Danger -- Our Government Set to Explode

By Liz PeekFinancial Columnist

Democrats in Congress, with the support of the Obama administration, are set to upend a policy which for the past 50 years has saved taxpayers hundreds of billions of dollars, but cut into the ranks of unionized labor. They are preparing to in-source to the federal government thousands - possibly hundreds of thousands - of jobs formerly contacted out to private companies. If you are concerned that government is the only sector adding jobs today in America, as the latest employment report confirms, be prepared for the numbers to get much, much worse.


Exhibiting a cynical disregard for the country's dire need to cut spending, Democrats in Congress are fighting to eliminate a competitive contracting procedure known as the A-76 program. Senator Barbara Mikulski of Maryland has introduced the so-called "Clean Up Act," which would eliminate outsourcing of government work to private contractors. Ironically, her bill calls for federal agencies to determine if they face looming employee shortages. According to her press release "It is estimated that 600,000 federal jobs - close to one-third of the government - will need to be filled in the next four years." That such a hiring spree might be compounded by her bill, and might drive costs through the roof, appears not to have occurred to the senator. (The release is included on her Web site -- along with, believe it or not, her recipe for crab cakes.) The winners of this bill? Members of the American Federation of Government Employees (AFGE), and other unions. The losers? You and me, the taxpayers.

In 1966 the Office of Management and Budget issued Circular A-76, formalizing a process begun in 1955 by which federal agencies were requested to obtain commercial goods and services from the private sector if such purchases would save taxpayers money. In the intervening years, thousands of contracts have been bid competitively. Senator Mikulski claims that such outsourcing totaled $532 billion in 2008. Ronald Utt, Senior Research Fellow at the Heritage Foundation, says that the cost savings from these awards have averaged 30%, relying on information provided by the CNA Corporation, a nonprofit research organization that operates the Center for Naval Analyses. If this is correct, in 2008 taxpayers saved more than $150 billion.

Mr. Utt says that when some contracts are farmed out, union workers are replaced, but that about half the time the existing government workforce wins the bid, by agreeing to operate more efficiently.

At a moment when our president creates photo ops to crow about cutting 1.7% of the soaring federal budget, one of the primary mechanisms for reducing wasteful spending in Defense, and other agencies, is in jeopardy.

Why? Because quite often, the private contractors save money through working more efficiently, and some union jobs are lost. This does not sit well with the likes of New York's two Democratic Senators -- Chuck Schumer and Kirsten Gillibrand. They have recently intervened to stop a small company -- the Ginn Group, founded nine years ago by service-disabled twin bothers -- to take on a contract won fair and square through an A-76 bid process for plant maintenance at West Point. At stake are jobs now held by 300 members of the American Federation of Government Employees (AFGE), which has lobbied vigorously against the Ginn organization.

The Ginns specialize in these kinds of contracts at military bases, and have an outstanding record. They provide similar services, according to CEO Jim Ginn, at Fort Knox, where they were awarded a five year, $55 million contract by substantially underbidding the competition. Not only has the company been awarded near-perfect performance scores by the DOD, they actually returned roughly $2 million to the department last year, since they were able to slice costs even more than expected. Jim Ginn says "We have never failed in a contract in any way."

The Ginn Group is almost entirely staffed by veterans. The Ginn brothers both flew helicopters in Vietnam, and both served their country for over 25 years. They are frustrated that the politics of the West Point situation are prohibiting them from talking to the local work force, and reassuring them about their employment prospects. Contrary to the rumors being encouraged by the AFGE, the Ginns typically end up keeping a large number of existing employees, offering superior wages and benefits, and may even employ current management.

Unfortunately, the former pilots are flying into a thundercloud. New York's senators are not just interested in scoring a win for the union in their state. They are joining the fight to eliminate the A-76 program altogether, and to "ensure that work...is incrementally brought back in-house..." That is, no matter what it costs. As stated in their press release, the Clean Up Act "Will Put Final Nail in the Coffin of Ineffective and Counterproductive A-76 Studies".

President Obama signed into law the suspension of A-76 studies, except in the Department of Defense, through fiscal 2009 as part of the Omnibus spending bill. The DOD is covered in a separate provision in the Defense Authorization Bill. The president's explanation is that he wants clarification on what constitutes "government work." Parsing that term could open the door to undoing decades of cost-effective outsourcing, since the various agencies are required to seek competitive bids only on work that does not fall under that heading. Grass mowing, snow removal and other such plant maintenance jobs are activities that have heretofore been open to private contractors like Ginn. That could change.

The push by Congress and the administration, aimed at growing the federal workforce, could end up costing the country billions of dollars. As Jim Ginn says, "Can you imagine if all the work that has been given out to the most efficient contractors was taken back in house? In these difficult times?" No, I can't either.