Department of Labor:

Better Cost Assessments and Departmentwide Performance Tracking Are Needed to Effectively Manage Competitive Sourcing Program

GAO-09-14: Published: Nov 21, 2008. Publicly Released: Nov 21, 2008.

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Competition between federal and private organizations to provide services--referred to as "competitive sourcing"--can be one way to help achieve greater efficiency in government. Under guidance from the Office of Management and Budget (OMB), competitive sourcing has been implemented at various executive branch agencies over the years. As required under the Consolidated Appropriations Act, 2008 and directed by House Report 110-231, this report examines the use of competitive sourcing at the Department of Labor (DOL). Specifically, GAO examined the comprehensiveness and reliability of DOL's performance and cost assessments in accordance with OMB and DOL guidance as well as the impact of competitive sourcing on certain DOL workers. To address these issues, GAO reviewed relevant statutes, guidance, reports and personnel actions; and interviewed OMB and DOL officials and 60 DOL staff, grouped by role, in four locations.

DOL first began conducting public-private competitions as part of its competitive sourcing program in fiscal year 2004, and since that time, it has set up performance and cost reporting systems to monitor progress in meeting the goals of competitive sourcing--that is, to obtain high-quality services at a reasonable cost and to achieve outcomes that represent the best deal for the taxpayer. For the most part, we found that DOL's policies and procedures were followed in conducting competitive sourcing activities; however, a number of weaknesses inhibit DOL's ability to reliably and comprehensively assess whether competitive sourcing achieves the outcomes promised. DOL lacks a departmentwide process for tracking and addressing deficiencies and recommendations for improvements that are identified in postcompetition accountability reviews. Though consistent with OMB guidance, DOL excluded a number of substantial costs in its reports to Congress--such as the costs for precompetition planning, certain transition costs and staff time, and postcompetition review activities--thereby understating the full costs of this contracting approach. DOL's savings reports are not reliable: a sample of three reports contained inaccuracies, and others used projections when actual numbers were available, which sometimes resulted in overstated savings. Because of these and other weaknesses, DOL is hindered in its ability to determine if services are being provided more efficiently as a result of competitive sourcing. Moreover, though not a representative sample of DOL personnel, in GAO's interviews with 60 employees involved with five competitions (including employees who assisted with competition activities, as well as employees whose positions were affected by the competitions), most said that they were dissatisfied with how the competitive sourcing process was implemented and that it had a negative impact on morale. Overall, DOL's competitions have resulted in few job losses or salary reductions. Among the 314 workers who experienced a personnel action, 263 were reassigned to new positions with the same title and pay or were promoted. In addition, of the 16 workers who were demoted, 14 were able to retain their same grade or pay. At the same time, certain groups have been impacted more than others. For example, though small in numbers, all 22 of those who were either demoted or laid off were African-American, while 10 of the 15 workers who were promoted were Caucasian. OMB recently issued new guidance that directs agencies to use a variety of tools to manage their commercial activities, including--but not limited to-- competitive sourcing. However, unless agencies are required to comprehensively track all the costs associated with competitive sourcing, it will be difficult to assess which tool may provide the best outcome in terms of efficiency in the management of commercial activities.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: As a result of changes in the laws and policies affecting the initiation and continuity of competitive sourcing programs by the Department of Labor (DOL) and other agencies, DOL no longer has a Competitive Sourcing Program. Thus, DOL informed us that our recommendations for DOL's Competitive Sourcing Program are no longer applicable. In addition, all DOL "Most Efficient Organizations" implemented under prior Competitive Sourcing actions either have expired or have been terminated.

    Recommendation: To improve the reliability and comprehensiveness of DOL's performance assessments and savings estimates in its competitive sourcing program, the Secretary of Labor should implement a system to track the full costs associated with managing DOL's commercial management activities, including--but not limited to--all costs associated with competitive sourcing.

    Agency Affected: Department of Labor

  2. Status: Closed - Not Implemented

    Comments: As a result of changes in the laws and policies affecting the initiation and continuity of competitive sourcing programs by the Department of Labor (DOL) and other agencies, DOL no longer has a Competitive Sourcing Program. Thus, DOL informed us that our recommendations for DOL's Competitive Sourcing Program are no longer applicable. In addition, all DOL "Most Efficient Organizations" implemented under prior Competitive Sourcing actions either have expired or have been terminated.

    Recommendation: To improve the reliability and comprehensiveness of DOL's performance assessments and savings estimates in its competitive sourcing program, the Secretary of Labor should implement a consistently applied, departmentwide system to track identified deficiencies and recommendations for improvement in each of the competitions and the program overall.

    Agency Affected: Department of Labor

  3. Status: Closed - Not Implemented

    Comments: In FY 2011, the federal government published a plan that defines what government positions are inherently governmental and what can be contracted out; however, this plan does not address cost issues associated with competitive sourcing. Further, in FY2011 civilian agencies like DOL did not conduct A-76 competitions, due to a governmentwide moratorium on A-76 contracting.

    Recommendation: In the interest of providing agency decision makers and policymakers with more complete information on the total costs associated with competitive sourcing, in addition to the current cost reports that OMB requires agencies to prepare, the Director of OMB should require agencies to systematically report all costs associated with competitive sourcing, including regular full-time equivalent (FTE) staff wages for time spent on planning and conducting competitions, as well as all other precompetition, transition, and implementation costs, including postcompetition monitoring or accountability reviews.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  4. Status: Closed - Not Implemented

    Comments: As a result of changes in the laws and policies affecting the initiation and continuity of competitive sourcing programs by the Department of Labor (DOL) and other agencies, DOL no longer has a Competitive Sourcing Program. Thus, DOL informed us that our recommendations for DOL's Competitive Sourcing Program are no longer applicable. In addition, all DOL "Most Efficient Organizations" implemented under prior Competitive Sourcing actions either have expired or have been terminated.

    Recommendation: To improve the reliability and comprehensiveness of DOL's performance assessments and savings estimates in its competitive sourcing program, the Secretary of Labor should develop and implement a review process to ensure the accuracy of competitive sourcing savings reports to Congress.

    Agency Affected: Department of Labor

 

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