House Rejects Outsourcing of Federal Jobs in Vote to Block Revival of Circular A-76


By Charles S. Clark
July 28, 2017

The House on Thursday voted to continue a seven-year-old moratorium on public-private competition to perform certain federal jobs under the long-standing Office of Management and Budget Circular A-76.

A bipartisan amendment by Rep. Matt Cartwright, D-Pa., attached to the fiscal 2018 Defense appropriations bill was approved 253-172.

“The fundamental flaw inherent in the A-76 process is the erroneous underlying methodology used to determine whether or not federal civilian jobs would be outsourced,” said Cartwright, noting that the last time such contractor-versus-agency employee competitions were attempted was in 2003. “These studies rely on a process that both the Government Accountability Office and the Inspector General of the Department of Defense concluded could not demonstrate any savings.”

Rep. Ken Calvert, R-Calif., countered that, “I support competition, and these competitions, as a whole, have been beneficial to the Department of Defense. The OMB has reported that, regardless of whether the federal government or the private contractor win the competition, the act of competition alone has saved or generated a cost savings up to 10 to 40 percent –10 to 40 percent just having the competition.”

Calvert warned that a renewed ban would “block opportunities for the defense industrial base, protect the status quo within the DoD civilian workforce, prevent cost savings at the DoD and negate the natural innovation that comes from competition.”

One group pleased with passage is the American Federation of Government Employees.  “Taxpayers benefit when the government’s work is performed by civil service employees, who are less costly and more accountable than private-sector workers,” said its national president, J. David Cox Sr. “But the current privatization process is biased against federal workers, which is why Congress must retain the longstanding ban on contracting out federal jobs using the flawed A-76 outsourcing method.”

In hailing passage of the amendment, Cartwright noted that it would protect federal civilian jobs at Pennsylvania’s Tobyhanna Army Depot.

The amendment is now part of a fiscal 2018 package combining the appropriations bills for the Defense Department, military construction and Veterans Affairs Department, energy and water, and the legislative branch.

The package must still clear the Senate.

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Federal Unions Need to Redefine Their Role

It’s not fake news: The union movement is close to extinct in the private sector. Union membership now accounts for less than 7 percent of the workforce. In government, at all levels, the percentage is almost 35 percent. Federal unions have added members but total public sector membership fell from 2015 to 2016.  It’s unlikely anyone expects unions to regain the influence they commanded 50 years ago.

Workers benefited from increasing union strength after World War II. The US and world economies were growing; the few recessions were brief. From 1948 to 1979, productivity rose 108 percent and the average real (inflation adjusted) hourly wage rose 93 percent.  Since Ronald Reagan’s election in 1980, productivity has increased 65 percent but real wages have risen only 8 percent. Unions have lost 3 million members since 1983. If middle class incomes had continued to rise, it’s been estimated that families would now have roughly $20,000 more to spend. The declining purchasing power contributes to our slow growth economy.

The stories of labor-management clashes have been told in books and movies. Strikes in the past occasionally involved 100,000 or more employees and lasted for months. Now we have 3-day weekend strikes by AT&T employees. In the decade after World War II, the country experienced an annual average of almost 350 major strikes (involving 1,000 or more employees). The decade ending with 2016 saw an average of 14 major strikes per year.

The story in Germany is very different. Unions there represent an important force in the economy. And the German economy is one of strongest in the world. Their trade balance is consistently positive while ours is $700+ billion in the red. Public debt in Germany is 70 percent of GDP; public debt in the U.S. is over 100 percent of GDP.

An important difference is the role of unions. Employees in Germany have the legal right to elect representatives (usually union leaders) for almost half of a company’s board of directors. It’s known as co-determination. German workers are also entitled by law to form Works Councils at their workplace with regularly scheduled meetings to discuss work-related issues with management. Together the laws have contributed to largely cooperative labor-management relations.

A local Washington expert, American University’s Stephen Silvia, confirmed that the “Council idea is highly regarded by employers as well as employees. This is true across the political spectrum in Germany.”  Another expert, Cornell’s Lowell Turner, argues “the German model is going strong, and generally credited as an important factor in sustained German economic success.”

There is a separate but similar statutory provision providing for staff councils in government organizations.

The Works Council idea (or something similar) has become common in several European countries—Austria, the Benelux countries, Scandinavia and Spain.

The idea has never been accepted by the U.S. business community. Historically union-management relations have been confrontational rather than collaborative. That carries over from the private sector. As one senior executive told me, “Always bring your lawyer, a Kevlar vest and a shotgun to a meeting with a union rep.” That undermines working relationships.

At the federal level the current political environment provides no hope that a confrontational strategy will be effective. President Obama tried to improve labor-management relations when he created the National Council on Federal Labor-Management Relations but while there are examples of collaboration, there is little evidence of continuing improvement. Now the Council is effectively annulled. It’s time to consider new strategies.

The U.S. culture is not the same as Germany’s and that’s important. American executives historically have been “the boss” and exerted their control. In business, owner/managers naturally are reluctant, at least initially, to delegate responsibility that could affect their company’s future. Not too many years ago, managers made all the decisions. In today’s rapidly changing environment, that’s proven to be a failed management style.

Despite that tradition, profit sharing plans have been widely used for over a century. The idea of course is to motivate employees to contribute to their employer’s success. In small work groups (under 500 employees) profit sharing can be effective. A related group incentive concept, gainsharing, was introduced by a union leader, Joe Scanlon, in the 1930s. A similar concept, goal sharing, emerged roughly 20 years ago. The point is that there is a long history of efforts supported by organizational leaders to motivate employees to work together to raise performance levels. Employees are more productive when they collaborate.

One of the stand out stories of unions collaborating with company management is the agreement by the United Auto Workers for concessions to save the auto companies after the 2008 recession. Workers now receive profit sharing checks, most recently for $12,000 at General Motors. One columnist highlighted the “expertise the union now brings to discussions of quality, safety, predictive and preventative maintenance, workforce development, team-based operations, and other such topics.” That’s a far broader union role.

In higher education and healthcare, employers commonly rely on practices parallel to the Works Council idea. Colleges rely on a faculty senate and “shared governance” to address management issues. In both sectors, ad hoc employee task forces are created to solve specific problems.

As a consultant, I often play a role in developing a new pay or performance program. I’ve learned employees know better than any expert what is likely to be accepted and fit their situation. Because of repeatedly positive experience, I generally suggest new clients involve an employee committee. It’s never failed.

Some years ago I worked with a GSA task force to develop a goal sharing incentive plan for a unit.  Management originally undertook the project without involving the unions. The union took it to arbitration and lost. After a year and the first incentive payouts, the plan was so successful the union wanted it extended to all GSA employees. Employees liked the idea of working together to achieve goals.

The GSA story illustrates a core difference that should facilitate labor-management cooperation. In government, there is no “bottom line” other than serving the mission effectively. That purpose is or should be shared by managers and employees alike. The self-interest motivation that influences people in business is not the same barrier to collaboration.

A Path to Better Worker-Manager Relations

The announced restructuring of federal agencies will trigger a need to address endless, hopefully minor problems. Plans will need to be developed at all levels to resolve emerging operational issues. Relying on local employee councils assures that issues affecting the workplace are addressed at an early stage. It also reinforces everyone’s responsibility for their group’s performance.

It would also be advantageous to have employees or unions represented on Federal Executive Boards.  Changes that are mandated without adequately considering employee interests are often problematic.

Unfortunately the transition will be resisted by some, but just as in Germany it’s a strategy that should raise performance levels and contribute to better worker-manager relationships. Everybody wins.

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During Visit A Factory Worker Tears Into Paul Ryan

For many Republicans in America’s heartland, the level of frustration with Washington D.C. is at an all time high. The GOP has the White House and both chambers on Capitol Hill, but little is being accomplished. The promises made to get elected going unfulfilled. Many waited eight long years through the previous administration, and their patience is running thin.

On Wednesday at a manufacturing plant in Wisconsin, House Speaker Paul Ryan (R-WI) faced this frustration head on.

A worker at the plant said, “I think for eight horrible years I heard, ‘We don’t have control of the House, we don’t have the Senate, we don’t have the presidency.’ OK? And ‘when we get in, we have a plan, and we’re going to change stuff.’ Well, I’ll tell you what, you’re in there now, and all I see is infighting, it is very dysfunctional.”

Ryan had little to say other than to agree that when the GOP health care bill imploded due to lack of Republican consensus, “It was extremely frustrating.” The Speak of the House was left with just this, “I don’t run the Senate. I run the House.”

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