered incentives in government, and I think that is where DOD started out this spring, in terms of its arguments on behalf of personnel reform; the notion being that give us some tools that we can use on a day-to-day basis to promote higher performance. I guess my general reaction is this is a tool that needs to be very carefully used because of its repercussions throughout government on government morale, and its kind of reinforcing effects on whether or not or doubts among Federal employees that they do, in fact, have the tools with which to compete. I think there are an awful lot of Federal employees out there who are saying give us the training, give us the staffing, give us the resources so that we can do the jobs that we came here to do. In that regard, you bring competition in on a unit, you have to, at some level, deal with that general sense that there are not enough resources out there. Senator Voinovich. Mr. Tiefer, would you like to comment? Mr. Tiefer. Thank you, Mr. Chairman. Dr. Gansler has noticed that I am concerned about the streamlining process and that I have a question about the government breaking units so they get them under the 65 level and other shifts in it. I can't claim originality on these. I read the GAO report that was provided today, and I listened to Comptroller General Walker's testimony. And as he said in his section entitled, ``Potential Issues with Streamlined Cost Comparison Process,'' there used to be--well, he says: ``First, the prior version of the circular contained an express prohibition on dividing functions so as to come under the 65 FTE limit for using a streamlined process. The revised circular contains no such prohibition. We are concerned that in the absence of an express prohibition, agencies could arbitrarily split activities, entities or functions to circumvent the 65 FTE ceiling applicable to the streamlined process,'' and then goes on to comment about the elimination of the 10-percent conversion differential. There is a reason why a procurement professional, such as the Comptroller General or myself, is worried about this. Splitting things in order to come under the limit is tactic, No. 1 for speeding things through the procurement process. The Comptroller General has seen this everywhere else in procurement, as have I. That is the problem. Senator Voinovich. Dr. Camm. Mr. Camm. Let me just comment on a couple of things that Dr. Light said. I agree with him that, as we get into this, the debate is going to move towards the question of how to define the inventory, and I actually welcome that. Because I think if we can get agreement on an improved competition process through A-76, then we can move on to what is a much more difficult question. And that is which activities really do belong within the government and which should be taken care of by an outside provider. I have been privileged to be present at many of the discussions inside different agencies about how that decision is made, and I look forward to improvements in the process that is used, because the processes I have observed in a number of different settings are not reassuring. I think there is a lot of misunderstanding about what core competency means, there is a lot of misunderstanding about what inherently governmental means, there is a lot of misunderstanding about what the risks are that are present when you are using an internal, as opposed to an external source. We need a lot of learning on the part of our government decisionmakers about this, because this is a strategic decision that has to be made, and I think Dr. Light is right. I think the focus will be moving in that direction. We need to be prepared to keep an eye on that. I also agree, and I guess it has been said several times, but let me emphasize that the secret to the success of this whole program is going to lie in its implementation. I have spent a lot of time in several parts of DOD helping people go through these competitions, and so I have a special appreciation for the challenge that they face. You are asking people who have full-time jobs to take on an additional job they have never had before--and in all likelihood, one they won't have again in the foreseeable future--a very difficult thing. They are going to be doing things that their commercial counterparts do every day for a living, and so they are very good at it. These people are frightened, and they need help. I think that there are lots of things that could be recommended to empower these people. I think we can put together what in the Air Force was called a central tiger team that could go from one location to the next. Experts can come in and provide a very clear way of executing an A-76 study from the government point of view. We can provide just-in-time training. There is a nice program in place which has been recommended at the Defense Acquisition University, that could apply throughout the government. There is nothing special about Defense. Just before one of these studies, the program trains the people who are going to be involved in exactly how the study runs. It is a simple thing to do, and I think it will be quite effective to try. And I think Federal employees can benefit from analytic support from third parties. Unless we spend the money to do that, we are going to be in big trouble. I appreciate Ms. Styles' comments that, on the one hand, we want to get the cost of these competitions down, but on the other hand, if we want them to run right. As Dr. Gansler has suggested, if you want to do this right, it is not going to be cheap, and we shouldn't do it on the cheap. Senator Voinovich. Thank you very much. Senator Lautenberg. Senator Lautenberg. Thanks very much, Mr. Chairman, and thank all of you for your interesting testimony. I am not going to try to create condition, but I can tell you that several hours in the room would probably be a good way to get to understand what it is precisely that we are talking about here because there is no magic that says competition--I think you, Mr. Chairman, said something about it--being the driver always for the best result. Look at the management of some of our great companies that used to exist, I might add, about how they competed for capital dollars, how they competed for wealth and how they competed for position and the kind of chicanery that crept in there to try and make it look like it was straight old competition. Well, it was not. And I come from the management school, and I really do buy into the training of the people that we have, insisting that there be some criteria for performance given to them and discussed with them. We found in my first 18 years here, when I was very involved in the superfund, the development of this program, the management of these huge projects, is that too often the management really did not get to the people who had to do the job and let them understand what was required of them, and we tend to permit those things to slip by in government because of the magnitude of the job, the growth of the responsibility, the growth of our country, the demographic growth. I mean, look at what has happened. We put on maybe 100 million people in the last 25 or 30 years, and there are a lot of services required. So it is complicated. And I do not say you have to keep everybody on the Federal payroll that you started with, but Professor Gansler, I am curious about one thing, do you support tenure as a mark of appropriateness on the college campus? Mr. Gansler. I have to tell you, Senator, I, for most of my life, was either in industry, mostly in industry, and served two terms in the government, and during that period I chaired an advisory board at the University of Virginia and another one at the University of Maryland, and frankly I was against tenure. Now, I have it. [Laughter.] There are some advantages, but clearly I think, in the long run, it is not a good idea. Personally, I don't think it is a good idea. Senator Lautenberg. Therefore, then, if one takes a sabbatical, do not come back or something like that? Mr. Gansler. No, I think you should measure an individual on their performance, and if they do a good job, they should keep their jobs. I believe the same thing should be true for the government workforce, as well as for the private sector. The difference is, in the private sector, I had more flexibility than I did in the government when I had government workers working for me. Senator Lautenberg. Yes. How do the others of you feel about tenure on the campus? I am just curious. Dr. Camm, do you---- Mr. Camm. Well, I don't have tenure. My company doesn't believe in it, and I think it---- Senator Lautenberg. They believe in it, but they just do not enforce it. Mr. Camm. Well, we don't have tenure, and I think we are better for it. I think it makes it a more interesting place to work. Senator Lautenberg. Yes. My company did not have any tenure either, and we got up to 45,000 employees and started with zero, and capital, just good will handed down by our parents, and that was it. We had no--the company is called ADP, Automatic Data Processing, and in business now, 50 years, and I am one of the three founders, and the other two guys are in better shape than I am. So that tells you something about what hard work does. But the fact of the matter is, if there is an incentive, and I do not quite know how we do it in government. You cannot just do it with plaques, and little hors d'oeuvres and a glass of Diet Coke. That is not quite enough. But I will tell you, and I am a firm supporter of the workforce generally in the government, and I see that when they are asked to do things, when there is leadership, they perform as no other workforce that I have seen. And, again, we had a very successful one, and I know lots of people in the private world. And I am considered a Hall of Famer in information processing. I had to do that to match Bill Bradley's Hall of Fame and reputation in similar things---- [Laughter.] But the fact of the matter is that I was a pioneer in outsourcing. That is what that began, and I really believe in it, but what do you outsource? You do not outsource jobs, you outsource assignments, and here we start talking about it as outsourcing jobs. I would prefer another look at things. So, when I look at what has happened--and this is what worries me--I have a particular focus on the FAA and where it belongs. Again, I think it is like the fifth branch of the military, and I cannot believe, and I am sorry that Ms. Styles is not here, that the President would veto a bill that takes care of essential air service, advances the technology and FAA, etc., because we passed, with the help of 11 Republicans, a bill to restrict FAA to inherently government because I have looked at other situations. In Great Britain, since privatization, near misses or other problems have increased by 50 percent. That is near misses in the area. Delays caused by air traffic control have increased by 20 percent, and the story goes on. Debt service has increased by 80 percent. Canada's privatized system has run up a $145-million deficit just in the past year, and I worry about what happens when you buy security on the cheap, and that is what you have got when you are up there, and there is a labor dispute. I mean, we can talk about strike prohibitions here, but when you turn it out to an employer, you cannot say, and, remember, they are not allowed to strike. It is impossible. So the review is an excellent one, and I thank each one of you for your contribution, especially my good friend, the Chairman here, who has an earnest view of the responsibility to employees, but also responsibility to the constituents in the government, and I salute that. I thank you very much. Senator Carper. Is there going to be a second round of questions? Do you have some questions? Senator Voinovich. No, I think we will conclude with yours. Senator Carper. All right. Senator Voinovich. Because we are past the 12 o'clock hour. OPENING STATEMENT OF SENATOR CARPER Senator Carper. I apologize for not being here earlier to hear your testimony. Others of my colleagues and I are working with things on the floor, and we have constituents that are in and trying to meet with us, and so I apologize for having missed your testimony. OPENING PREPARED STATEMENT OF SENATOR CARPER Thank you, Mr. Chairman. I think we would all agree that the goal of any effort to encourage public-private competitions for Federal work should be to ensure that the people best able to do the work win the competition, regardless of whether they are Federal employees or from the private sector. I am concerned, however, that the administration's competitive sourcing initiative, at the very least, sends the message that most work is better handled by the private sector. As a former governor who has some experience managing a public workforce, I can appreciate the President's desire to fix the competitive sourcing process. The old process took too long and probably prevented qualified contractors who could have saved the Federal Government money from competing for work. That said, the new process laid out in revised OMB Circular A-76 probably makes it more likely that private sector bidders will be awarded Federal contracts, even if that is not in our best interests. While I am concerned that some of the new time limits for public-private competitions laid out in the revised rules may not give Federal employees enough time to put forward their best bid, I am most concerned with aspects of the rules that could unfairly tilt the process in the private sector's favor. First, requiring agencies to decide a competition based on ``best value'' instead of cost could be positive if it allows agencies to contract out in situations in which the private bidder is more expensive initially but could save them money in the long run. However, I think it should be made clear that cost should be the main item agencies look at when deciding who wins a competition. Also, while I would generally look on increased competition as a good thing, I do not think it is a good idea to dramatically expand the number of Federal jobs eligible for competition. There are certain jobs, such as air traffic control and food inspection, that I think should not be competed under any set of rules. I am concerned that the revised rules could classify too many sensitive jobs as ``commercial'' in nature and led to irresponsible outsourcing decisions. Finally, while they have been moderated somewhat in recent months, I would argue that the administration's competitive sourcing goals are arbitrary and will force agency managers to compete jobs even when they might not think doing so is the best thing to do. In closing, I will point out that, if we are going to increase public-private competition, we must also increase the resources made available for contracting management and oversight. Federal employees forced to bid for their jobs under tight timelines need to get enough resources to be able to make their best offer. Perhaps more importantly, agencies must also be capable of monitoring contractors to ensure that they are providing taxpayers good service. Thank you, Mr. Chairman, for holding this important hearing and thank you Administrator Styles and Comptroller General Walker for your work on this issue. Senator Carper. I have a summary of what you have said, but I probably will not have a chance to read your testimony. Let me just ask each of you, when I walk out of here, I do not know if I will ever see you fellows, again, but I want to thank you for having come today and shared your thoughts with us. Just take a minute, what would you like for me to take out of this hearing that you think will be most valuable to us as we go through our deliberations? Mr. Camm. What I would suggest is that A-76 should be considered as an integral part of the strategic management of the Federal workforce and that Federal workers must recognize that they are part of a broader economy where competition drives the way the workforce works. When we use the word ``human capital,'' and we use it repeatedly without thinking about what it means, it means you carry a basket of skills with you wherever you go. We need to make sure that the workers in the Federal workforce have the basket of skills they need, whether they stay in the Federal workforce or go someplace else. A-76 is an integral part of that because it trains them in what competition is, and it makes them skilled and useful if they decide to go somewhere else. So I would hope that you would remember A-76 as being an integral part of that strategic human capital planning process. Senator Carper. Thanks. Mr. Tiefer. Mr. Tiefer. What I think we have seen today is, let us put it this way, already this year the issue of outsourcing has been handled a number of times by appropriation riders because last year that is how it was handled, by an anti-quota provision that became Section 647 on the omnibus appropriation because there is a great deal of support in Congress for not having numerical targets for outsourcing, and although there was some modification today, Ms. Styles implicitly adheres to a 15-percent near-term and 50-percent long-term target, the same targets we have been seeing previously this year for what should be put through the competition process, and it is a streamlined process. And so the up-shot is you are going to be seeing plenty more of those appropriation rider votes the rest of the year because we are still stuck with numerical targets. Senator Carper. Thank you. Dr. Light. Mr. Light. I would say that the thing that I would emphasize is that we have a workforce that does the job for the Federal Government that is much larger than just civil servants. If you add up the contractors, and the grantees, the military personnel and Federal civil servants, we have a workforce in the Federal Government of about 12.5 million employees. What we ought to be thinking about is how to make sure they are all performing well, how to make sure they all have the tools to succeed, and how to get on with this very difficult issue of how you sort who does the job. We are dealing with terms here, commercially available, and inherently governmental, that were first applied in the 1950's, and I think we are well beyond the sort of environment in which we invented this system that we use now for sorting jobs. It is just not up to snuff, I would argue, for managing the kind of workforce we have and managing the kinds of functions that we perform. Senator Carper. Thanks, Dr. Light. Dr. Gansler. Mr. Gansler. I would first of all point out, that there have been lots and lots of examples, thousands of examples of competitive sourcing. And what they show is when it is done right, that the benefits of, first, improved performance, and then lower cost, are really very important and worth it for the government, for the appropriate portions of the government, that are doing work that is not inherently governmental. On the other hand, I think it is equally important to recognize that we have a really great workforce, the people are very dedicated. It is not the people that we are trying to attack here. It is the system that basically has a monopoly environment and that no matter who wins the competition--the government or the private sector--there is a significant improvement in performance and a significant reduction in cost. And so we need to move in that direction, as the Chairman said, for 100 percent of the workforce, and this means a high- quality, performance-oriented, excellent workforce. That is the direction that we really need to move in across the board. Competition is one way to do that in those sectors where we have non-inherently governmental work. Senator Carper. Could I have one more minute? Senator Voinovich. Sure. Senator Carper. Governor Voinovich and I were governors once in an earlier life, and I recall debates in the way we awarded construction contracts. We used to award them on lowest bid, and if the---- I like to run. I go back and forth to Delaware every day, and I am a runner. And sometimes when I run, I run by a high school that is not too far from our house. And the school, I see them replacing the windows of the school, and I am reminded of the contract that was let in one of our schools where they were rehabbing an older school, and they let the contract out to the lowest bidder for replacing the windows. It turned out the company did not know what they were doing, did a lousy job, a couple of years later had to replace the windows, but we awarded the bid on the lowest possible cost, not best value. I remember the governor's house down in Dover. It is an old house, in fact, over 200 years old. It is the oldest governor's mansion in America. And I remember we had to replace the patio around the house, George, and the folks that came in to do the masonry work won it on the lowest bid, the lowest cost, but as it turns out the work that they did had to be basically ripped up and replaced within a year--not best value. Somewhere inherent in this debate is the question of awarding bids who work on the lowest cost versus best value--my last question is to ask you your thoughts on either approach. Mr. Camm. The government wants to move towards the use of performance-based contracting. This is standard policy in the Department of Defense. It is spreading to the rest of the government as well. They have learned this from the commercial sector. In the commercial sector, you cannot do performance-based contracting successfully unless you are also doing best-value competition. The reason for that is that you don't want to rely in a performance-based contract on the minimum cost offeror. And so I would say that, because we have this policy of pursuing performance-based contracts, we have to recognize that it has to be matched to a sourcing policy based on best value. That is true for private-private competitions; it is true for public-private competitions. I am very concerned that right now Congress does not allow the Department of Defense to use best-value in public-private competitions. I think we are going to run into trouble down the road, because the Department of Defense is pursuing these performance-based arrangements. DoD is going to get poor providers, and they are not going to work. So I am quite concerned about it. Senator Carper. Thank you. Mr. Tiefer. Mr. Tiefer. Senator Carper, the new A-76 makes a change I think in the wrong direction in the area that you are talking about--I discuss it on Page 13 of my written testimony--in that you now can have a competition, a public-private competition of a certain kind, a specialized kind, in which, a trade-off kind it is called, in which they not only have gone away from lowest cost, but there is not even a requirement, there was in the draft, and it was taken out in the final, there is not even a requirement of a ``quantifiable'' basis for choosing the private contractor. Now, the history that you described is your classic correct executive perspective, which is the movement, the evolution from pure cost comparisons to best value, and it is a classic correct analysis, but at least there should be a quantifiable basis, and that, for the choice, and now that has been taken out even of the final. Senator Carper. Thank you. Dr. Light and Dr. Gansler, we have about 6 minutes to go in a vote that is underway, so I will just ask you to use about a minute apiece, if you would. Mr. Light. Yes, I agree with Frank Camm on this issue. The problem is that we have an environment that is so distrustful right now between the people making the decisions about outsourcing or competitive sourcing and the people who are involved in actually the target or the emphasis of this that I don't see how we can create a political environment in which we could allow for a best-value competition. I don't see why, I mean, on the surface, you would like to get away from price as the consideration here because it is entirely conceivable that a private contractor could do a job better at a higher price or that a Federal unit could do the job better at a higher price. You get better value, but the politics of this are just so extreme right now, and the anxiety in the workforce so extreme that I just don't see how we get there. Maybe if we do this work on defining terms more carefully so that we could bring a quantitative position to bear on it, perhaps. Senator Carper. Thank you. Mr. Gansler. I think we must use best value. It is clearly the objective here has to be to improve performance at lower cost. It is the improved service that is really the objective, and if you don't use best value, what you get is cheap service, and that is not acceptable service, as far as I am concerned. The answer has to be to move towards best value. It will be more difficult because it becomes more subjective in some ways, but even the performance is measurable in most cases, and you should be able to use that the same way you and I do when we go out shopping in the stores. We don't buy the cheapest, we buy something that is the best value. Senator Carper [presiding]. My wife says I buy the cheapest. [Laughter.] I tell her I am looking for the best value. That is what we ought to be looking for, I think, for our taxpayers. But you are good to come here and share your time and your thoughts with all of us. Senator Voinovich has gone to vote, and I probably ought to go join him or I am going to miss this opportunity. Thank you very much, and the Committee stands adjourned. [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] A P P E N D I X ---------- [GRAPHIC] [TIFF OMITTED] T8936.008 [GRAPHIC] [TIFF OMITTED] T8936.009 [GRAPHIC] [TIFF OMITTED] T8936.010 [GRAPHIC] [TIFF OMITTED] T8936.011 [GRAPHIC] [TIFF OMITTED] T8936.012 [GRAPHIC] [TIFF OMITTED] T8936.013 [GRAPHIC] [TIFF OMITTED] T8936.014 [GRAPHIC] [TIFF OMITTED] T8936.015 [GRAPHIC] [TIFF OMITTED] T8936.016 [GRAPHIC] [TIFF OMITTED] T8936.017 [GRAPHIC] [TIFF OMITTED] T8936.018 [GRAPHIC] [TIFF OMITTED] T8936.019 [GRAPHIC] [TIFF OMITTED] T8936.020 [GRAPHIC] [TIFF OMITTED] T8936.021 [GRAPHIC] [TIFF OMITTED] T8936.022 [GRAPHIC] [TIFF OMITTED] T8936.023 [GRAPHIC] [TIFF OMITTED] T8936.024 [GRAPHIC] [TIFF OMITTED] T8936.025 [GRAPHIC] [TIFF OMITTED] T8936.026 [GRAPHIC] [TIFF OMITTED] T8936.027 [GRAPHIC] [TIFF OMITTED] T8936.028 [GRAPHIC] [TIFF OMITTED] T8936.029 [GRAPHIC] [TIFF OMITTED] T8936.030 [GRAPHIC] [TIFF OMITTED] T8936.031 [GRAPHIC] [TIFF OMITTED] T8936.032 [GRAPHIC] [TIFF OMITTED] T8936.033 [GRAPHIC] [TIFF OMITTED] T8936.034 [GRAPHIC] [TIFF OMITTED] T8936.035 [GRAPHIC] [TIFF OMITTED] T8936.036 [GRAPHIC] [TIFF OMITTED] T8936.037 [GRAPHIC] [TIFF OMITTED] T8936.038 [GRAPHIC] [TIFF OMITTED] T8936.039 [GRAPHIC] [TIFF OMITTED] T8936.040 [GRAPHIC] [TIFF OMITTED] T8936.041 [GRAPHIC] [TIFF OMITTED] T8936.042 [GRAPHIC] [TIFF OMITTED] T8936.043 [GRAPHIC] [TIFF OMITTED] T8936.044 [GRAPHIC] [TIFF OMITTED] T8936.045 [GRAPHIC] [TIFF OMITTED] T8936.046 [GRAPHIC] [TIFF OMITTED] T8936.047 [GRAPHIC] [TIFF OMITTED] T8936.048 [GRAPHIC] [TIFF OMITTED] T8936.049 [GRAPHIC] [TIFF OMITTED] T8936.050 [GRAPHIC] [TIFF OMITTED] T8936.051 [GRAPHIC] [TIFF OMITTED] T8936.052 [GRAPHIC] [TIFF OMITTED] T8936.053 [GRAPHIC] [TIFF OMITTED] T8936.054 [GRAPHIC] [TIFF OMITTED] T8936.055 [GRAPHIC] [TIFF OMITTED] T8936.056 [GRAPHIC] [TIFF OMITTED] T8936.057 [GRAPHIC] [TIFF OMITTED] T8936.058 [GRAPHIC] [TIFF OMITTED] T8936.059 [GRAPHIC] [TIFF OMITTED] T8936.060 [GRAPHIC] [TIFF OMITTED] T8936.061 [GRAPHIC] [TIFF OMITTED] T8936.062 [GRAPHIC] [TIFF OMITTED] T8936.063 [GRAPHIC] [TIFF OMITTED] T8936.064 [GRAPHIC] [TIFF OMITTED] T8936.065 [GRAPHIC] [TIFF OMITTED] T8936.066 [GRAPHIC] [TIFF OMITTED] T8936.067 [GRAPHIC] [TIFF OMITTED] T8936.068 [GRAPHIC] [TIFF OMITTED] T8936.069 [GRAPHIC] [TIFF OMITTED] T8936.070 [GRAPHIC] [TIFF OMITTED] T8936.071 [GRAPHIC] [TIFF OMITTED] T8936.072 [GRAPHIC] [TIFF OMITTED] T8936.073 [GRAPHIC] [TIFF OMITTED] T8936.074 [GRAPHIC] [TIFF OMITTED] T8936.075 [GRAPHIC] [TIFF OMITTED] T8936.076 [GRAPHIC] [TIFF OMITTED] T8936.077 [GRAPHIC] [TIFF OMITTED] T8936.078 [GRAPHIC] [TIFF OMITTED] T8936.079 [GRAPHIC] [TIFF OMITTED] T8936.080 [GRAPHIC] [TIFF OMITTED] T8936.081 [GRAPHIC] [TIFF OMITTED] T8936.082 [GRAPHIC] [TIFF OMITTED] T8936.083 [GRAPHIC] [TIFF OMITTED] T8936.084 [GRAPHIC] [TIFF OMITTED] T8936.085 [GRAPHIC] [TIFF OMITTED] T8936.086 [GRAPHIC] [TIFF OMITTED] T8936.087 [GRAPHIC] [TIFF OMITTED] T8936.088 [GRAPHIC] [TIFF OMITTED] T8936.089 [GRAPHIC] [TIFF OMITTED] T8936.090 [GRAPHIC] [TIFF OMITTED] T8936.091 [GRAPHIC] [TIFF OMITTED] T8936.092 [GRAPHIC] [TIFF OMITTED] T8936.093 [GRAPHIC] [TIFF OMITTED] T8936.094 [GRAPHIC] [TIFF OMITTED] T8936.095 [GRAPHIC] [TIFF OMITTED] T8936.096 [GRAPHIC] [TIFF OMITTED] T8936.097 [GRAPHIC] [TIFF OMITTED] T8936.098 [GRAPHIC] [TIFF OMITTED] T8936.099 [GRAPHIC] [TIFF OMITTED] T8936.100 [GRAPHIC] [TIFF OMITTED] T8936.101 [GRAPHIC] [TIFF OMITTED] T8936.102 [GRAPHIC] [TIFF OMITTED] T8936.103 [GRAPHIC] [TIFF OMITTED] T8936.104 [GRAPHIC] [TIFF OMITTED] T8936.105 [GRAPHIC] [TIFF OMITTED] T8936.106 [GRAPHIC] [TIFF OMITTED] T8936.107 [GRAPHIC] [TIFF OMITTED] T8936.108 [GRAPHIC] [TIFF OMITTED] T8936.109 [GRAPHIC] [TIFF OMITTED] T8936.110 [GRAPHIC] [TIFF OMITTED] T8936.111 [GRAPHIC] [TIFF OMITTED] T8936.112 [GRAPHIC] [TIFF OMITTED] T8936.113 [GRAPHIC] [TIFF OMITTED] T8936.114 [GRAPHIC] [TIFF OMITTED] T8936.115 [GRAPHIC] [TIFF OMITTED] T8936.116 [GRAPHIC] [TIFF OMITTED] T8936.117 [GRAPHIC] [TIFF OMITTED] T8936.118 [GRAPHIC] [TIFF OMITTED] T8936.119 [GRAPHIC] [TIFF OMITTED] T8936.120 [GRAPHIC] [TIFF OMITTED] T8936.121 [GRAPHIC] [TIFF OMITTED] T8936.122 [GRAPHIC] [TIFF OMITTED] T8936.123 [GRAPHIC] [TIFF OMITTED] T8936.124 [GRAPHIC] [TIFF OMITTED] T8936.125 [GRAPHIC] [TIFF OMITTED] T8936.126 [GRAPHIC] [TIFF OMITTED] T8936.127 [GRAPHIC] [TIFF OMITTED] T8936.128 [GRAPHIC] [TIFF OMITTED] T8936.129 [GRAPHIC] [TIFF OMITTED] T8936.130 [GRAPHIC] [TIFF OMITTED] T8936.131 [GRAPHIC] [TIFF OMITTED] T8936.132 [GRAPHIC] [TIFF OMITTED] T8936.133 [GRAPHIC] [TIFF OMITTED] T8936.134 [GRAPHIC] [TIFF OMITTED] T8936.135 [GRAPHIC] [TIFF OMITTED] T8936.136 [GRAPHIC] [TIFF OMITTED] T8936.137 [GRAPHIC] [TIFF OMITTED] T8936.138 [GRAPHIC] [TIFF OMITTED] T8936.139 [GRAPHIC] [TIFF OMITTED] T8936.140 [GRAPHIC] [TIFF OMITTED] T8936.141 [GRAPHIC] [TIFF OMITTED] T8936.142 [GRAPHIC] [TIFF OMITTED] T8936.143 [GRAPHIC] [TIFF OMITTED] T8936.144 [GRAPHIC] [TIFF OMITTED] T8936.145 [GRAPHIC] [TIFF OMITTED] T8936.146 [GRAPHIC] [TIFF OMITTED] T8936.147 [GRAPHIC] [TIFF OMITTED] T8936.148 [GRAPHIC] [TIFF OMITTED] T8936.149 [GRAPHIC] [TIFF OMITTED] T8936.150 [GRAPHIC] [TIFF OMITTED] T8936.151 [GRAPHIC] [TIFF OMITTED] T8936.152 [GRAPHIC] [TIFF OMITTED] T8936.153 [GRAPHIC] [TIFF OMITTED] T8936.154 [GRAPHIC] [TIFF OMITTED] T8936.155 [GRAPHIC] [TIFF OMITTED] T8936.156 [GRAPHIC] [TIFF OMITTED] T8936.157 [GRAPHIC] [TIFF OMITTED] T8936.158 [GRAPHIC] [TIFF OMITTED] T8936.159 [GRAPHIC] [TIFF OMITTED] T8936.160 [GRAPHIC] [TIFF OMITTED] T8936.161 [GRAPHIC] [TIFF OMITTED] T8936.162 [GRAPHIC] [TIFF OMITTED] T8936.163 [GRAPHIC] [TIFF OMITTED] T8936.164 [GRAPHIC] [TIFF OMITTED] T8936.165 [GRAPHIC] [TIFF OMITTED] T8936.166 [GRAPHIC] [TIFF OMITTED] T8936.167 [GRAPHIC] [TIFF OMITTED] T8936.168 [GRAPHIC] [TIFF OMITTED] T8936.169 [GRAPHIC] [TIFF OMITTED] T8936.170 [GRAPHIC] [TIFF OMITTED] T8936.171 [GRAPHIC] [TIFF OMITTED] T8936.172 [GRAPHIC] [TIFF OMITTED] T8936.173 [GRAPHIC] [TIFF OMITTED] T8936.174 [GRAPHIC] [TIFF OMITTED] T8936.175 [GRAPHIC] [TIFF OMITTED] T8936.176 [GRAPHIC] [TIFF OMITTED] T8936.177 [GRAPHIC] [TIFF OMITTED] T8936.178 [GRAPHIC] [TIFF OMITTED] T8936.179 [GRAPHIC] [TIFF OMITTED] T8936.180 [GRAPHIC] [TIFF OMITTED] T8936.181 [GRAPHIC] [TIFF OMITTED] T8936.182 [GRAPHIC] [TIFF OMITTED] T8936.183 [GRAPHIC] [TIFF OMITTED] T8936.184 [GRAPHIC] [TIFF OMITTED] T8936.185 [GRAPHIC] [TIFF OMITTED] T8936.186 [GRAPHIC] [TIFF OMITTED] T8936.187 [GRAPHIC] [TIFF OMITTED] T8936.188 [GRAPHIC] [TIFF OMITTED] T8936.189 [GRAPHIC] [TIFF OMITTED] T8936.190 [GRAPHIC] [TIFF OMITTED] T8936.191 [GRAPHIC] [TIFF OMITTED] T8936.192 [GRAPHIC] [TIFF OMITTED] T8936.193 [GRAPHIC] [TIFF OMITTED] T8936.194 [GRAPHIC] [TIFF OMITTED] T8936.195 [GRAPHIC] [TIFF OMITTED] T8936.196 [GRAPHIC] [TIFF OMITTED] T8936.197 [GRAPHIC] [TIFF OMITTED] T8936.198 [GRAPHIC] [TIFF OMITTED] T8936.199 [GRAPHIC] [TIFF OMITTED] T8936.200 [GRAPHIC] [TIFF OMITTED] T8936.201 [GRAPHIC] [TIFF OMITTED] T8936.202 [GRAPHIC] [TIFF OMITTED] T8936.203 [GRAPHIC] [TIFF OMITTED] T8936.204 [GRAPHIC] [TIFF OMITTED] T8936.205 [GRAPHIC] [TIFF OMITTED] T8936.206 [GRAPHIC] [TIFF OMITTED] T8936.207 [GRAPHIC] [TIFF OMITTED] T8936.208 [GRAPHIC] [TIFF OMITTED] T8936.209 [GRAPHIC] [TIFF OMITTED] T8936.210 [GRAPHIC] [TIFF OMITTED] T8936.211 [GRAPHIC] [TIFF OMITTED] T8936.212 [GRAPHIC] [TIFF OMITTED] T8936.213 [GRAPHIC] [TIFF OMITTED] T8936.214 [GRAPHIC] [TIFF OMITTED] T8936.215 [GRAPHIC] [TIFF OMITTED] T8936.216 [GRAPHIC] [TIFF OMITTED] T8936.217 [GRAPHIC] [TIFF OMITTED] T8936.218 [GRAPHIC] [TIFF OMITTED] T8936.219 [GRAPHIC] [TIFF OMITTED] T8936.220 [GRAPHIC] [TIFF OMITTED] T8936.221 [GRAPHIC] [TIFF OMITTED] T8936.222 [GRAPHIC] [TIFF OMITTED] T8936.223 [GRAPHIC] [TIFF OMITTED] T8936.224 [GRAPHIC] [TIFF OMITTED] T8936.225 [GRAPHIC] [TIFF OMITTED] T8936.226 [GRAPHIC] [TIFF OMITTED] T8936.227 [GRAPHIC] [TIFF OMITTED] T8936.228 [GRAPHIC] [TIFF OMITTED] T8936.229 [GRAPHIC] [TIFF OMITTED] T8936.230