This is the accessible text file for GAO report number GAO-09-14
entitled 'Department Of Labor: Better Cost Assessments and
Departmentwide Performance Tracking Are Needed to Effectively Manage
Competitive Sourcing Program' which was released on November 21, 2008.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Committees:
United States Government Accountability Office:
GAO:
November 2008:
Department Of Labor:
Better Cost Assessments and Departmentwide Performance Tracking Are
Needed to Effectively Manage Competitive Sourcing Program:
GAO-09-14:
GAO Highlights:
Highlights of GAO-09-14, a report to congressional committees.
Why GAO Did This Study:
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.
What GAO Found:
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.
What GAO Recommends:
GAO recommends that OMB direct federal agencies to report all costs
associated with competitive sourcing and that DOL track all such costs.
OMB said it would work with the next administration as it considers
GAO’s recommendation. DOL said it would wait for guidance from OMB
before tracking all costs. GAO also recommends that DOL implement
systems to track performance and review the accuracy of its savings
reports. DOL agreed to implement these systems.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/products/GAO-09-14]. For more
information, contact George Scott at (202) 512-7215 or scottg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOL Has Established a Performance Assessment System but Does Not Track
Deficiencies or Recommendations for Improvement Departmentwide:
DOL Competitive Sourcing Cost Reports Are Not Comprehensive or
Reliable:
DOL's Competitions Rarely Resulted in Lost Jobs or Lower Salaries, but
Employees Report Negative Impacts on Morale:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: DOL's Categorization of Commercial Activities:
Appendix III: Required Reporting and Monitoring for Competitive
Sourcing:
Appendix IV: Postcompetition Accountability Review Checklist:
Appendix V: List of DOL Competitive Sourcing Competitions, Fiscal Years
2004 through 2007:
Appendix VI: Comments from the Office of Management and Budget:
Appendix VII: Comments from the Department of Labor:
Appendix VIII: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Competitive Sourcing at DOL, Fiscal Years 2004 through 2007:
Table 2: Incremental Competition Costs to Be Included and Excluded in
Annual Reports to Congress:
Table 3: DOL Competitions Selected as the Focus for GAO's Group
Interviews:
Table 4: DOL Employees Participating in GAO's Group Interviews:
Table 5: DOL's Categorization of Work Activities, Fiscal Year 2006:
Table 6: Reporting and Monitoring Requirements:
Figures:
Figure 1: The Competition Process at DOL:
Figure 2: Effects of Competitive Sourcing on DOL Workers, Fiscal Years
2004 through 2007:
Figure 3: Race/National Origin of Affected Personnel, Compared with
General DOL Personnel, Fiscal Years 2004 through 2007:
Figure 4: Gender and Age of Affected Personnel, Compared with General
DOL Personnel, Fiscal Years 2004 through 2007:
Figure 5: Interview Respondents' Reported Satisfaction Levels with the
Competitive Sourcing Process:
Figure 6: DOL Postcompetition Accountability Preliminary Review
Checklist:
Abbreviations:
AFGE: American Federation of Government Employees:
DOD: Department of Defense:
DOL: Department of Labor:
FAIR Act: Federal Activities Inventory Reform Act of 1998:
FTE: full-time equivalent:
MEO: most efficient organization:
OMB: Office of Management and Budget:
PCAR: postcompetition accountability review:
USDA: Department of Agriculture:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 21, 2008:
The Honorable Tom Harkin:
Chairman:
The Honorable Arlen Specter:
Ranking Member:
Subcommittee on Labor, Health and Human Services, Education, and
Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable David R. Obey:
Chairman:
The Honorable James T. Walsh:
Ranking Member:
Subcommittee on Labor, Health and Human Services, Education, and
Related Agencies:
Committee on Appropriations:
House of Representatives:
Since 1955, the federal government has encouraged competition between
federal and private sector organizations to provide specific services-
-an initiative referred to as "competitive sourcing." Since 2001,
competitive sourcing has been one of the key elements of the
President's Management Agenda, implemented under guidance from the
Office of Management and Budget (OMB) in Circular No. A-76. Over the
years, GAO has reported on a number of issues related to competitive
sourcing at various executive branch agencies,[Footnote 1] including
the extent to which there are plans and guidance to help agencies
implement the competitive sourcing program effectively and whether
savings are likely to be achieved.
The Department of Labor (DOL) began conducting public-private
competitions in fiscal year 2004.[Footnote 2] From fiscal years 2004
through 2007, DOL held 28 competitions involving 1,029 full-time
equivalent (FTE)[Footnote 3] government positions designated as
commercial,[Footnote 4] such as training specialists, information
technology specialists, and maintenance mechanics. DOL planned to
compete nearly 700 additional FTEs during fiscal years 2008 and 2009;
however, these plans have been put on hold pursuant to federal law.
[Footnote 5] Given that DOL employees have won all but three of the
competitions DOL has held, Congress is interested in determining
whether competitive sourcing has achieved increased efficiency or cost
savings at DOL. In addition, since competitive sourcing may also result
in government employees being reassigned or losing their jobs, Congress
expressed concern over DOL's implementation of this initiative and its
implications for the federal workforce.
As required under the Consolidated Appropriations Act, 2008 and as
directed by the House Committee on Appropriations,[Footnote 6] this
report examines the use of competitive sourcing at DOL. The House
Committee on Appropriations directed that we review the extent to which
DOL has established a reliable and comprehensive system to track costs,
savings, and the quality of work performed by contractors, as well as
DOL's adherence to the principles adopted in 2002 by the Commercial
Activities Panel chaired by the Comptroller General.[Footnote 7] In
response, as agreed with your staffs, this report addresses the
following:
1. The extent to which DOL established a reliable and comprehensive
system to assess the quality of work performed as a result of
competitive sourcing.
2. The comprehensiveness and reliability of DOL's assessments of the
savings and costs associated with competitive sourcing.
3. The implications of competitive sourcing for certain DOL worker
populations, such as women and minorities.
To address these issues, we focused on DOL's competitive sourcing
activities from fiscal years 2004 through 2007, including all 28
competitions DOL conducted during this period. We examined relevant
statutes, regulations, and OMB guidance on competitive sourcing, DOL
internal policies and guidance on competitive sourcing, competition
announcements, annual reports to Congress, GAO reports, and related
documents. We interviewed DOL officials, OMB officials, representatives
from the American Federation of Government Employees (AFGE), two
private sector companies, and the president of a leading national
private sector trade association representing over 300 companies. To
assess the quality of work performed as a result of competitive
sourcing, we examined all 18 of DOL's initial postcompetition
accountability reviews (PCAR) conducted as of July 2008 and evaluated
the structure and content of these reviews according to DOL and OMB
policy. To assess DOL's savings and cost reports, we interviewed the
agency officials responsible for preparing these reports and reviewed
the process they used to compile them. To assess the accuracy of the
reports, we reviewed the documents from all 18 initial PCARs and
conducted more detailed analyses of the calculations for a simple
random sample of three reports for competitions with initial PCARs
completed between 2006 and 2007 and interviewed agency officials
knowledgeable about these reports. Due to this limited sample size, no
inferences can be made about the accuracy of savings and cost reports
across all of DOL's competitions. To identify the implications of
competitive sourcing for certain DOL worker populations, we analyzed
DOL's demographic data on overall departmentwide personnel and compared
it with the demographic data for all DOL employees who experienced a
personnel action as a result of competitions conducted during fiscal
years 2004 through 2007. We also obtained a range of employees'
perspectives on the competitive sourcing process by conducting group
interviews with 60 DOL managers and employees who either assisted with
competition activities or whose positions were affected by five
competitions in four locations throughout the United States. We
assessed the reliability of the savings, cost, and demographic data by
reviewing information about the systems that produced the data and
interviewing agency officials knowledgeable about these systems. We
determined that the data were sufficiently reliable for the purposes of
our report. For a more detailed discussion of our methodology, see
appendix I.
We conducted this performance audit from October 2007 to September 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Results in Brief:
DOL has made progress developing a system to assess the performance of
winning service providers in its competitive sourcing program, but DOL
does not track progress in addressing identified deficiencies or
recommendations for improving performance at a departmentwide level.
DOL developed policy and procedures for conducting performance
assessments according to formal review and inspection requirements in
OMB Circular No. A-76 and the Federal Acquisition Regulation. In our
review of all assessments conducted as of July 2008, we found that
DOL's policy and procedures generally were followed in conducting these
assessments. For example, the majority of initial assessments reported
information on lessons learned. However, DOL does not ensure that
deficiencies identified and recommendations made in initial performance
assessments are tracked and followed up on at a departmentwide level.
Instead, DOL relies on an ad hoc process for addressing deficiencies
and recommendations for improvement. As a result, DOL is hindered in
its ability to systematically track performance trends or improvements
to identified deficiencies departmentwide and to determine if the
winning service providers are performing more efficiently than the
prior service providers.
DOL's savings reports, while adhering to OMB reporting guidance,
exclude many of the costs associated with competitive sourcing and are
unreliable. In reporting its estimated $15.7 million in savings due to
competitive sourcing from fiscal years 2004 through 2007, DOL excluded
a number of substantial items, including the time in-house staff spent
on competition activities, precompetition planning, certain transition
costs, and postcompetition review activities. OMB does not require
agencies to report these costs because they reflect what would be
incurred as part of an agency's typical management responsibilities.
However, our analysis shows that these costs can be substantial and
that excluding them overstates savings achieved by competitive
sourcing. For example, we found that including in-house staff time
spent on competition activities would have doubled the costs reported
for one competition. In addition, DOL competition savings reports are
unreliable and do not provide an accurate measure of competitive
sourcing savings. All three of the competitions that we randomly
selected and analyzed had inaccuracies. For example, DOL excluded
contract administration costs from one competition's savings figure,
overstating savings by about $185,000 a year, or 25 percent. In
addition to these inaccuracies, DOL used projections to estimate
savings for seven of its competitions when actual numbers should have
been used, sometimes resulting in overstated savings. In one
competition, actual staffing costs were 45 percent higher than those
originally projected. Finally, the cost baseline used by DOL to
estimate savings was inaccurate and misrepresented savings in some
cases, such as when pre-existing, budgeted personnel vacancies
increased the savings attributed to completed competitions.
DOL's competitions rarely resulted in lost jobs or salary reductions
for DOL workers, but many experienced changes to their jobs, and those
we interviewed who were involved in the process reported negative
impacts on morale. In the 28 competitions DOL held during fiscal years
2004 through 2007, a total of 314 employees experienced formal changes
to their jobs (that is, changes reflected in personnel actions). Of
these employees, 248 were reassigned to different positions within DOL
at the same federal grade and salary level, and 15 were promoted to a
higher federal grade level. Another 16 were demoted to a lower federal
grade level, but these employees generally retained the same salary
they had before the competition due to grade or salary protection
provisions. Of the remaining workers who left DOL, 29 left voluntarily
through retirement or with a monetary separation incentive. Only 6
employees were laid off from the federal workforce. Among those 314
workers who experienced a personnel action of some type, 47 percent
were African-American (including all those who were either demoted or
laid off), 60 percent were women, and 89 percent were 40 years old or
older--significantly higher proportions than their representation in
the general DOL workforce overall. DOL management stated that they made
their best efforts to treat well those employees whose jobs were
competed. For example, they offered reassignments, voluntary early
retirement options, separation incentives, and other services for
career transition. Nevertheless, in our interviews with DOL employees
who assisted with competition activities or whose positions were
affected by the competitions--though not a representative sample--we
found that employees who were satisfied, as well as those who were
dissatisfied, with the competitive sourcing process reported negative
impacts on morale for themselves and others.
We have previously reported that other federal agencies--the Department
of Defense (DOD) and the Department of Agriculture's (USDA) Forest
Service, in particular--did not develop comprehensive estimates for the
costs associated with competitive sourcing. This report identifies
similar issues at DOL. Without a better system to assess performance
and comprehensively track all the costs associated with competitive
sourcing, DOL cannot reliably assess whether competitive sourcing truly
provides the best deal for the taxpayer. We are recommending that the
Director of OMB require agencies to systematically report all costs
associated with competitive sourcing. In addition, we are recommending
that the Secretary of Labor take the following three actions:
* implement a consistently applied, departmentwide system to track
identified deficiencies and recommendations for improvement in each of
the competitions and the competitive sourcing program overall;
* implement a system to track the full costs associated with managing
its commercial management activities, including--but not limited to--
all costs associated with competitive sourcing; and:
* develop and implement a review process to ensure the accuracy of
competitive sourcing savings reports to Congress.
OMB and DOL provided written comments on a draft of this report, which
are reprinted in appendixes VI and VII, respectively. In comments on
our draft, OMB concurred with our conclusion that all agencies can
maximize savings and performance benefits by ensuring that appropriate
internal controls are in place to monitor results. DOL agreed with our
recommendation to implement a departmentwide system to track identified
deficiencies and recommendations for improvement, as well as our
recommendation to conduct an internal review process to ensure the
accuracy of its savings reports. DOL expressed concerns about our
recommendation to implement a system to track full costs related to
competitive sourcing in the absence of governmentwide guidance from OMB
to do so. We continue to maintain that federal agencies like DOL need
to track all costs associated with competitive sourcing so that they
can accurately determine if competitive sourcing is the most cost-
effective tool for managing certain commercial activities. This is a
separate issue from our recommendation that the Director of OMB require
federal agencies to report all costs associated with competitive
sourcing. We maintain that reporting all costs would enhance the
transparency surrounding the estimates of savings from competitive
sourcing and provide for accountability in connection with sourcing
decisions--one of the principles of the Commercial Activities Panel.
OMB questioned the need for reporting all costs associated with
competitive sourcing but said that it would work with the transition
team so the next administration will be fully informed about the
costing policies for competitive sourcing as it considers our
recommendation.
Background:
[Commercial Activities Panel: Principles to Guide Competitive Sourcing:
As listed in the panel’s final report issued in 2002, federal sourcing
policy should adhere to the following principles:
1. Support agency missions, goals, and objectives.
2. Be consistent with human capital practices designed to attract,
motivate, retain, and reward a high-performing federal workforce.
3. Recognize that inherently governmental and certain other functions
should be performed by federal workers.
4. Create incentives and processes to foster high-performing,
efficient, and effective organizations throughout the federal
government.
5. Be based on a clear, transparent, and consistently applied process.
6. Avoid arbitrary full-time equivalent or other arbitrary numerical
goals.
7. Establish a process that, for activities that may be performed by
either the public or the private sector, would permit public and
private sources to participate in competitions for work currently
performed in-house, work currently contracted to the private sector,
and new work, consistent with these principles.
8. Ensure that, when competitions are held, they are conducted as
fairly, effectively, and efficiently as possible.
9. Ensure that competitions involve a process that considers both
quality and cost factors.
10. Provide for accountability in connection with all sourcing
decisions.]
Federal agencies rely on a mix of public and private sector sources to
perform a wide variety of commercial activities, such as information
technology, building maintenance, property management, and logistics.
Competitive sourcing is the term used to describe the strategy under
which agencies use competitions between public and private sector
organizations to identify the most cost-effective provider of
commercial activities. In 2001 and 2002, the Comptroller General
convened a Commercial Activities Panel to study the policies and
procedures governing competitive sourcing. This panel included
officials from federal agencies, federal labor unions, and private
industry. The panel unanimously approved a set of 10 principles (see
sidebar), and a supermajority of two-thirds of the panel members
adopted an additional set of recommendations that they believed would
significantly improve the government's policies and procedures for
making competitive sourcing decisions.[Footnote 8]
Virtually all acquisition of private sector services is governed by the
Federal Acquisition Regulation, which covers such topics as recognizing
the needs of the agency and planning how to address those needs through
award and administration of a contract. In addition, the use of
competitive sourcing for work activities currently performed by federal
workers must be conducted in accordance with OMB Circular No. A-76.
This circular provides agency management with a structured process to
compare the public and private sector approaches to, and costs of,
performing work activities with the stated goal of obtaining maximum
value for taxpayers' dollars by taking advantage of competitive forces.
Further, in July 2008, OMB issued a memorandum on commercial services
management recognizing that agencies should improve the operation of
their commercial functions using a variety of techniques--such as
business process re-engineering efforts and strengthened oversight of
contractors--in addition to competitive sourcing.[Footnote 9]
Competitive Sourcing Process:
[Inherently governmental activities: Functions that are so intimately
related to the public interest that they require performance by federal
government employees. These functions normally fall into two
categories: the exercise of sovereign government authority or the
establishment of procedures and processes related to the oversight of
monetary transactions or entitlements.
Commercial activities: Recurring services that could be performed by
the private sector. OMB specifies a list of more than 700 functions
that are deemed commercial and thus potentially subject to competitive
sourcing.]
The first step in the competitive sourcing process is for agencies to
determine which activities are suitable for competition. In accordance
with the Federal Activities Inventory Reform Act of 1998 (FAIR Act)
[Footnote 10] and OMB Circular No. A-76, federal agencies categorize
all of the activities performed by their employees as either inherently
governmental (not subject to competitive sourcing) or commercial
(potentially subject to competitive sourcing). OMB Circular No. A-76
then directs agencies to further categorize their commercial activities
according to six "reason codes," with only one code signifying
suitability for competitive sourcing that year.[Footnote 11] Agencies
are allowed considerable discretion in how they categorize their
activities, subject to review by OMB.
Once the annual inventory is complete, agencies then select which
activities will be competed and begin planning the associated
competitions. In this stage, agencies separate the selected activities
into groups and develop a full description of each group--called a
"statement of work"--that will serve as a guide to potential bidders on
what will be required by the final contracts or letters of
obligation.[Footnote 12] Agencies also develop quality assurance plans
and cost estimates to be used as standards against which to evaluate
the performance of the winning service provider and the cost savings
achieved by the competition.
Agencies next announce the competition and receive bids, then select
the winning bid and award the contract. Private sector firms may submit
bids, much as in any federal procurement. In competitive sourcing,
government agencies also develop an in-house bid, or "tender," under
which agency employees will perform the work if the in-house government
bid wins the competition. The staffing plan identified in the in-house
agency bid is referred to as a "most efficient organization" (MEO). The
MEO is not usually a representation of the incumbent organizational
structure "as is," but more commonly, it reflects a smaller,
restructured version of the incumbent government organization doing the
work.
[Announcing a Competition:
Under the FAIR Act, when an agency considers contracting with a private
sector source to perform a commercial activity, it generally must use a
competitive process to select the source. The FAIR Act also requires
OMB to issue guidance on the administration of this requirement.
According to OMB Circular No. A-76, agencies are to announce all
competitions through the federal website, FedBizOpps.gov, and include
basic information about the competition, such as the work activity
being competed, the number of government personnel performing the
activity, and the end date of the competition. Agencies also must
determine whether to use a streamlined or a standard format for their
competitions:
* A streamlined competition is a simplified competition process that
may be used with activities of 65 or fewer FTEs, requiring less
analysis and documentation than a standard competition. In-house bids
for streamlined competitions may be based on the incumbent “as is”
organization, but agencies are encouraged to develop a more efficient
organization.
* A standard competition is a more formal competitive process to be
used when more than 65 FTEs are involved (but may also be used when
fewer than 65 are involved). Bids are required to include quality
control plans, and agencies are required to develop plans to measure
the winning service provider’s performance. In-house bids for standard
competitions are to include a most efficient organization (MEO) and more
detailed analysis and documentation than for a streamlined
competition.]
Generally, the lowest cost provider that is technically acceptable is
awarded the contract, but factors other than cost may be considered in
some circumstances. If a contractor (private sector service provider)
wins the competition, certain federal worker protections are required,
such as the right to "first refusal" in which the private sector
service provider winning the competition generally must first offer any
new employment openings under the contract to qualified government
employees who were (or who will be) adversely affected as a result of
the awarding of the contract. If the in-house government service
provider wins the competition, other federal worker protections apply,
such as those governing grade and salary retention rights.
Once the competition is complete and the letter of obligation or
contract is awarded, agencies are required to monitor the performance
of the winning service provider on an ongoing basis and must report
findings to both Congress and OMB, regardless of whether the winner is
the in-house government service provider or a private sector service
provider. For example, federal law requires agencies to submit annual
reports to Congress on competitions announced and completed.[Footnote
13] In addition, OMB Circular No. A-76 and other guidance directs
agencies to monitor postcompetition performance of the winning service
provider and to track the actual costs of the performance.[Footnote 14]
(See appendix III for more details.)
Competitive Sourcing at DOL:
Within DOL, the Office of Asset and Resource Management is responsible
for planning and conducting the FAIR Act inventories of commercial and
inherently governmental activities.[Footnote 15] It is also responsible
for managing DOL's competitive sourcing program, including the
planning, monitoring, and evaluation of potential opportunities to
improve effective and efficient program delivery at DOL. For example,
this office coordinates the PCAR for each competition.[Footnote 16]
According to DOL policy and procedures, an initial PCAR is normally
conducted by an independent review official after the first full year
of performance following a competition, with annual PCARs thereafter
for the duration of the contract, in order to meet formal review and
inspection requirements in OMB Circular No. A-76 and the Federal
Acquisition Regulation.[Footnote 17] The competition process at DOL is
illustrated in figure 1.
Figure 1: The Competition Process at DOL:
[Refer to PDF for image]
This figure is an illustration of the Competition Process at DOL, as
follows:
Preliminary planning:
* DOL establishes:
- statement of work; and;
- estimates of the costs to perform each group of work activities with
the current agency structure.
* DOL completes preliminary planning, beginning with scoping and
grouping of activities and ending with announcement of the competition.
Public announcement:
* Depending on the type of competition, DOL issues a solicitation, which
can include a performance work statement and a quality assurance
plan.[A]
* Service providers develop quality control plans to monitor their
performance and submit plans with their bids.[B]
Contract implementation:
* DOL awards the contract to a service provider and the work begins.
* DOL monitors the service provider’s performance for discrepancies.
Postcompetition accountability review (1 year after start date):
* DOL reviews performance, identifies and documents deficiencies, and
implements procedures for corrective actions.
* DOL uses cost estimates as the baseline to help measure the cost
savings achieved through competitive sourcing.
Deficiencies found in performance?
If yes:
Corrective actions:
* DOL resolves deficiencies by submitting a request for changes to the
service provider or taking corrective action.
If no:
Certification:
* DOL certifies the postcompetition accountability review.
* DOL contracting officer documents implementation of performance
decisions for future competitions and forwards lessons learned to OMB.
DOL conducts the process for each subsequent year of performance:
beginning at the Contract implementation step.
Sources: DOL officials and GAO analysis of DOL and OMB documents.
[A] Planning documents for streamlined competitions without an MEO may
include an abbreviated version of the performance work statement.
[B] For streamlined competitions without an MEO, it is optional for
service providers to develop quality control plans and monitor their
own performance.
[End of figure]
Beginning in fiscal year 2004, DOL's strategy for identifying and
selecting work activities for competitive sourcing competitions
involved starting out small in scope and gradually expanding its
efforts over time. DOL's first competitions in fiscal year 2004
involved mostly small groups of FTEs within a single DOL office (see
table 1).[Footnote 18] By fiscal year 2007, DOL had expanded its public-
private competitions to include functions involving a greater number of
FTEs across multiple DOL offices. In addition, the number of private
sector bids decreased over time. For a complete listing of DOL's fiscal
year 2004 through 2007 competitive sourcing competitions, see appendix
V.
Table 1: Competitive Sourcing at DOL, Fiscal Years 2004 through 2007:
Number of competitions;
Fiscal year: 2004: 6;
Fiscal year: 2005: 9;
Fiscal year: 2006: 6;
Fiscal year: 2007: 7;
Total: 28.
Number of competitions involving two or more DOL offices;
Fiscal year: 2004: 0;
Fiscal year: 2005: 1;
Fiscal year: 2006: 1;
Fiscal year: 2007: 4;
Total: 6.
FTEs prior to competition ("as is");
Fiscal year: 2004: 69;
Fiscal year: 2005: 159;
Fiscal year: 2006: 144;
Fiscal year: 2007: 657;
Total: 1,029.
Type of competitions: Number of streamlined competitions;
Fiscal year: 2004: 5;
Fiscal year: 2005: 5;
Fiscal year: 2006: 6;
Fiscal year: 2007: 0;
Total: 16.
Type of competitions: Number of streamlined competitions with an MEO;
Fiscal year: 2004: 0;
Fiscal year: 2005: 2;
Fiscal year: 2006: 0;
Fiscal year: 2007: 2;
Total: 4.
Type of competitions: Number of standard competitions;
Fiscal year: 2004: 1;
Fiscal year: 2005: 2;
Fiscal year: 2006: 0;
Fiscal year: 2007: 5;
Total: 8.
Number of private sector bids[A];
Fiscal year: 2004: 14;
Fiscal year: 2005: 5;
Fiscal year: 2006: 0;
Fiscal year: 2007: 1;
Total: 20.
Winning bids: Number of competitions won by private sector;
Fiscal year: 2004: 1;
Fiscal year: 2005: 1;
Fiscal year: 2006: 0;
Fiscal year: 2007: 1;
Total: 3.
Winning bids: Number of competitions won by government MEO;
Fiscal year: 2004: 5;
Fiscal year: 2005: 8;
Fiscal year: 2006: 6;
Fiscal year: 2007: 6;
Total: 25.
Source: GAO analysis of DOL documents.
[A] Numbers of private sector bids are from DOL's annual reports to
Congress on completed competitions. However, these reports did not
include two competitions that DOL reported elsewhere as completed
competitions that were awarded to private sector service providers;
thus, the numbers of private sector bids reported in this table have
been increased to reflect the winning bidders in these two
competitions. Additional private sector bids may also have been
received for these competitions that are not reflected.
[End of table]
DOL Has Established a Performance Assessment System but Does Not Track
Deficiencies or Recommendations for Improvement Departmentwide:
DOL has made progress developing a system to assess the performance of
winning service providers in its competitive sourcing program. DOL's
system, as outlined in its policy and procedures issued in 2005,
directs DOL offices to ensure that (1) records are maintained for
independent review of the competition, (2) all assessments contain
criteria to measure performance, and (3) lessons learned are reported.
In our review of all assessments conducted as of July 2008, we found
that these policies and procedures generally were followed and that
these assessments provide key information for DOL policymakers to
evaluate the effectiveness of its competitive sourcing program.
However, we found that DOL lacks a departmentwide process for tracking
and addressing deficiencies and recommendations for improvement.
DOL's System for Assessing Performance Shows Progress:
In 2005, DOL issued policy and procedures for conducting PCARs--DOL's
system for monitoring performance in accordance with OMB Circular No. A-
76 and the Federal Acquisition Regulation. We examined all of DOL's
initial PCARs completed as of July 2008 (18 total), and we found that
DOL's policy and procedures generally were followed in conducting the
reviews. Most initial PCARs were completed in a timely manner and most
records were maintained for review. Criteria to measure performance
were established for half of the competitions, and the majority of
initial PCARs included lessons learned.
Most Initial PCARs Completed in a Timely Manner:
According to DOL policy and procedures and DOL officials, initial PCARs
are normally conducted approximately 1 year after the first full year
of performance for each competition. As of July 2008, we found that DOL
had completed 18 of these reviews, based on the 21 competitions that
were completed during fiscal years 2004 through 2006.[Footnote 19] Of
the 3 competitions that did not have an initial PCAR, one case involved
a fiscal year 2005 competition that, according to DOL officials, had
been delayed in implementation. The initial PCAR for this competition
was later completed in September 2008. The second case was DOL's very
first fiscal year 2004 competition to be won by a private sector
service provider, and at the time, DOL had not yet issued the policy
and procedures for conducting PCARs. In the last case, the contract was
terminated a few months before the initial PCAR was expected to be
completed.
In addition to calling for initial PCARs, DOL's policy also calls for
annual PCARs thereafter. As of August 2008, we found that DOL had
completed two annual follow-up reviews of the 14 cases where 1 year or
more had elapsed since the initial PCAR. In 4 cases, implementation of
the competitions had been terminated.[Footnote 20] In the remaining 10
cases, the follow-up reviews were still pending; in 6 cases, 2 or 3
years had elapsed since the initial PCAR was completed. A senior DOL
official explained that DOL interpreted OMB guidance as calling for
follow-up reviews only for certain standard competitions. However, as
noted by OMB officials, OMB's guidance states that all competitions
should still be reviewed as part of the agency's management oversight
activities (unless otherwise exempted by law). Thus, in all of these
cases, follow-up PCARs should be completed annually in accordance with
DOL's policy for performance monitoring.
Most Records Maintained for Review:
Following issuance of DOL's policy and procedures in 2005, DOL
officials generally maintained the records needed for conducting PCARs,
but this was not the case at the outset of DOL's competitive sourcing
program. Independent review officials noted that they were unable to
fully assess four competitions completed in fiscal year 2004 because of
missing documentation. For example, these reviewers noted that records
such as the initial solicitation and public announcement of the
competition, backup cost information, and the performance decision were
missing. DOL officials explained that these fiscal year 2004
competitions were the department's first under its competitive sourcing
program and that they experienced a learning curve. They said that the
missing files for all of these competitions have been recovered and
corrective actions such as recreating the files have been taken. The
independent review officials for all four PCARs also noted that the
files had been recreated for each of their competitions. Subsequent
reviews of other competitions completed in fiscal years 2005 through
2007 did not cite similar problems.
Criteria to Measure Performance Established for Half of the
Competitions:
[Quality Assurance and Quality Control Plans:
To assist agencies with monitoring the performance of winning service
providers for standard competitions, OMB Circular No. A-76 directs
agencies to ensure that:
* a quality assurance surveillance plan is developed to document the
methods used to measure the performance of the winning service provider
against the requirements of the statement of work, and;
* a quality control plan is included in all bids to describe the
internal staffing and procedures that the prospective provider will use
to meet the quality, quantity, timeframes, responsiveness, customer
satisfaction, and other service delivery requirements in the statement
of work.]
According to the PCARs, criteria to measure performance had been
established for half of the competitions reviewed. OMB Circular No. A-
76 calls for quality assurance and quality control plans to be
established to assist agencies with monitoring the performance of
winning service providers for standard competitions. Although OMB
Circular No. A-76 does not specify a requirement for streamlined
competitions, DOL's policy and procedures call for streamlined
competitions to establish quality assurance plans or, at a minimum,
abbreviated work requirements, with quality control plans optional in
some cases.[Footnote 21] Of the 18 initial PCARs completed as of July
2008, we found that independent reviewers identified a lack of quality
assurance plans in nine cases and a lack of quality control plans in
seven cases (all of which were streamlined competitions). In three of
the nine cases lacking quality assurance plans, reviewers noted the
difficulty in assessing the performance of a winning service provider
without any kind of general standards or requirements that may be used
to measure performance. In addition, in one case that had established a
quality control plan, the independent review official commented that
the service provider who had won the competition was not utilizing the
quality control plan.
Majority of Initial PCARs Reported Lessons Learned:
The majority of the 18 initial PCARs completed as of July 2008 reported
information on lessons learned: 13 provided this information, but the
remaining 5 did not. OMB Circular No. A-76 calls for agencies to
allocate resources to effectively apply a clear, transparent, and
consistent competition process based on lessons learned and best
practices. DOL policy and procedures also state that reporting lessons
learned in a competition should be documented in each PCAR. Yet, a
senior DOL management official stated that DOL considers providing
lessons learned in a PCAR to be a best practice, rather than a
requirement, and that the "lessons learned" often can be found
elsewhere in the body of the review. However, in three initial PCARs,
reviewers noted specifically that there were no lessons learned
identified or reported in any part of the reviews. In one other follow-
up PCAR, the reviewer noted that lessons learned were not formally
documented, but the in-house organization has effectively applied
lessons learned after the competition decision.
DOL Lacks a Departmentwide Process for Tracking and Addressing
Deficiencies and Recommendations for Improvement:
DOL does not ensure that deficiencies identified and recommendations
made in initial PCARs are tracked and followed up on at a
departmentwide level. Instead, DOL relies on an ad hoc process. As a
result, DOL is hindered in its ability to systematically monitor
performance trends and determine if the winning service providers are
performing more efficiently than the prior service providers.
OMB Circular No. A-76 directs agencies to maintain a database to track
the execution of competitions through completion of the last
performance period (or cancellation of the competition), and to post
best practices and lessons learned. In addition, guidance on internal
controls from OMB, GAO, and others typically points out that taking a
more systematic approach to identifying weaknesses and needed
improvements enhances the accountability and effectiveness of an
agency's programs. For example, OMB Circular No. A-123 directs agencies
and individual federal managers to take systematic and proactive
measures to identify needed improvements and to take corresponding
corrective action to improve the accountability and effectiveness of
their programs. OMB Circular No. A-123 also directs agencies to
carefully consider whether systemic weaknesses exist that adversely
affect internal control across organizational or program lines.
[Footnote 22] With respect to internal controls, GAO has issued
standards which state that assessing the quality of performance over
time is a key aspect of internal control monitoring in a government
agency and that managers need to compare actual performance to planned
or expected results throughout the organization and analyze significant
differences.[Footnote 23] In addition, GAO's Commercial Activities
Panel report states that methods to track success or deviation from
objectives are required to ensure accountability.
All of DOL's 18 initial PCARs completed as of July 2008 contained
recommendations for improvements for each of their competitions. The
recommendations included suggestions such as modifying the performance
work statement to more accurately reflect the workload of the winning
service provider, developing educational briefings, and providing an
example of a completed PCAR in DOL's policy and procedures for
conducting performance reviews. But DOL does not track such
recommendations at the departmentwide level. According to a senior DOL
official in the Office of Asset and Resource Management, it is the
responsibility of each individual DOL office--such as the Mine Safety
and Health Administration or the Office of Administrative Law Judges--
to document and respond to deficiencies and recommendations noted in
the initial PCARs. Information about whether any deficiencies have or
have not been addressed is maintained only at the individual office
level.
At our request, DOL officials from individual offices were able to
provide information for a sample of six competitions that described how
they had followed up on some of the issues reported in the initial
PCARs. For example, DOL officials stated that after tracking the
findings from one PCAR, they decided to conduct a follow-up work
management study that provided a blueprint for undertaking a series of
programmatic and quality assurance surveillance improvements. Senior
DOL officials also told us that they have an executive steering
committee, with members from its competitive sourcing, human resources,
and labor management relations offices, that meets weekly to discuss
items that need to be adjusted in competitive sourcing competitions.
However, as one DOL senior management official acknowledged, they do
not always follow up on all of the problems that they keep on file.
Thus, DOL's ad hoc system does not currently take a systematic approach
to identifying weaknesses and needed improvements to enhance the
effectiveness and accountability of its competitive sourcing program
across the organization, as called for by OMB guidance and GAO internal
control standards.
DOL Competitive Sourcing Cost Reports Are Not Comprehensive or
Reliable:
DOL's savings reports for competitive sourcing, while adhering to OMB
guidance,[Footnote 24] exclude a number of substantial costs and also
are unreliable. OMB's guidance directs agencies to exclude certain
costs associated with the competitions, such as some staff costs and
costs incurred before the competition's announcement. These costs can
be substantial. In addition, DOL's savings reports are unreliable for a
number of reasons. For example, we found cases of inflated savings
reports due to calculation errors, the use of projections rather than
actual costs, and the use of baseline costs that were inaccurate and
misrepresented actual savings.
Savings Reports Are Not Comprehensive:
DOL's savings reports to Congress are not comprehensive because they
exclude substantial costs associated with the competition process.
Although these reporting practices conform to OMB's guidance for
competitive sourcing, reporting costs in this way does not
comprehensively assess competitive sourcing as a tool to manage a
particular commercial activity, compared with other possible management
tools.
The Consolidated Appropriations Act, 2004,[Footnote 25] established a
requirement for all executive agencies to report on their competitive
sourcing efforts for the prior fiscal year. As part of this law,
Congress requires agencies to report:
* the incremental cost directly attributable to conducting the
competitions, including costs attributable to paying outside
consultants and contractors;
* an estimate of the total anticipated savings, or a quantifiable
description of improvements in service or performance, derived from
completed competitions; and:
* actual savings, or a quantifiable description of improvements in
service or performance, derived from the implementation of competitions
completed after May 29, 2003.
In its oversight role for competitive sourcing, OMB issues a yearly
memorandum providing guidance to agency heads on how to develop this
report. From 2004 through 2007, these memos have directed agencies to
exclude certain costs that are associated with the competition process
(see table 2).
Table 2: Incremental Competition Costs to Be Included and Excluded in
Annual Reports to Congress:
Included[A]:
* Costs of consultants or contractors who participated in the conduct
of the reported competitions;
* Travel, training, and other costs directly attributable to the
conduct of the reported competitions;
* Costs of staff hired specifically to work on a particular competition
or competitions or fill in for employees temporarily working on a
competition;
* Employee overtime costs (where overtime costs are tracked);
Excluded:
* Any costs incurred prior to the public announcement of the
competition;
* Costs of in-house staff spent on the competition during normal
working hours;
Not expressly included or excluded:
* Certain transition costs to the new provider, such as organization re-
engineering costs and employee separation payments[B];
* Costs related to postcompetition accountability reviews.
Source: GAO analysis of OMB Memoranda M-08-02, M-07-01, M-06-01, and M-
05-01.
[A] OMB also directs agencies to report the labor costs of providing
central direction and oversight (costs that cannot be attributed to
individual competitions) as fixed costs in their reports to Congress.
[B] OMB guidance does not direct agencies to include or exclude
transition costs as part of competition costs; however, it does direct
agencies to exclude these costs when calculating savings.
[End of table]
OMB officials told us that their policy directs agencies to exclude
certain costs because these costs reflect what would be incurred as
part of an agency's typical management responsibilities. For example,
OMB directs agencies to exclude the costs of precompetition planning
and agency staff time spent on competition activities, as these
activities can help the agency identify and correct performance gaps
and improve efficiency and should be taking place whether or not the
agency is conducting any competitions. Additionally, OMB officials
explained that transition costs associated with competitions should be
excluded because such costs also occur with other management processes,
such as new program re-engineering and separation payments provided to
employees who are displaced by a downsizing. Similarly, they explained
that the costs associated with conducting PCARs should be excluded
because these reviews help organizations identify and correct
performance gaps in their work groups and should be considered as part
of normal business operations. OMB officials commented that they do not
believe that excluding these costs has a major impact on an agency's
ability to determine the cost-effectiveness of competitive sourcing as
a management tool.
However, because OMB's guidance directs agencies to exclude certain
costs, the full cost associated with DOL's competitive sourcing program
is not transparent. Since 1990, we have reported that improvements in
the completeness and accuracy of savings reports of competitive
sourcing could help present a more comprehensive picture of program
costs and benefits and help determine the most cost-effective use of
resources. For example, in our reviews of the competitive sourcing
programs at DOD and USDA's Forest Service, we recommended that these
agencies improve the way they account for and report costs associated
with their competitive sourcing programs.[Footnote 26]
In this review, we found similar issues with the comprehensiveness of
DOL's savings reports. Specifically, DOL reported a total of $15.7
million in savings and $4.3 million in competition costs for all of its
completed competitions for fiscal years 2004 through 2007. While DOL
reported these savings in conformance with OMB guidance, we found that
the excluded costs attributable to competitive sourcing over this
period were substantial, and--importantly--it is not clear that these
costs would be incurred when using a commercial management tool other
than competitive sourcing.
For example, consistent with OMB guidance, DOL excluded costs
attributable to the time in-house staff spent on assisting with
competition activities (staff not dedicated to central oversight of
DOL's competitive sourcing program).[Footnote 27] While these staff are
already paid by the government, their time spent away from regular work
duties represents a cost that is attributable to the competition
process. We were not able to obtain specific estimates on the number of
hours that such staff members spent on competition activities, since
DOL does not require its offices to record this information. However,
employees in one office who were at the GS-12 level or higher estimated
that they worked a total of 2,263 hours on one competition. Including
these staff costs would have doubled the costs reported by DOL for this
competition. Employee responses in our interviews suggest that the
amount of time employee staff spent assisting on competitions varied
greatly, with some staff members spending little, if any, time on
competition activities and others who reported spending one-quarter to
one-half of their total working time over the course of a year.
According to OMB's guidance, agencies should also exclude costs
incurred during the preliminary planning phase of a competition, such
as the use of contractors, as well as other costs that are directly
related to the conduct of the competition (see table 2). DOL employed
private sector consultants to conduct precompetition planning,
including feasibility studies before the competition phase, and to
conduct PCARs following the competition. DOL also employed private
sector consultants for other activities related to competitive
sourcing, such as to conduct business and industry analyses to
determine the likelihood of generating private sector offers and to
review the government positions open for bidding to determine if they
had been appropriately designated during the FAIR Act inventory
process.
In addition, OMB guidance does not require agencies to include many of
the transition costs directly associated with generating savings from
competitive sourcing activities, such as the costs of voluntary
separation payments[Footnote 28] and system re-engineering costs. For
example, according to DOL data, in calendar year 2006, 14 employees
were provided voluntary incentive payments due to competitive sourcing
that totaled $350,000. Including these costs would have increased total
completed competition costs by 32 percent for the year. In addition to
these costs, one competition utilized a newly re-engineered process to
decrease total staff hours and to help generate a reported $3.3 million
in savings from fiscal year 2005 to fiscal year 2007. The costs of full-
time staff hours spent on the re-engineering process were not shown as
costs of competitive sourcing, and DOL did not have information on the
amount of staff time used.
Finally, OMB guidance does not require agencies' savings reports to
include the costs of monitoring performance after the winning service
provider begins its activities. However, we found that the PCARs are
often conducted by contractors or consultants to monitor competitive
sourcing performance for DOL and that they represent a cost in addition
to normal federal employee and contractor oversight costs. DOL spent a
total of $126,614 on PCARs conducted by consultants as of July 2008.
DOL Savings Reports Are Not Reliable:
In addition to excluding costs, DOL's savings reports are unreliable.
We reviewed the process DOL uses to compile its reports for a sample of
competitions. We found a number of calculation errors in the sample; we
also found cases where DOL used projections rather than actual costs to
estimate savings or used a baseline that was inaccurate and overstated
savings.
Calculation Errors:
We randomly selected three competitions for review to determine the
accuracy and reliability of DOL's savings reports. While not
necessarily representative of all DOL competitions, these three savings
reports contained inaccuracies--with two of the three containing
significant errors that inflated the reported savings achieved through
those competitions. For example, in the first competition, won by a
private sector service provider, DOL reported $2.7 million in savings
from fiscal year 2005 through fiscal year 2007. This savings figure did
not include contract administration costs that are directed to be
included according to OMB guidance. By excluding these costs, DOL
overstated its savings by about $185,000 per year, or 25 percent. In
the second competition, DOL used an incorrect cost value that excluded
some employee wage costs when calculating savings. This error inflated
the reported savings by almost $169,000, or 22 percent, for fiscal year
2006. In the third competition, though the inaccuracy was less
significant, DOL reported a full year's worth of savings for fiscal
year 2006, even though the new provider was not phased in until 7
months into the new fiscal year. DOL officials stated that the savings
estimate was an interim figure that was used before the actual costs
were updated for fiscal year 2008.
Use of Projections in Savings Estimates:
DOL used projections--rather than actual costs--to report $9.3 million
of its $15.7 million in savings to Congress, even though OMB guidance
specifies that calculating savings based on actual costs rather than
projections is preferred. OMB guidance states that agencies may use
projections as an interim estimate but that the actual numbers should
be used as soon as they are available.
Savings reports based on projections can be less accurate than reports
using actual numbers because projections use average salaries for
employees estimated during the competition, as well as projected
staffing and hours that do not always reflect true personnel costs.
Projections also exclude "retained pay," which is pay to employees who
receive grade demotions but keep their original pay due to worker
protections. By using projections, these costs are excluded from
competition savings reports but would be included if actual costs were
used. For example, in one competition won by the in-house agency (MEO),
8 of the 9.3 full time employees[Footnote 29] in the MEO received
retained pay after the competition. In total, a DOL review noted that
retained pay for these employees caused the actual personnel costs to
be 45 percent higher than the original estimated costs for the MEO. By
using projections rather than actual values in estimating savings, DOL
excluded the higher actual personnel costs for fiscal years 2004 and
2005, even though actual numbers were available.
Inaccurate Baseline:
Of the 18 initial PCARs that we reviewed, 8 noted that organizational
or workload changes had occurred. For example, in one instance, a DOL
office lost 45 FTE positions in fiscal year 2006 due to budgetary
reasons, with 8 of these lost positions designated for an activity
being competed and that, at the time, was in the source selection
phase. This reduced the designated FTEs for this competition from 32 to
24. As noted in the PCAR, the private sector service provider who won
this competition was chosen on the basis of the smaller 24-employee
demand. However, the final savings figure--the difference between the
original government provider and the winning private sector service
provider--was calculated using the baseline cost of the original 32 FTE
service provider. A senior DOL official that we spoke with stated that
the original baseline was used because the private sector service
provider was doing the same level of work that the government service
provider had been doing before. However, as noted in the PCAR, actual
workload data was not available for this competition. Because of this,
it cannot be known for certain if the same level of work was being
performed. Using the baseline of 32 FTEs, rather than 24 FTEs,
increased reported savings by almost $2.7 million over the 5-year
performance period.
Vacancies within agency workgroups also increased reported savings,
though it is unclear if these savings should be attributed to
competitive sourcing efforts. For example, in five competitions, the in-
house government bid won the competition by maintaining its original
"as-is" work group organization, and no anticipated future savings were
reported because, according to DOL officials, the staff structure did
not change. However, in two of the competitions, savings were later
reported. In one of these competitions, employee retirements and a
decrease in organization workload resulted in vacancies that caused
staff wages to be 46 percent lower than those originally projected, and
DOL reported savings of $64,000 for fiscal year 2005 and $86,000 for
fiscal year 2006. In the second competition, savings of $26,000 were
recorded for 1 year, partly due to a vacant position. In addition to
staffing vacancies after the competition, vacancies that occur before a
competition can inflate reported savings, as the baseline used to
calculate savings is determined by the government service provider's
budgeted staffing levels for the year of the planned competition. For
example, the same competition discussed previously that reported $3.3
million in savings because of a re-engineered process that decreased
workload and required staffing hours, did not change its actual
staffing levels at the time of the competition due to pre-existing,
budgeted vacancies. Thus, the savings figures based on full staffing
levels were inflated.
In three separate PCARs, as well as in our interviews with DOL
employees, DOL staff were identified as inappropriately contributing to
the work assigned to the winning bids, and in some cases, this resulted
in overestimating the savings achieved by the competitions. In one
case, the bid was won by a private sector contractor, yet the
independent reviewer determined that a DOL employee was performing some
of the work, noting that "a government employee is assisting a [private
sector service provider] employee for up to1-2 hours per day and could
total up to 500 hours on an annual basis. The service provider is being
supplemented with the government workforce at this time." DOL officials
stated that the government employee was no longer assisting the private
sector service provider and that a workload study was being conducted
to help address this problem. Additionally, in two cases, staff who
were not part of the MEO were found to be contributing to the work
assigned to the MEO. For example, in one case, the PCAR indicated that
non-MEO workers were found contributing to work within the MEO and that
DOL had not included these costs. DOL savings estimates were based on
the cost of only the MEO staff; thus, though the non-MEO staff costs
were not available, including these costs would have decreased the
reported savings of the competition.
DOL's Competitions Rarely Resulted in Lost Jobs or Lower Salaries, but
Employees Report Negative Impacts on Morale:
DOL's competitions reportedly had negative impacts on morale, even
though they rarely resulted in lost jobs or salary reductions for DOL
workers. Of the 28 competitions DOL held during fiscal years 2004
through 2007, 23 resulted in formal job changes (that is, changes
reflected in personnel actions) for DOL employees--most often,
reassignments to different positions at the same or higher salary
levels. Many of the workers experiencing personnel actions have been
minorities and women. DOL management stated that they made their best
efforts to treat well those employees who were involved in the process,
in adherence with the Commercial Activities Panel principles;
nevertheless, employees we spoke with reported negative impacts on
morale.
Most Affected Personnel Were Reassigned but Kept Their Same Salary
Level:
In 23 of the 28 competitive sourcing competitions conducted by DOL
during fiscal years 2004 through 2007, personnel actions affected the
jobs of a total of 314 DOL employees.[Footnote 30] Most often, the
affected employees were reassigned to new DOL positions. About 79
percent (248 workers) were reassigned to new positions at the same
federal grade and salary level (see fig. 2). For example, a worker who
was a GS-13 safety and occupational health specialist before the
competition was reassigned as a GS-13 safety and occupational health
specialist after the competition, but was placed under a different
agency management structure designed as part of the winning in-house
bid (MEO). Another 15 workers were promoted to a higher federal grade
with entitlement to any associated salary increases. Of the 16 workers
who were demoted to a lower federal grade, 5 retained their same grade
and 9 retained their same salaries that they had before the
competition, due to grade and pay retention provisions.[Footnote 31]
All the remaining workers left DOL, including 29 who left voluntarily,
either through retirement or through a nonretirement separation with an
incentive payment, and 6 who were laid off from the agency through a
reduction in force.[Footnote 32]
Figure 2: Effects of Competitive Sourcing on DOL Workers, Fiscal Years
2004 through 2007:
[Refer to PDF for image]
This figure is a pie-chart depicting the following data:
Effects of Competitive Sourcing on DOL Workers, Fiscal Years 2004
through 2007:
Reassignment: 248;
Voluntary separation: 29;
Demotion: 16;
Promotion: 15;
Involuntary separation: 6;
Total number of personnel actions: 314.
Source: GAO analysis of DOL data.
[End of figure]
Many Affected Personnel Were African-Americans, Women, and Older
Workers:
Of the 314 DOL workers who were affected by personnel actions due to
competitive sourcing during fiscal years 2004 through 2007, 47 percent
were African-Americans, 60 percent were women, and 89 percent were 40
years old or older--much higher proportions than their representation
in the general DOL working population overall. It may be that these
population groups more frequently hold the commercial positions
eligible for competition compared with the general DOL population.
However, DOL does not tabulate demographic data by OMB's list of FAIR
Act function code categories for commercial activities, and the data
were not readily available. Thus, we were unable to determine if this
could be an underlying cause.
Although DOL does not routinely track the demographic characteristics
of those affected by competitive sourcing decisions, agency officials
were able to gather these data from various sources in response to our
request. A comparison of these data with the demographic profile of DOL
personnel overall shows that African-Americans comprised about 47
percent of affected workers, compared with 23 percent of the overall
DOL working population. Similarly, Native Americans comprised a greater
proportion of the affected workers compared with the overall DOL
working population. In contrast, the proportions of affected Caucasian,
Hispanic/Latino, and Asian/Pacific Islander workers were lower than
their representation in the general DOL working population (see fig.
3). Moreover, among those affected, African-Americans experienced more
negative impacts. All 16 workers who were demoted, and all 6 workers
who were laid off, were African-American. In contrast, of the 15
workers who were promoted, 10 were Caucasian, 3 were African-American,
1 was Hispanic/Latino, and 1 was Asian/Pacific Islander.
Figure 3: Race/National Origin of Affected Personnel, Compared with
General DOL Personnel, Fiscal Years 2004 through 2007:
[Refer to PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Race/national origin: African-American;
Affected personnel: 46.8%;
DOL personnel: 23.1%.
Race/national origin: Native American;
Affected personnel: 1.0%;
DOL personnel: 0.7%.
Race/national origin: Asian/Pacific Islander;
Affected personnel: 1.6%;
DOL personnel: 4.4%.
Race/national origin: Hispanic/Latino;
Affected personnel: 3.2%;
DOL personnel: 6.9%.
Race/national origin: Caucasian;
Affected personnel: 47.5%;
DOL personnel: 65.0%.
Source: GAO analysis of DOL data.
[End of figure]
Similarly, 60 percent of affected workers were women, compared with 50
percent of the DOL working population. Likewise, 89 percent of affected
workers were age 40 or over, compared with 75 percent of DOL workers
overall, mostly due to the impact of those over age 50. (See fig. 4.)
Figure 4: Gender and Age of Affected Personnel, Compared with General
DOL Personnel, Fiscal Years 2004 through 2007:
[Refer to PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Gender: Male;
Affected personnel: 39.8%;
DOL personnel: 50.0%.
Gender: Female;
Affected personnel: 60.2%;
DOL personnel: 50.0%.
Age: Less than 40 years old;
Affected personnel: 11.1%;
DOL personnel: 24.7%.
Age: 40 to 49 years old;
Affected personnel: 21.0%;
DOL personnel: 27.8%.
Age: 50 or older;
Affected personnel: 67.8%;
DOL personnel: 47.6%.
Source: GAO analysis of DOL data.
Note: Percentages do not add to 100 percent due to rounding.
[End of figure]
Selected Employees' Views on Implementation and Morale Issues:
Although DOL management stated that they made their best efforts to
treat well those employees whose positions were competed in the
competitive sourcing process, almost all DOL employees we spoke with
who assisted with competition activities, and whose positions were
affected by the competitions, reported that the competitive sourcing
process has had a negative impact on morale. The Commercial Activities
Panel principles include, among other things, that agencies should base
their competitions on a "clear, transparent, and consistently applied
process" and ensure that, when competitions are held, they are
conducted as "fairly, effectively, and efficiently as possible."
[Footnote 33] According to DOL management officials, extensive efforts
were made to adhere to these principles. DOL issued a guidebook
describing how the process worked, and management officials said they
made every effort to find a job for all those affected by a
competition. Employees were offered reassignments, voluntary early
retirement options, separation incentives, and other services for
career transition. However, most employees we interviewed said that
they were either dissatisfied or very dissatisfied with how DOL has
implemented the competitive sourcing process (see fig. 5). Though not a
representative sample of all those involved in the process, these
interviews included employees who were responsible for assisting with
competition activities, as well as employees whose positions had been
competed.[Footnote 34]
Figure 5: Interview Respondents' Reported Satisfaction Levels with the
Competitive Sourcing Process:
[Refer to PDF for image]
This figure is a horizontal bar graph depicting the following data:
Level of satisfaction: Very satisfied;
Number of respondents: 2.
Level of satisfaction: Satisfied;
Number of respondents: 5.
Level of satisfaction: Neither satisfied or dissatisfied;
Number of respondents: 10.
Level of satisfaction: Dissatisfied;
Number of respondents: 13.
Level of satisfaction: Very dissatisfied;
Number of respondents: 19.
Total Number of respondents: 49.
Source: GAO analysis of interview responses.
[A] Level of satisfaction was determined by analyzing responses to the
question: "Overall, how satisfied or dissatisfied are you with how DOL
has implemented the A-76 process?" The question was asked of 50 DOL
employee participants (1 participant did not respond). The question was
not asked of 5 participants, and the responses of 5 senior management
officials were not included in the analysis.
[End of figure]
In general, the employees we interviewed said that the process has
harmed morale. For example, some noted that it has led to a lack of
trust between staff and management and that these effects appear to be
long-lasting. They told us that competitive sourcing had taken away the
job security that federal employment used to provide and that this
change has harmed the morale of current employees, as well as the
agency's ability to recruit future employees. Some said that even
though employees may have ended up benefiting from competitive
sourcing, many were still unhappy about having been subjected to the
process. They noted that they felt they must have done something wrong
for their jobs to have been selected for the competition. Others said
that they were no longer in positions that they had been trained for or
wanted. Several said that if their jobs were competed again, they would
leave the agency.
Among those reporting that they were satisfied or very satisfied with
the process, several commented on the improved efficiency and
effectiveness of the organization after the competition. For example,
the employees responsible for overseeing the competition in one
location noted that the competition had an overall positive impact on
the organization because the winning MEO incorporated a better balance
of personnel and resources than what had existed before. According to
these employees, they met their goals, saved some money, and came up
with a better organization afterward. However, others we spoke with
commented that employees are not as willing to put in the extra effort
needed to provide high-quality work. For example, some DOL employees
told us that the job was still being done but that loyalty and effort
has decreased. Moreover, even employees who said they were satisfied
with the process noted that there were negative impacts on morale.
Conclusions:
As the Commercial Activities Panel report describes, the government's
goal for competitive sourcing is to obtain high-quality services at a
reasonable cost and to achieve outcomes that represent the best deal
for the taxpayer. DOL has conducted public-private competitions under
its competitive sourcing program for 4 years and has set up performance
and cost reporting systems to track its progress in meeting such goals.
Yet these systems have a number of weaknesses, and unless these
weaknesses are addressed, they will continue to inhibit DOL's ability
to reliably and comprehensively assess whether the cost of the work
performed by the winning service providers--whether in-house government
service providers or contracted private sector service providers--
achieves the savings promised through the competitive sourcing process.
Under OMB's new Commercial Services Management guidance, agencies are
encouraged to use the tool that provides the best value and the most
efficient process to manage its commercial activities. However, without
a better system to track deficiencies and improvements departmentwide
and identify all the costs associated with competitive sourcing, it
will be difficult to assess whether competitive sourcing truly provides
the best deal for the taxpayer. To accurately determine which
management tool is most cost-effective in performing a certain
activity, agencies need a full accounting of the costs and performance.
Previous GAO reports have cited problems at other federal agencies--DOD
and USDA's Forest Service, in particular--because they did not develop
comprehensive estimates for the costs associated with competitive
sourcing. This report identifies similar problems at DOL. To enhance
the transparency surrounding their estimates of savings from
competitive sourcing, federal agencies need to track all costs--
including planning costs, transition costs, postcompetition monitoring,
and the labor costs of all staff who participate in competitions.
We found that DOL does not ensure that identified deficiencies and
recommendations are tracked and followed up on at a departmentwide
level. Without such departmentwide tracking, DOL is hindered in
identifying and monitoring agencywide competitive sourcing performance
trends, reliably determining whether all deficiencies or
recommendations for improvement have been addressed, or determining
whether the new organization is working more efficiently. Moreover, if
DOL continues to conduct more competitions that involve multiple DOL
offices, the ability to track competitions departmentwide will become
increasingly important.
We also found that in a sample of three of DOL's savings reports to
Congress, all three contained errors that overstated the savings
achieved through competitive sourcing, two of which were significant.
Without reliable savings assessments, policymakers do not have the
information that they need to determine the effectiveness of
competitive sourcing.
Recommendations for Executive Action:
We are making four recommendations.
In the interest of providing agency decision makers and policymakers
with more complete information on the total costs associated with
competitive sourcing, we recommend that in addition to the current cost
reports that OMB requires agencies to prepare, the Director of OMB
should:
* require agencies to systematically report all costs associated with
competitive sourcing, including regular FTE staff wages for time spent
on planning and conducting competitions, as well as all other
precompetition, transition, and implementation costs, including
postcompetition monitoring or accountability reviews.
To improve the reliability and comprehensiveness of DOL's performance
assessments and savings estimates in its competitive sourcing program,
we recommend that the Secretary of Labor take the following three
actions:
* implement a consistently applied, departmentwide system to track
identified deficiencies and recommendations for improvement in each of
the competitions and the program overall;
* implement a system to track the full costs associated with managing
DOL's commercial management activities, including--but not limited to-
-all costs associated with competitive sourcing; and:
* develop and implement a review process to ensure the accuracy of
competitive sourcing savings reports to Congress.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Office of Management and
Budget and the Department of Labor for review and comment. Both
agencies provided written comments on a draft of our report which are
reprinted in appendixes VI and VII, respectively. These agencies also
provided us with technical comments that we incorporated, as
appropriate.
OMB concurred with our conclusion that all agencies can maximize
savings and performance benefits by ensuring appropriate internal
controls are in place to monitor results but questioned the need for
reporting all costs associated with competitive sourcing. OMB stated
that certain costs are not necessarily unique to competitive sourcing
and would not have a significant impact on the amount of savings.
However, as the examples in this report and past GAO reports
demonstrate, the lack of complete and accurate savings reports for the
competitive sourcing program results in agencies not having a
comprehensive, transparent picture of all the costs and benefits
associated with the program. Moreover, while not unique to competitive
sourcing, some costs could nevertheless vary across the myriad of
management tools for improving the delivery of commercial services.
Even if OMB does not expect a significantly different result in savings
achieved by including these additional costs, agencies need a full
accounting of all of the costs associated with competitive sourcing in
order to enhance the transparency of their savings estimates and
accurately determine if competitive sourcing truly provides the best
deal for the taxpayer. OMB stated that it would work with the
transition team so the next administration will be fully informed about
the costing policies for competitive sourcing as it considers our
recommendation.
DOL acknowledged that improving cost assessments and performance
tracking can provide better tools for managing their competitive
sourcing program and agreed with our recommendation to implement a
departmentwide system to track identified deficiencies and
recommendations for improvement, as well as our recommendation to
develop and implement an internal review process to ensure the accuracy
of savings reports. However, DOL expressed concerns about our
recommendation to implement a system to track full costs related to
competitive sourcing in the absence of governmentwide guidance from OMB
to do so. While we recognize that DOL is subject to OMB guidance on
reporting costs, we continue to maintain that federal agencies like DOL
need to track all costs associated with competitive sourcing--whether
they are reported or not--so they can accurately determine if
competitive sourcing is the most cost-effective tool for managing
certain commercial activities. This is a separate issue from our
recommendation that the Director of OMB require federal agencies to
report all costs associated with competitive sourcing. We maintain that
tracking all costs would enhance the transparency surrounding the
estimates of savings from competitive sourcing and provide for
accountability in connection with sourcing decisions--one of the
principles of the Commercial Activities Panel.
We are sending copies of this report to interested congressional
committees, the Director of the Office of Management and Budget, the
Secretary of Labor, and other interested parties. In addition, the
report will be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions regarding this report, please
contact me at (202) 512-7215 or scottg@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix VIII.
Signed by:
George A. Scott:
Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
As required under the Consolidated Appropriations Act, 2008,[Footnote
35] and as directed by the House Committee on Appropriations,[Footnote
36] this report examines the use of competitive sourcing at the
Department of Labor (DOL). The House Committee on Appropriations
directed that we review the extent to which DOL has established a
reliable and comprehensive system to track costs, savings, and the
quality of work performed by contractors, as well as DOL's adherence to
the principles adopted in 2002 by the Commercial Activities Panel
chaired by the Comptroller General.[Footnote 37] In response, GAO's
review focused on the following:
1. The extent to which DOL has established a reliable and comprehensive
system to assess the quality of work performed as a result of
competitive sourcing.
2. The comprehensiveness and reliability of DOL's assessments of the
savings and costs associated with competitive sourcing.
3. The implications of competitive sourcing for certain DOL worker
populations, such as women and minorities.
To address these issues, we examined relevant statutes, regulations,
and guidance on competitive sourcing, Office of Management and Budget
(OMB) guidance, DOL internal policies and guidance on competitive
sourcing, annual reports to Congress, DOL Inspector General reports,
GAO reports, and related documents. We interviewed DOL officials and
employees, OMB officials, two private sector companies, and the
president of a leading national private sector trade association
representing over 300 companies. We also met with representatives from
the American Federation of Government Employees (AFGE)--a union
representing 600,000 federal and D.C. government workers nationwide and
overseas--and employee representatives to AFGE from DOL. We focused on
DOL's competitive sourcing activities from fiscal years 2004 through
2007. There were no DOL competitive sourcing activities in 2008 for us
to review because the Consolidated Appropriations Act, 2008 prohibited
funds from that act from being used for carrying out competitions under
OMB Circular No. A-76 until 60 days after this report is provided to
the Committees on Appropriations for the House of Representatives and
the Senate.
To address the first issue, we examined all 18 of DOL's postcompetition
accountability reviews (PCARs) completed as of July 2008 for the 28
competitions conducted from fiscal years 2004 through 2007. We
interviewed DOL officials, together with one performance review
contractor selected by DOL, about their processes for conducting the
PCARs, and we evaluated the structure and content of the reviews
according to DOL and OMB policy. In addition, we selected a group of
six PCARs to evaluate the extent to which DOL management had followed
up and addressed the deficiencies and suggestions for improvement that
were identified in each of these reviews. The six PCARs were comprised
of a simple random sample of 3 PCARs from among the 13 initial PCARs
completed between 2006 and 2007, plus a nonrandom sample of three
additional PCARs completed between 2004 and 2005 that had examples of
significant findings and recommendations that were not present in the
three random PCARs selected.
To address the second issue, we interviewed DOL officials responsible
for completing these assessments and reviewed the process they used to
complete the savings and cost reports. To assess the accuracy of DOL's
reports, we reviewed DOL's annual reports to Congress, all 18 of DOL's
PCARs completed as of July 2008, and the cost records for the private
contractors involved in assisting with the competition process and
completing the PCARs. We reviewed the documents from all 18 initial
PCARs and conducted more detailed analyses of the calculations provided
in the cost reports for the same 3 randomly selected initial PCARs
completed between 2006 and 2007, as described above. We chose to focus
our sample on PCARs completed during 2006 and 2007 to ensure that the
most recent, full records were available for analysis. We examined the
savings and costs for these three competitions, including the contract
billing for the private sector consultants employed by DOL during the
competition, and compared the results to the amounts reported in DOL's
annual reports to Congress. We did not examine the accuracy of the
reports for the remaining DOL competitions. Due to this limited sample
size, our findings should not be used to make inferences about all of
DOL's competitions. Finally, we obtained anecdotal evidence of the
number of hours that some staff spent on competitive sourcing
activities during our group interviews with staff members involved in
assisting with the competitions (see below).
To address the third issue, we analyzed DOL's demographic data on total
personnel departmentwide and on personnel who experienced personnel
actions as a result of the competitive sourcing process. We did not
assess the demographic characteristics of DOL personnel by OMB's list
of the Federal Activities Inventory Reform Act of 1998 (FAIR Act)
function code categories because DOL does not tabulate demographic data
in that way and the data were not readily available. To obtain employee
views on the process and impacts on morale, we conducted group
interviews with 60 DOL employees affected by five competitive sourcing
competitions in four locations: Arlington Heights, Illinois; Beckley,
West Virginia; San Francisco, California; and Washington, D.C. We
selected the four group interview locations in order to obtain
perspectives from a range of geographic locations and from competitions
of different sizes. Once the four locations were determined, we
selected five competitions as our focus: one large competition that
affected personnel at all four sites (though mostly personnel in D.C.);
one smaller competition in D.C.; and three additional competitions--one
that affected a large number of personnel at each of the three sites
outside of D.C. (see table 3).
Table 3: DOL Competitions Selected as the Focus for GAO's Group
Interviews:
Competition (fiscal year): Grants Management (2005);
Agencies involved: Employment and Training Administration (ETA);
Location(s): DC;
Type of competition (fiscal year): Streamlined competition;
Number of FTEs competed: 3;
Number of personnel actions: 0.
Competition (fiscal year): Statistical Systems (2005);
Agencies involved: Mine Safety and Health Administration (MSHA);
Location(s): CO, PA, WV;
Type of competition (fiscal year): Standard competition;
Number of FTEs competed: 34;
Number of personnel actions: 28.
Competition (fiscal year): Training & Education (2006);
Agencies involved: Occupational Safety and Health Administration
(OSHA);
Location(s): IL;
Type of competition (fiscal year): Streamlined competition with MEO;
Number of FTEs competed: 37;
Number of personnel actions: 34.
Competition (fiscal year): Other Legal Support Services (2006);
Agencies involved: Office of Administration Law Judges (OALJ);
Location(s): CA, CO, DC, GA, LA, MA, NJ, OH, PA, VA;
Type of competition (fiscal year): Streamlined competition with MEO;
Number of FTEs competed: 50;
Number of personnel actions: 44.
Competition (fiscal year): Installation Services (2007);
Agencies involved: Office of the Assistant Secretary for Administration
and Management (OASAM)/OALJ;
Location(s): CA, DC, GA, IL, MA, MO, NY, PA, TX, VA, WA, WV;
Type of competition (fiscal year): Standard competition;
Number of FTEs competed: 59;
Number of personnel actions: 41.
Source: GAO analysis of DOL documents and data.
[End of table]
We then worked with DOL officials to identify a list of employees in
each location who assisted with these competitions (competition
officials and performance work statement team members who were not
dedicated to central oversight of DOL's competitive sourcing program)
and employees whose positions were part of the work group function that
was competed. Some of these employees' positions were included in DOL's
in-house "most efficient organization" (MEO) bid (MEO staff), and some
were not included (non-MEO staff). We scheduled group interviews at
each location, grouping together invitees based on their different
roles, and extended invitations to all those on the lists accordingly.
A total of 95 invitations were extended across all four locations;
however, participation was voluntary and turnout was often low.
Overall, 55 DOL employees participated (see table 4). In addition, we
held a group session and follow-up interviews with five senior
management officials in D.C. for a total of 60 participants. This is
not a representative sample, and the results cannot be generalized to
either all of DOL or all those affected by competitive sourcing, by
location, or by size of competition. Nevertheless, these group
interviews present a range of perspectives from across the country and
from those involved in different ways with the competitive sourcing
process.
We assessed the reliability of the demographic and cost data by
reviewing information about the systems that produced the data and
interviewing agency officials knowledgeable about these systems. We
conducted this performance audit from October 2007 to September 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Table 4: DOL Employees Participating in GAO's Group Interviews:
Location: DC;
Employees assisting with the competitions: Competition officials: 6;
Employees assisting with the competitions: Performance work statement
team: 10;
Employees whose positions were competed (MEO and non-MEO): 4;
Total: 20.
Location: CA;
Employees assisting with the competitions: Competition officials:
[Empty];
Employees assisting with the competitions: Performance work statement
team: [Empty];
Employees whose positions were competed (MEO and non-MEO): 2;
Total: 2.
Location: IL;
Employees assisting with the competitions: Competition officials: 2;
Employees assisting with the competitions: Performance work statement
team: 1;
Employees whose positions were competed (MEO and non-MEO): 23;
Total: 26.
Location: WV;
Employees assisting with the competitions: Competition officials:
[Empty];
Employees assisting with the competitions: Performance work statement
team: 1;
Employees whose positions were competed (MEO and non-MEO): 6;
Total: 7.
Location: Total;
Employees assisting with the competitions: Competition officials: 8;
Employees assisting with the competitions: Performance work statement
team: 12;
Employees whose positions were competed (MEO and non-MEO): 35;
Total: 55.
Source: GAO.
[End of table]
[End of section]
Appendix II: DOL's Categorization of Commercial Activities:
Once agencies have designated all their activities as either inherently
governmental or commercial, OMB Circular No. A-76 requires agencies to
further categorize their commercial activities according to six "reason
codes" labeled A through F. Only one category--Reason B--signifies
suitability for competitive sourcing that year. For example, in fiscal
year 2006, DOL categorized about 20 percent of its total full-time
employees (FTE) as Reason B: suitable for a streamlined or standard
competition (see table 5).
Table 5: DOL's Categorization of Work Activities, Fiscal Year 2006:
Inherently governmental activities:
FTEs: Number: 8,706.50;
FTEs: Percent: 56.46.
Commercial activities:
FTEs: Number: 6,713.47;
FTEs: Percent: 43.54.
Commercial activities: Reason A: Not appropriate for private sector
performance pursuant to a written determination;
FTEs: Number: 2,559.32;
FTEs: Percent: 16.60.
Commercial activities: Reason B: Suitable for a streamlined or standard
competition;
FTEs: Number: 3,050.90;
FTEs: Percent: 19.79.
Commercial activities: Reason C: Subject of an in-progress streamlined
or standard competition;
FTEs: Number: 630.25;
FTEs: Percent: 4.09.
Commercial activities: Reason D: Performed by government personnel as
the result of a standard or streamlined competition within the past 5
years;
FTEs: Number: 306.00;
FTEs: Percent: 1.98.
Commercial activities: Reason E: Pending an agency-approved
restructuring decision, such as a closure or realignment;
FTEs: Number: 46.00;
FTEs: Percent: 0.30.
Commercial activities: Reason F: Performed by government personnel due
to a statutory prohibition against private sector performance;
FTEs: Number: 121.00;
FTEs: Percent: 0.78.
Total:
FTEs: Number: 15,419.97;
FTEs: Percent: 100.00.
Source: GAO analysis of data from DOL's FAIR Act inventory (2006).
[End of table]
[End of section]
Appendix III: Required Reporting and Monitoring for Competitive
Sourcing:
Section 647(b) of Division F of the Consolidated Appropriations Act,
2004 requires agencies to report their competitive sourcing activities
to Congress at the end of each calendar year. These reports are to
include the total number of competitions announced and completed; the
incremental costs directly attributable to conducting those
competitions; and the savings--both actual and anticipated--derived
from such competitions. In addition, OMB Circular No. A-76 outlines the
requirements for monitoring the performance and costs of the winning
service provider following a competitive sourcing competition, whether
the winner is the in-house government service provider or a service
provider from the private sector. (See table 6.)
Table 6: Reporting and Monitoring Requirements:
Requirement: Annual reports to Congress;
Controlling statute or guidance: Section 647(b) of Division F of the
Consolidated Appropriations Act, 2004 (Pub. L. No. 108-199 (2004)) and
OMB Memorandum M-08-02 (October 31, 2007);
Frequency of reporting: Completed at the end of each calendar year;
Description of report content: These reports must include;
* number of affected full-time employees;
* competition costs;
* observed savings;
* projected savings;
* general description of competitive sourcing process; and;
* number of announced and completed competitions.
Requirement: Performance reports and monitoring;
Controlling statute or guidance: OMB Circular No. A-76 (Revised May 29,
2003) and OMB Memorandum for the President's Management Council:
Validating the Results of Public-Private Competition (April 13, 2007);
Frequency of reporting: Completed by performance period, as determined
by the agency;
Description of report content: Regardless of the selected service
provider, an agency shall;
* monitor performance for all performance periods stated in the
solicitation;
* implement the quality assurance surveillance plan;
* retain the solicitation and any other documentation from the
streamlined or standard competition as part of the competition file;
* maintain the currency of the contract file, consistent with the
Federal Acquisition Regulation;
* record the actual cost of performance by performance period; and;
* monitor, collect, and report performance information, consistent with
the Federal Acquisition Regulation.
The April 13, 2007 OMB Memo also directs agencies to have a plan in
place to independently validate results on a reasonable sampling of
covered competitions.
Sources: GAO analysis of documents, as cited above.
[End of table]
[End of section]
Appendix IV: Postcompetition Accountability Review Checklist:
DOL's Office of Asset and Resource Management is responsible for
coordinating the PCARs of the winning service providers, in accordance
with OMB guidance and the Federal Acquisition Regulation. The following
checklist specifies preaudit or review actions that DOL policy and
procedures direct officials to document as part of the PCAR. (Note that
not all items included in the checklist are applicable for all
competitions.)
Figure 6: DOL Postcompetition Accountability Preliminary Review
Checklist:
[Refer to PDF for image]
First Year of Performance Name:
Re-competition Review:
Date:
Name:
Location:
Competition File and Performance Review (FAR Subpart 4.8/OMB Circular A-
76):
Required Documentation:
Yes:
No:
Comments:
Solicitation/Statement of Work:
Yes:
No:
Comments:
Quality Assurance Surveillance Plan:
Yes:
No:
Comments:
Management Plan:
Yes:
No:
Comments:
Quality Control Plan:
Yes:
No:
Comments:
Position Descriptions:
Yes:
No:
Comments:
Agency Cost Estimate (SCF/SLCF):
Yes:
No:
Comments:
Cost Worksheets (COMPARE):
Yes:
No:
Comments:
Modifications/Approved Deviations:
Yes:
No:
Comments:
Letter of Obligation (Current):
Yes:
No:
Comments:
Quality Assurance Evaluations/Inspections:
Yes:
No:
Comments:
Prior Review Results (e.g., IR):
Yes:
No:
Comments:
Prior Inspection Results:
Yes:
No:
Comments:
Staffing Plan:
Meeting FTE requirements:
Yes:
No:
Comments:
MEO/Non-MEO fully staffed:
Yes:
No:
Comments:
Staffing corrections:
Yes:
No:
Comments:
Training corrections:
Yes:
No:
Comments:
Position changes required:
Yes:
No:
Comments:
Cost Performance:
Actual costs w/I cost estimates (SCF/SLCF):
Yes:
No:
Comments:
All actual costs documented:
Yes:
No:
Comments:
Prior Reviews/Actions:
Prior Reviews/Results:
Yes:
No:
Comments:
Corrective Actions:
Yes:
No:
Comments:
Management and Performance Requirements (FAR Subpart 42.15/OMB Circular
A-76):
Transition Management:
Tasks/Time documented:
Yes:
No:
Comments:
Milestones met/adjusted:
Yes:
No:
Comments:
Active Oversight (HR):
Yes:
No:
Comments:
Workload Indicators:
Significant changes in workload:
Yes:
No:
Comments:
Records documented:
Yes:
No:
Comments:
Performance metrics:
Yes:
No:
Comments:
Performance monitoring of work:
Yes:
No:
Comments:
Meeting/Reporting/Performance Evaluations (if required by PWS/PRS):
Meetings/reporting requirements:
Yes:
No:
Comments:
Customer surveys:
Yes:
No:
Comments:
Customer reporting within requirements:
Yes:
No:
Comments:
Corrective action required/completed:
Yes:
No:
Comments:
Deviations/Discrepancies:
Deviation Request required/developed:
Yes:
No:
Comments:
Discrepancies Noted/Waiver Issued:
Yes:
No:
Comments:
Corrective Action/Show Cause/Cure Notice:
Yes:
No:
Comments:
Re-competition Analysis Required/Waiver:
Yes:
No:
Comments:
Review prepared by:
Recommend to exercise option year:
Office Of Competitive Sourcing:
Source: DOL.
[End of figure]
[End of section]
Appendix V: List of DOL Competitive Sourcing Competitions, Fiscal Years
2004 through 2007:
Fiscal year: 2004; #1;
Competition title: Administrative Services for Finance;
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition;
Location (State): DC;
Number of FTEs in study: 24;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Implementation
terminated in May 2007.
Fiscal year: 2004; #2;
Competition title: Reports Disclosure;
Agencies involved[A]: ESA/OLMS;
Type of competition: Streamlined competition;
Location (State): DC;
Number of FTEs in study: 8;
Winning bid: Private contractor;
Status[B]: Personnel actions resulted. No PCAR completed. Ongoing.
Fiscal year: 2004; #3;
Competition title: Invoice Payments;
Agencies involved[A]: OASAM;
Type of competition: Streamlined competition;
Location (State): CO, DC, GA, IL, MA, NY, PA, TX;
Number of FTEs in study: 11;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2004; #4;
Competition title: IT Services;
Agencies involved[A]: OASAM;
Type of competition: Streamlined competition;
Location (State): DC;
Number of FTEs in study: 9;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCARs completed. Ongoing.
Fiscal year: 2004; #5;
Competition title: Conference Center;
Agencies involved[A]: BLS;
Type of competition: Streamlined competition;
Location (State): DC;
Number of FTEs in study: 5;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCARs completed. Ongoing.
Fiscal year: 2004; #6;
Competition title: Printing & Reprographics; Agencies involved[A]:
OASAM;
Type of competition: Standard competition;
Location (State): DC;
Number of FTEs in study: 12;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCARs completed. Ongoing.
Fiscal year: 2005; #7;
Competition title: Library Services;
Agencies involved[A]: MSHA;
Type of competition: Streamlined competition;
Location (State): WV;
Number of FTEs in study: 5;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Implementation
terminated in May 2007.[C]
Fiscal year: 2005; #8;
Competition title: Grants Management/Closeout;
Agencies involved[A]: ETA;
Type of competition: Streamlined competition;
Location (State): DC;
Number of FTEs in study: 3;
Winning bid: In-house;
Status[B]: No personnel actions. PCAR completed. Ongoing.
Fiscal year: 2005; #9;
Competition title: Health Services;
Agencies involved[A]: MSHA,ETA;
Type of competition: Streamlined competition;
Location (State): WV;
Number of FTEs in study: 3;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Implementation
terminated in May 2007.[C]
Fiscal year: 2005; #10;
Competition title: Maintenance Services;
Agencies involved[A]: MSHA;
Type of competition: Streamlined competition;
Location (State): WV;
Number of FTEs in study: 5;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Implementation
terminated in May 2007.[C]
Fiscal year: 2005; #11;
Competition title: Claims Examiners;
Agencies involved[A]: ESA/OWCP;
Type of competition: Streamlined competition; with MEO;
Location (State): FL; Number of FTEs in study: 34;
Winning bid: In-house;
Status[B]: No personnel actions. PCAR completed. Ongoing.
Fiscal year: 2005; #12;
Competition title: Customer Services;
Agencies involved[A]: ESA/OWCP;
Type of competition: Streamlined competition; with MEO;
Location (State): CO;
Number of FTEs in study: 20;
Winning bid: In-house;
Status[B]: No personnel actions. PCAR completed. Ongoing.
Fiscal year: 2005; #13;
Competition title: Statistical Systems;
Agencies involved[A]: MSHA;
Type of competition: Standard competition;
Location (State): CO, PA, WV;
Number of FTEs in study: 34;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Implementation
terminated in May 2007.[C]
Fiscal year: 2005; #14;
Competition title: Finance & Accounting;
Agencies involved[A]: ETA;
Type of competition: Standard competition;
Location (State): DC;
Number of FTEs in study: 23;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008. Ongoing.
Fiscal year: 2005; #15;
Competition title: Administrative Services[D];
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition;
Location (State): DC, IL;
Number of FTEs in study: 32;
Winning bid: Private contractor;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #16;
Competition title: Docket Clerks;
Agencies involved[A]: OALJ, ADJ BOARDS;
Type of competition: Streamlined competition; with MEO;
Location (State): DC;
Number of FTEs in study: 30;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #17;
Competition title: Internal Communications;
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition; with MEO;
Location (State): DC;
Number of FTEs in study: 8;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #18;
Competition title: Training Administration & Instruction;
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition; with MEO;
Location (State): IL;
Number of FTEs in study: 37;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #19;
Competition title: Other Legal Support Services;
Agencies involved[A]: OALJ;
Type of competition: Streamlined competition; with MEO;
Location (State): CA, CO, DC, GA, LA, MA, NJ, OH, PA, VA;
Number of FTEs in study: 50;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #20;
Competition title: National Certification Program;
Agencies involved[A]: ESA/WHD;
Type of competition: Streamlined competition; with MEO;
Location (State): CA, IL, PA, TX;
Number of FTEs in study: 11;
Winning bid: In-house;
Status[B]: Personnel actions resulted. PCAR completed. Ongoing.
Fiscal year: 2006; #21;
Competition title: Visual Services (LBU-5);
Agencies involved[A]: MSHA;
Type of competition: Streamlined competition; with MEO;
Location (State): WV;
Number of FTEs in study: 8;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed because
implementation was terminated in May 2007.[C]
Fiscal year: 2007; #22;
Competition title: Chemical Services (LBU-3);
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition; with MEO;
Location (State): UT;
Number of FTEs in study: 37;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008. Ongoing.
Fiscal year: 2007; #23;
Competition title: Professional & Tech Support (LBU-2);
Agencies involved[A]: OSHA;
Type of competition: Streamlined competition; with MEO;
Location (State): DC, OH;
Number of FTEs in study: 16;
Winning bid: In-house;
Status[B]: No personnel actions. No PCAR completed as of July 2008
because implementation of competition was suspended.[E,F]
Fiscal year: 2007; #24;
Competition title: Installation Services;
Agencies involved[A]: OASAM, OALJ;
Type of competition: Standard competition;
Location (State): CA, DC, GA, IL, MA, MO, NY, PA, TX, VA, WA, WV;
Number of FTEs in study: 59;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008. Ongoing.[E]
Fiscal year: 2007; #25;
Competition title: Program Support Services (LBU-6);
Agencies involved[A]: ESA, ETA, WB;
Type of competition: Standard competition;
Location (State): CA, CT, DC, FL, GA, HI, IL, IN, MI, MS, MO, NE, NY,
NC, OH, PA, TX, VA, WI;
Number of FTEs in study: 65;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008 because implementation of competition was suspended.[E,F]
Fiscal year: 2007; #26;
Competition title: Finance & Accounting Services;
Agencies involved[A]: BLS, OASAM, OCFO, OSHA;
Type of competition: Standard competition;
Location (State): CA, DC, GA, IL, MA, MO, NY, PA, TX;
Number of FTEs in study: 101;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008 because implementation of competition was suspended.[E,F]
Fiscal year: 2007; #27;
Competition title: Economists and Writers (LBU-4);
Agencies involved[A]: BLS;
Type of competition: Standard competition;
Location (State): DC;
Number of FTEs in study: 51;
Winning bid: In-house;
Status[B]: Personnel actions resulted. No PCAR completed as of July
2008 because implementation of competition was suspended.[F]
Fiscal year: 2007; #28;
Competition title: Admin Support Services (LBU-1)[D];
Agencies involved[A]: EBSA, ESA, ETA, ILAB, MSHA, OASAM, OASP, OSBP,
OSHA, VETS, WB;
Type of competition: Standard competition;
Location (State): AL, AR, AZ, CA, CO, DC, FL, GA, IL, IN, KY, MA, MD,
MI, MN, MO, MS, MT, NC, ND, NJ, NY, OH, OK, OR, PA, SC, TN, TX, VA, WA,
WV;
Number of FTEs in study: 328;
Winning bid: Private contractor;
Status[B]: No personnel actions. No PCAR completed because contract was
terminated in May 2007.[C]
Total: Number of FTEs in study: 1,029.
Source: DOL reports to Congress and data on affected personnel.
[A] DOL agency abbreviations are as follows:
ADJ Boards: Adjudicatory Boards:
BLS: Bureau of Labor Statistics:
EBSA: Employee Benefits Security Administration:
ESA: Employment Standards Administration:
ETA: Employment and Training Administration:
ILAB: Bureau of International Labor Affairs:
MSHA: Mine Safety and Health Administration:
OALJ: Office of Administrative Law Judges:
OASAM: Office of the Assistant Secretary for Administration and
Management:
OASP: Office of the Assistant Secretary for Policy:
OCFO: Office of the Chief Financial Officer:
OLMS: Office of Labor Management Standards:
OSBP: Office of Small Business Programs:
OSHA: Occupational Safety and Health Administration:
OWCP: Office of Workers' Compensation Programs:
VETS: Veterans' Employment & Training Service:
WB: Women's Bureau:
WHD: Wage & Hour Division:
[B] Initial PCARs are normally conducted after the first full year of
performance following a competition. Thus, for competitions completed
in fiscal year 2007, PCARs normally would be conducted no later than
the end of September 2008; however, as noted, several have been
suspended.
[C] In six instances, the implementation of completed competitions
involving MHSA FTEs was terminated to comply with Pub. L. No. 110-28,
§6602 (2007).
[D] DOL did not include these two competitions on the Section 647 lists
of "Completed Competitions" that were provided to Congress for fiscal
years 2005 and 2007, respectively. They are included here, however,
because they were subsequently identified on a spreadsheet of completed
competitions provided by DOL.
[E] In four instances, MSHA FTEs were removed from the implementation
of completed competitions to comply with Pub. L. No. 110-28, §6602
(2007).
[F] In four instances, the implementation of completed competitions was
suspended to comply with Pub. L. No. 110-161, Division G, Title I, §111
(2007).
[End of table]
[End of section]
Appendix VI: Comments from the Office of Management and Budget:
Executive Office Of The President:
Office Of Management And Budget:
Deputy Director For Management:
Washington, D.C. 20503:
October 22, 2008:
Mr. George A. Scott:
Director:
Education, Workforce, and Income Security Issues:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Scott:
This responds to your October 6, 2008 request for comment from the
Office of Management and Budget (OMB) on your draft report "Department
of Labor: Better Cost Assessments and Department-wide Performance
Tracking Are Needed to Effectively Manage Competitive Sourcing
Program." The report includes a recommendation that the OMB Director
issue guidance to expand the types of costs that agencies (1) report to
Congress as costs of competitive sourcing and (2) consider in
evaluating the cost-effectiveness of competitive sourcing as a
management tool.
Section 647(b) of Division F of the Consolidated Appropriations Act,
Fiscal Year (FY) 2004, P.L. 108-199, establishes general government-
wide requirements for reporting costs on competitive sourcing efforts.
Section 647(b) requires agencies to identify "the incremental cost
directly attributable" to conducting competitions. Consistent with
section 647, OMB guidance focuses on out-of-pocket expenses, such as
the cost of consultants who provide support to agency officials
conducting competitions. The OMB guidance excludes costs that would
likely be incurred in closing a performance gap irrespective of whether
the agency used competition as part of its process for achieving
improved performance and cost-effectiveness. For example, the costs of
preliminary planning activities, such as workload assessment and
benchmarking, are excluded because these efforts are common to most
disciplined management strategies for improving government performance
and would likely be needed to effectively close a performance gap
whether or not public-private competition was part of the reengineering
process.
Your draft report recommends that OMB broaden the scope of costs that
agency managers track and consider in evaluating the return on
investment from competitive sourcing to include costs that would not
necessarily be unique to competitive sourcing, such as preliminary
planning costs and costs associated with monitoring a reengineered
function. Agencies must plan for these costs, but we question whether
they should be used to compare the cost-effectiveness of competitive
sourcing to other management tools.
If the additional costs specifically identified by the GAO were
included in evaluating the cost-effectiveness of competitive sourcing
as a management tool, we believe savings would continue to exceed costs
by a significant margin. Based on agency data calculations made in
accordance with OMB's current guidance, the incremental cost for
competitions conducted between FYs 2003 - 2007 was $239 million and
savings to be realized are over $7 billion, meaning taxpayers are
expected to receive a return of about $30 for every dollar spent on
competition. Our review of the findings in your report on the
competitive sourcing efforts at the Department of Labor (DOL) did not
give us reason to expect a significantly different result. However, we
agree that DOL, and all agencies, can maximize savings and performance
benefits by ensuring appropriate internal controls are in place to
continually monitor results through all performance periods, and take
timely actions, when necessary, to adjust agency operations.
The Administration intends to work with the transition team so that
they will be fully informed about the costing policies for competitive
sourcing as they consider the GAO's recommendations. I appreciate the
opportunity to comment on the draft report.
Sincerely,
Signed by:
Clay Johnson III:
Deputy Director for Management:
[End of section]
Appendix VII: Comments from the Department of Labor:
U.S. Department of Labor:
Office of the Assistant Secretary for Administration and Management:
Washington, D.C. 20210:
October 23, 2008:
Mr. Bill Keller:
Assistant Director:
Education, Workforce, and Income Security Issues:
Government Accountability Office:
441 G. Street, N.W., Mail Drop 5K21:
Washington, D.C. 20548:
Dear Mr. Keller:
I am responding to your request for comment on the Government
Accountability Office's (GAO) draft report entitled, "Department Of
Labor: Better Cost Assessments and Department-wide Performance Tracking
Are Needed to Effectively Manage Competitive Sourcing Program" (GAO-09-
14), dated November 2008. This letter provides our general comments,
observations, and responses to the report's recommendations.
We appreciate GAO's review and assessment of the Department of Labor's
(DOL) competitive sourcing program. As recognized in the draft report,
the Department is generally in compliance with Office of Management and
Budget (OMB) guidance, competitive sourcing policy and procedures
promulgated by DOL, were generally followed, and the Department made
progress in developing a system to assess the performance of winning
service providers resulting from A-76 competitions. In addition, it
should be noted that the DOL competitive sourcing program has been
operating under Congressional restrictions. Specifically, P.L. 110-28,
signed on May 25, 2007, classifying Mine Safety and Health
Administration (MSHA) employees as inherently governmental, which
exempts MSHA from A-76 competitions, and P.L. 110-161, signed on
December 26, 2007, prohibits the Department from carrying out public-
private competitions under OMB Circular A-76 until 60 clays after the
GAO provides Congress a report on the use of competitive sourcing at
DOL.
At the same time, DOL acknowledges GAO's observation that improving
cost assessments and performance tracking can provide better tools for
managing DOL's competitive sourcing program. In response to the draft
report's recommendations for the Department, beginning in FY 2009 DOL
will:
* Implement a Department-wide system to track identified deficiencies
and recommendations for improvement in competitions and the program
overall; and:
* Implement an internal review process to increase the accuracy of
competitive sourcing savings reports to Congress [based on the
prevailing guidance from OMB].
A final GAO recommendation for the Department suggests that DOL
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. As noted in the draft
report, govennmentwide guidance on the reporting of costs associated
with competitive sourcing is provided by OMB. Therefore, DOL's
implementation of this recommendation will be subject to OMB's
additional guidance concerning the costs to be reported.
Additional technical comments are enclosed for your consideration. The
Department appreciates the opportunity to comment on the proposed
report. If you have any questions, please contact me or have your staff
contact Ed Bugler, Deputy Assistant Secretary for Operations, at (202)
693-4040.
Sincerely,
Signed by:
Patrick Pizzella:
Assistant Secretary for Administration and Management, Competitive
Sourcing Official:
Enclosure:
[End of section]
Appendix VIII: GAO Contact and Staff Acknowledgments:
GAO Contact:
George A. Scott, (202) 512-7215 or scottg@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Bill J. Keller, (Assistant
Director), Kristy L. Kennedy, Margie K. Shields, Nicholas L. Weeks,
Jeffrey W. Weinstein, Doreen S. Feldman, Alexander G. Galuten, William
T. Woods, and Jessica S. Orr made significant contributions to this
report.
[End of section]
Related GAO Products:
Department of Defense: Department of Defense Pilot Authority for
Acquiring Information Technology Services under OMB Circular A-76.
[hyperlink, http://www.gao.gov/products/GAO-08-753R]. Washington, D.C.:
May 29, 2008.
Defense Management: DOD Needs to Reexamine Its Extensive Reliance on
Contractors and Continue to Improve Management and Oversight.
[hyperlink, http://www.gao.gov/products/GAO-08-572T]. Washington, D.C.:
March 11, 2008.
Forest Service: Better Planning, Guidance, and Data Are Needed to
Improve Management of the Competitive Sourcing Program. [hyperlink,
http://www.gao.gov/products/GAO-08-195]. Washington, D.C.: January 22,
2008.
Federal-Aid Highways: Increased Reliance on Contractors Can Pose
Oversight Challenges for Federal and State Officials. [hyperlink,
http://www.gao.gov/products/GAO-08-198]. Washington, D.C.: January 8,
2008.
Department of Homeland Security: Risk Assessment and Enhanced Oversight
Needed to Manage Reliance on Contractors. [hyperlink,
http://www.gao.gov/products/GAO-08-142T]. Washington, D.C.: October 17,
2007.
Defense Budget: Trends in Operation and Maintenance Costs and Support
Services Contracting. [hyperlink, http://www.gao.gov/products/GAO-07-
631]. Washington, D.C.: May 18, 2007.
Implementation of OMB Circular No. A-76 at Science Agencies.
[hyperlink, http://www.gao.gov/products/GAO-07-434R]. Washington, D.C.:
March 16, 2007.
Competitive Sourcing: Greater Emphasis Needed on Increasing Efficiency
and Improving Performance. [hyperlink, http://www.gao.gov/products/GAO-
04-367]. Washington, D.C.: February 27, 2004.
Competitive Sourcing: Implementation Will Be Challenging for Federal
Agencies. [hyperlink, http://www.gao.gov/products/GAO-03-1022T].
Washington, D.C.: July 24, 2003.
Competitive Sourcing: Implementation Will Be Key to Success of New
Circular A-76. [hyperlink, http://www.gao.gov/products/GAO-03-943T].
Washington, D.C.: June 26, 2003.
Commercial Activities Panel: Improving the Sourcing Decisions of the
Government; Final Report. [hyperlink,
http://www.gao.gov/products/GAO/A03209]. Washington, D.C.: April 30,
2002.
Competitive Sourcing: Challenges in Expanding A-76 Governmentwide.
[hyperlink, http://www.gao.gov/products/GAO-02-498T]. Washington, D.C.:
March 6, 2002.
DOD Competitive Sourcing: Effects of A-76 Studies on Federal Employees'
Employment, Pay, and Benefits Vary. [hyperlink,
http://www.gao.gov/products/GAO-01-388]. Washington, D.C.: March 16,
2001.
DOD Competitive Sourcing: Some Progress, but Continuing Challenges
Remain in Meeting Program Goals. [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-00-106]. Washington, D.C.: August
8, 2000.
DOD Competitive Sourcing: Savings Are Occurring, but Actions Are Needed
to Improve Accuracy of Savings Estimates. [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-00-107]. Washington, D.C.: August
8, 2000.
OMB Circular A-76: DOD's Reported Savings Figures Incomplete and
Inaccurate. [hyperlink, http://www.gao.gov/products/GAO/GGD-90-58].
Washington, D.C.: March 15, 1990.
[End of section]
Footnotes:
[1] These agencies include, for example, the Department of Defense
(DOD) and the Department of Agriculture (USDA). See GAO, DOD
Competitive Sourcing: Some Progress, but Continuing Challenges Remain
in Meeting Program Goals, [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-00-106] (Washington, D.C.: Aug.
8, 2000) and Forest Service: Better Planning, Guidance, and Data Are
Needed to Improve Management of the Competitive Sourcing Program,
[hyperlink, http://www.gao.gov/products/GAO-08-195] (Washington, D.C.:
Jan. 22, 2008).
[2] In fiscal year 2003, DOL completed 28 studies as part of its
competitive sourcing program, but these were all "direct conversions"-
-that is, functions converted directly to private sector service
providers with no assessment of DOL employees' capabilities to provide
these services in-house. This practice was no longer permitted
following issuance of the revised OMB Circular No. A-76 in May 2003.
[3] Full-time equivalent (FTE) is the basic measure of the staffing of
federal civilian employee positions. It is the total number of hours
worked (or to be worked) divided by the number of compensable hours
applicable to each fiscal year.
[4] Commercial activities are defined by OMB Circular No. A-76 as
recurring services that could be performed by the private sector. They
may be funded and controlled through a contract, fee-for-service
agreement, or performance by government personnel.
[5] Pub. L. No. 110-161, Division G, Title I, §111 (2007).
[6] The explanatory statement for the Consolidated Appropriations Act,
2008 specified that agencies should be guided by House Report 110-231
(2007), a report by the House Committee on Appropriations. This House
Report provided the details of the work GAO was directed to carry out.
[7] GAO, Commercial Activities Panel: Improving Sourcing Decisions of
the Government; Final Report, GAO/A03-209] (Washington, D.C.: April
2002).
[8] See GAO/A03209.
[9] OMB, Memorandum for the President's Management Council: Plans for
Commercial Services Management (Washington, D.C., July 11, 2008).
[10] Pub. L. No. 105-270 (1998).
[11] For a description of these six "reason codes," see appendix II.
[12] A letter of obligation is a formal agreement that an agency
implements when a competition results in the in-house work group
(government service provider) winning the competition and performing
the work.
[13] Pub. L. No. 108-199, §647(b) (2004).
[14] OMB provided guidance on postcompetition oversight in a memorandum
to the President's Management Council: Validating the Results of Public-
Private Competition (April 13, 2007).
[15] See appendix II for DOL's categorization of commercial activities
for fiscal year 2006.
[16] See appendix IV for DOL's checklist for conducting PCARs.
[17] OMB Circular No. A-76 directs agencies to monitor performance for
all performance periods stated in the solicitation; maintain the
currency of the contract file in accordance with Subpart 4.8 of the
Federal Acquisition Regulation; and monitor, collect, and report
performance information consistent with Subpart 42.15 of the Federal
Acquisition Regulation.
[18] As noted earlier, DOL completed 28 studies as part of its
competitive sourcing program in fiscal year 2003, but these were all
"direct conversions" to private sector service providers that did not
involve assessments of DOL employees' capabilities to provide these
services in-house.
[19] As of July 2008, DOL had not yet conducted any of the PCARs for
the seven competitions from fiscal year 2007 (these reviews were
expected to be completed at various times during fiscal year 2008).
[20] Implementation of four competitions was canceled as a result of
§6602(b) of Pub. L. No. 110-28 which classified all federal employees
at the Mine Safety and Health Administration as inherently
governmental, thus making them ineligible for inclusion in competitive
sourcing activities.
[21] DOL policy and procedures call for streamlined competitions with
an MEO to establish quality assurance and control plans, as they would
for a standard competition. For streamlined competitions without an
MEO, an abbreviated version of the quality assurance plan is provided,
while quality control plans are optional.
[22] OMB Circular No. A-123 provides guidance to federal managers on
improving the accountability and effectiveness of federal programs and
operations by establishing, assessing, correcting, and reporting on
internal control.
[23] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[24] The term "guidance," as used in this report, generally refers to
OMB memoranda M-08-02, M-07-01, M-06-01, and M-05-01 regarding agency
reports to Congress.
[25] Pub. L. No. 108-199 (2004).
[26] GAO, OMB Circular A-76: DOD's Reported Savings Figures Incomplete
and Inaccurate, [hyperlink, http://www.gao.gov/products/GAO/GGD-90-58]
(Washington, D.C.: March 15, 1990) and [hyperlink,
http://www.gao.gov/products/GAO-08-195].
[27] Costs attributable to staff dedicated to central program oversight
activities full time--unlike temporarily detailed staff--are to be
included in the cost reports, according to OMB guidance.
[28] Under the Voluntary Separation Incentive Payment Authority (also
known as buyout authority), agencies that are downsizing or
restructuring are allowed to offer employees lump-sum payments up to
$25,000 as an incentive to voluntarily separate.
[29] A partial FTE was designated for management support.
[30] No personnel actions occurred for various reasons in five of the
competitions. In three cases, there were no personnel actions because
of attrition or because there was no MEO. In one case, the competition
was canceled to comply with Pub. L. No. 110-28, §6602 (2007). In one
other case, the competitions were suspended to comply with Pub. L. No.
110-161, Division G, Title I,§111 (2007).
[31] Federal regulations provide for an employee's eligibility for
mandatory or optional grade and pay retention when an agency moves an
employee to a lower-graded position. See 5 C.F.R. part 536. According
to data provided by a senior DOL official, all but two of these
employees were eligible to maintain either their grade or their pay
under these provisions.
[32] When an agency must abolish positions, federal regulations
determine whether an employee keeps his or her present position or
whether the employee has a right to a different position. See 5 C.F.R.
part 351.
[33] For a list of all 10 principles, see the Background section of
this report.
[34] For a more detailed description of how the interviewees were
selected, see appendix I.
[35] Pub. L. No. 110-161, Division G, Title I, §111 (2007).
[36] The explanatory statement for the Consolidated Appropriations Act,
2008 specified that agencies should be guided by House Report 110-231
(2007), a report of the House Committee on Appropriations. This House
Report provided the details of the work GAO was directed to carry out.
[37] See GAO, Commercial Activities Panel: Improving Sourcing Decisions
of the Government; Final Report, GAO/A03209 (Washington, D.C.: April
2002).
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548: