Federal Employee Challenges to Contracting Out: Is There B Viable Forum?

• Author: by Major Richard K. Ketler, USMC
• Pages: 04

1. INTRODUCTION

   For neariy thirty years, the federal executive branch has espoused a policy of relying on private enterprise to supply the commercial products and services needed to perform ita governmental functions.' Originally, the justification far this policy was that, in the process of governing, the government should not compete with private business. Economy and op.erational efficiency, however, have become the primary factors in deter. mining whether the government's commerciai activities' shouid be per. formed in.hause' or under contract with private firms.'

   The current commercial actiwties policy, promulgated in the Office of Management and Budget'a Circular No. A.16,' requires that executive agencies conduct detailed comparisons of the estimated cost of the most efficient in.house performance of commercial activities with the cost of acquiring such Services through competitive bidding by private contrac.

   .. .

   tors In general, if an acceptable contractor bid i8 lower than the m. house estimate. commercial activities are converted from government performed to contractor performed If the activity can be performed less expensively imhouse, the agenq must do so by Implementing the organ. iration plan upon which the in-house estimate uas based

   In view of the escalating federal deficit. government officials must strive for optimum economy and efficiency of operations. Federal employees and their unions. on the other hand, are understandably concerned about job security Accordingly, employee challenges' to agency actions under the Circular have arisen in several forums, including ad. ministrative appeals under procedures mandated by the Circular itselE:a negotiability and arbitration auard appeals under Title VI1 of the Civil Service Reform Act of 1978 (CSRA)* before the Federal Labor Relations Authority (FLRA or Authority),Lolawsuits in federal court under the Ad. ministrative Procedure Act" and various appropriations acts.LZand pro.

   curement protest actions in the General Accounting Office (GAO) This diversity of available forums has resulted in inconsistent rulings con. cermng the extent of discretion agency officials may exercise in con. tracting out, as well 8s in elack of finality of government procurements under the Circular Additionally. because commercial activity conrer-sions generally are not delayed pending appeal, adversely affected em-

   19861 CONTRACTING OUT ployees suffer from the lack of a single, expeditious procedure to chal. lenge the propriety of agency contractingout determinations.

   This article examines employee challenges to federal contractingout determinations in the various forums, with emphasis an Equal Employ-ment Opportunity Cornmisston (EEOC) L.. FLRA,I'a case pending review by the US

   Supreme Court. The deeman of the Court of Appeals far the District of Columbia m EEOC u. FLRA greatly expanded the scope of cantractingout determinations subject to grievance arbitration, thus making labor arbitration the predominant forum for federal contract. ing-out litigation. This article concluded that the court m EEOC u. FLRA mimterpreted the language and legislative intent of pertinent Title VI1 provisions. Moreover, cantractingat arbitration severely impairs government managerial flexibility and efficiency wlthout providing an effective, expedient, and competitive reww procedure to employees ad. versely affected by cammercml activity converaons. The EEOC L.. FLRA decision should be overturned by the Supreme Court. To the extent that independent review af employee challenges to Circular A.76 determina. tions 1s needed, Congress should provide standing for adversely affected employees" under GAO procurement protest procedures. Such leg&. tion would foster implementation of the policies underlying the cammer. cia1 activities program by providing for prompt, impartial consideration of employee interests by a forum that could, at the bame time, adjudicate the procurement technicalities involved in challenges to contract awards under the Circular.

   11. THE COMMERCIAL ACTIVITIES PROGRAM A. OMB Circular No. A-76

   The government's contracting-aut policy was first announced in President Eisenhower's 1954 budget message to the C~ngress.'~

   He stated

   that that budget "mark[ed] the begmmng of a movement to shlft to . . private enterprise Federal activities which can be more appropri.

   "744 F 2d 842 (D C Cir 19641, csil gmnfrd. 106 S CT 3491 (19851 See 2ni.o notes 164-84and ae~~mmnvrnetext

   "In the cmrextbi mte;e.red parties authorized IO maintain GAO pr~curemenf promiti

   under legl~lalion proposed ~n thrs art& the term ''adversely affected emplayeea" IS used 10 refer ta Eederal ernplwee. Kho, because of B RIF resulting from a c ~ m e r c ~ a i sctlvlty

   converiion to contractor performance m e released from fhev eompetltive levels under 6CFR 5 351 601(19831 Irianofinrendedtoinclvdeallemplo~oeiuhoma)be~hgibl~E~~the right of first refusal for emp1a)ment with the privsfe contractor under Federal Acqui-sition Reg 5s 7 305w 62 207-3 I1 Apr 18841 and unplementme agency regnlatlons, or who may be entitled to appeal nn A-76 dererminalmn under agency administrative appeal procedure8 ' 8 , Depi of Arm). Reg No 6.20. Commercial Acti\~tiea Program, para 4.31a I1 Feb 1986,

   "Far a thorough historical development of the gmernrnent's early eoniractmg.out pro. gramandpohcias ~ e s

   Wildermuth.eupm note l,at3.19

   ately and more efficiently carried on that way "Ii The thenwistmg Bu. rea" of the Budget promulgated a aeries of bulletm implementing this policy In Agency heads were instructed to inventory and study commer. cia1 activities to determine whether they should be converted to contract to further the general policy of performance through private enterpnse. Specific methods of cast comparison were not required In fact, relative cast was not a primary consideration I'

   Circular No A.16, first issued as B Bureau of the Budget circular in 1966,'O marked a fundamental shift in the contractingat policy from e goal of absolute reliance on private suurces to meet the government's commercial activity needs to reliance on a cost-effective balancing be. tween imhouse and contractor The Circular was revised in 1961, 1979, and 1983. The current Circular states that it is the policy of the US Government to achieve economy and enhance productivity through competition between nhouse and commermal sources for performance of commercial activities, retain governmental functionsz' in-house; and rely on private enterpnse for commercially available goods and services if the activity can be performed more economically in the private sector.s' Specifically excluded from coverage under the Circular are government functions, Department of Defense (DOD) operations during wartime or military mobilization, and research and dexlopmenr contracts.*' Agency heads are required to review all other commercial ac- "ioocang R~~ 567(1964)

   "Sr~Wlldermuth,6"~.pranafe l.at4-ll"Id sf 4.5"Bureau of the Budget, Cuculsr Na A 76. PaLeies for Acquiring Commercisl or Indue-"Srr Rildermvth, supm note 1 st 10.14. for an m-depth analys~of the original Circular tiialProduets and Selvicea for Government Use (1966)

   'zId at pars 5

   "Id. at pars 7c In addition ta activities rpecifiesUy excluded from the pmnnans of the Cueulsr. the Supplement provides that commercial aeliviries ~ni,alvmg fen 01 fewer Full Time Equvalenr (FIE1 workyesra may be converted 10 contract without conducting easi compansons if

   theagDncydefFrMnesthat"farandressonablepriceseanbpohtainrd from guahfied commercial MYTC~S "OMB Circ A-76 Supp , pt I, ch 2. para AI An FIE

   18 the

   plsnnedweof 2.067sfrn%ht-trmepaid havraina fiscal year. apprarimate~fheamountaf work performed. for example. by one EuU-time emp1a)ee or m a part-time employees each warhg 211 hams B week Id et n 1 The Departmentof Defense. however. may not cmvem any activity, regardless of sue, without Emat conducting en A.76 coif compsnion demanitrating that eontraefor performance 18 more economical Dep'f ai Defenae Federal Ac. Qulsitran Rag Supp I 7 3021dJ I1 Apr 1984) The Dep't of Defense operarei 75% of the c~mmereisl ~ m ~ i f i e s aubieer to Circular A.76 OMB Cir A-76 Comment D. at 48 Ted Reg 37.111

   19861 CONTRACTING OUT tivities under procedures set forth m the Circular and Its Supplement. These activities may be continued to be performed in-house" only under the following conditions.

   a. No commercial source is capable of providing the needed goads or services, or such procurement would cause an mac. ceptable delay or disruption of an agency program;

   b. The interests of national defense, as determined by the Secretary of Defense, justify imhouse performance;

   c. The interest8 of patient care at government-operated hospitals, as determined by the agency head, justify retention of health care services; or

   d. A cost comparison prepared in accordance with the A.76 Supplement demonstrates that in.house operation of the ac. tivity can be accomplished at a lower estimated cost than by B

   qualified private contractor

   Agency heada are required to complete initial reviews of all existmg commercial activities by September 30, 1987." These reviews must de. termme whether the activity may be retained imhouse far any of the foregoing reasons If in-house performance is based on lower cast ireason d), it must be justified under detailed standards set forth in the Supple-ment for equitably comparing the cost of in-house performance with the cost of contract performance by the lowest acceptable bidder Any activity approved for retention fallowing the initial reww must again be reviewed at leaat once every five year^.'^

   A basic familiarity with the Circular and its Supplement is necessary to understand the issues presented in the various employee challenges to contractingat determinations Once a commercial actwty IS identified and approved for a cost comparison, the agency must develop a Perform. ance Work Statement (PWS) and a Quality Assurance Plan...