No one thought bringing competition to Washington would be easy. Upon entering office, President Bush issued the President's Management Agenda — a dramatic reform effort to put performance ahead of patronage in the federal government. Three years into it, even the program's biggest successes are decidedly modest. The Office of Personnel Management (OPM), which serves as the federal government's human resource manager, reflects the mixed success of the president's plan to bring competition to Washington.
One of the central tenants of President George W. Bush's management agenda is inserting competition into the federal workforce. In 2001, the president noted that there were more than 850,000 jobs in the federal government that could be provided by the private sector. While some progress has been made in recent months, in many ways OPM and other federal agencies fail to fully open up to competition by continuing to provide services that are readily available in the market.
The so-called competitive sourcing initiative — one of the central components of the management agenda — is using public-private competitions where public employees compete with the private sector to determine the best source of service delivery. So far the effort has had mixed success. Many agencies have greeted the initiative with reluctance and apprehension anchored by resistance from federal employee unions. All of the major employee unions, including the American Federation of Government Employees and the National Treasury Employees Union, have mounted extensive campaigns fighting and challenging the initiative at every turn. However, competition between public and private entities can bring lower costs, better focus, and improved services regardless of who wins the competition. For example, in 2002 the Office of Management and Budget (OMB) offered the job of printing the fiscal 2004 federal budget to competitive bidding. The Government Printing Office (GPO) turned in a bid that was almost 24 percent lower than its price from the previous year. That was $100,000 a year that GPO could have saved taxpayers any time it chose, but it never chose to do so until it was forced to compete.
Some agency heads are out in front touting the successes and rallying the troops, and few are more visible than Kay Cole James, director of the Office of Personnel Management (OPM). OPM has generally supported competitive sourcing and has also backed other personal management reforms outlined in the President's Management Agenda.
In just the last few months, for example, OPM completed several competitions for network management, employee benefits, and mail services. Director James added "We work for the American taxpayers, and it is incumbent upon us to ensure that we spend their money wisely giving them the best value for their hard-earned dollars. As we strive for excellence, we have a responsibility to examine every option to do the work of the American people, so we welcome competitions between the federal government and private sector to perform activities that are not inherently governmental. The result is the best value for the taxpayers of this great nation."
OPM has also completed competitions for its billing and collection, trust fund and administrative accounting, and is planning a competition for clerical, technical, and administrative support positions. In all OPM has completed 11 competitions resulting in an estimated savings of $52.4 million in projected savings over five years. One contract was awarded to operate the federal career Web site, "USAJobs." TMP Worldwide Government Services, the same company that operates the most popular online job search site, Monster.com, took over the government's central jobs Web site, which averages 17,000 job announcements a day.
On Office of Management and Budget's last scorecard detailing the progress of the management agenda, the agency was one of three to achieve a "green" — or "satisfactory" — on their competitive sourcing initiative.
More to Be Done
However, OPM's competitive sourcing agenda fails in one very important area: human resources. In fact, it's not as much a matter of competition as it is not opening services to competition. OPM directly competes with private sector vendors in providing human resource (HR) services — and fails to open these functions to competition.
For example, OPM tried to prevent federal agencies from posting jobs on their own websites and require them to post only on USAJobs, in effect monopolizing the job listing and application process. It did this even though nearly three times as many jobs are filled by the agencies themselves over OPM's website. It eventually took Congressional action, in the FY2004 Omnibus Appropriations Act, to rein in OPM's efforts.
Bruce McCracken, writing in The Outsourcing Journal, an internet journal dedicated to outsourcing as a strategic business decision, notes that between 40 and 60 percent of American and European companies outsource HR functions. In this regard, OPM's practices fly in the face of the policies and initiatives of the Bush administration.
Another cause for concern is that the OPM acts both as policymaker, regulator, and service provider, creating an inherent conflict of interest and giving it virtually unlimited powers to tilt the competitive playing field in its favor. For example, OPM can set policies that favor its service offerings over those of private companies. It does this by issuing official memorandums and other policy communiqués to Federal Chief Human Capital Officers to market OPM staffing software and services products (USA Jobs and USA Staffing) including specifically encouraging them to buy from OPM. In fact, a memo from April 12, 2002 stated, "we believe USA Staffing is an ideal system for virtually all Federal human resource offices, and we want other Federal agencies to share in the benefits of our continuing development efforts." It further added, "we have enclosed a fact sheet and pricing information for your review. USA Staffing — the system that works for us and can work for you." The combined roles of regulator and competitor give the OPM too much power and distort any potential competitive environment.
The Truman Doctrine
Back in 1950, President Truman issued the country's first policy on what the federal government should make versus what it should buy. It simply stated "it is the policy of the Government of the United States to rely on commercial sources to supply the products and services the government needs...[the government] shall not start or carry on any activity to provide a commercial product or service if the product or service can be procured more economically from a commercial source." While the original policy statement has changed over the years, the central tenets remain the same.
Cases allowing federal agencies to use outside vendors for HR services have seen dramatic increases in quality with reductions in costs. For example, the Immigration and Naturalization Service (INS - now the Bureau of Immigration and Customs Enforcement) used a private vendor to increase its applicant pool and significantly reduced the time it takes to receive applications for critical positions. Rick Hastings, INS assistant commissioner for HR management said having a competitive option has helped and that he "will be able to do more with less." Additionally, the Transportation Security Administration also used private contractors to quickly staff the more than 40,000 newly created airport security positions. In addition, TSA has contracted with an outside firm to handle day-to-day HR administration including personnel record-keeping and processing. Simply put, speed saves money and agencies that have contracted have cut their HR costs.
Since private HR services use innovative new technology, multifaceted web-based software systems built and offered by the private sector would allow federal agencies to prepare job announcements, extend their outreach, evaluate responses to job announcements and perform other HR functions more quickly and for less money. This software can be fully integrated and customized for each agency to meet specific needs.
Clearly, OPM should have a greater commitment to the president's management agenda and open up HR services to competition. Doing so will drive improved performance and efficiency of federal HR programs by helping agencies fill their personnel needs, create better public service, and save taxpayer money.
Geoffrey Segal is director of privatization and government reform at Reason Foundation.