Sheppard Air Force Base: Uncounted Costs of Privatizing Government Services

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dannin airforceSky’s the Limit (Image: Jared Rodriguez / Truthout)The privatization of public services isn’t a new trend. In the period in which the Clinton-Gore administration was promoting privatizing the military’s physical infrastructure, such as housing for the troops, it also was actively pursuing the privatization of jobs associated with the military. Its “theme song” seems to have been a parody of “My Fair Lady’s” “Why Can’t a Woman Be More like a Man?”

Yes, indeed, “Why Can’t the Public Sector Be More like the Capitalist, Profit-Maximizing Private Sector?”

In fact, there are very good reasons why government cannot operate properly when it is run like a business, says Forbes contributing writer John T. Harvey. He notes, “We should no more want the government to be run like a business than a business to be run like the government. … The problem in a nutshell, is that not everything that is profitable is of social value and not everything of social value is profitable.”

My Fair Capitalist?

Harvey’s observations on privatization, published by capitalist tool Forbes Magazine, clearly have been lost on the Department of Defense, which has been a major user of contractors.

The basic principles of the Office of Management and Budget’s 1983 Circular A-76 (revised 1999) – the document that controls federal privatization – are that “the Government should not compete with its citizens.” One would think that, if there is any work that is inherently governmental and should not be privatized, it must be military work. In other words, safeguarding national security means that disruptive changes in the military’s civilian workforce could have dangerous consequences.

Under A-76, determining whether a federal job – civilian or military – is inherently governmental and can be performed only by federal employees or whether public employees or private contractors can perform the work for less can require government agencies to hire experts to guide the privatization process, and part of that process is calming employee fears that they will lose their jobs, as in this document created by the US Department of Agriculture.

“What should an employee do for himself or herself while the study is taking place?”

“While the study is taking place, employees are expected to continue performing their work assignments in the same manner as before the study was announced. Until the study is completed and a decision made, it is impossible to predict the outcome or degree of impact. While feelings of uncertainty, stress, and/or anxiety are natural, the organization is committed to providing a supportive atmosphere to help employees be proactive in dealing with these emotions. … Give this activity your best effort to provide the most competitive position possible to the Government Proposal.”

However, the feelings of uncertainty, stress and anxiety the Department of Agriculture so presciently predicts are perfectly warranted: Privatization of essential government functions is a real cause for concern.

The Rube Goldberg Circular A-76 Process

The rationale for A-76 is that competition enhances quality and productivity, while promoting the free market and saving money. However, experience with the A-76 process can fairly be compared to a Rube Goldberg machine, in which the point of the process and its effects on employees are lost in its complexity. For example, A-76 requires federal agencies to identify “inventory” to privatize. The “inventory,” of course, is people’s jobs. The 2003 version of A-76 [ p.1] requires federal agencies to identify work as either “commercial” or “inherently governmental” – that is, to determine which work must be done by public employees.

Jobs are “competed” through either a standard or a streamlined process. “Streamlined competitions” allow work to be privatized as long as privatization is shown to be cost-effective and involves 10 or fewer civilians. Work involving more than 10 civilians must undergo a standard competition, including developing a “most efficient organization” and then “competing” against the private sector bidder. [p.1, par.4(c), (d)]

Saving money was supposed to be a product of privatization. For example, the Goodfellow Air Force Base guide to A-76 claims that “competitive sourcing” saves money, increases efficiency and effectiveness, identifies innovative procedures and frees Air Force personnel to focus on their core missions.

So much money was invested in employee time and in consultant fees that it is unclear whether any money was saved in the process. [p.21-23] In addition, the procedures were so complex that it is difficult to see how the process, even once implemented, could have saved any money. An economic analysis of the A-76 process found no evidence that it saved the government money.

Life for Sheppard Air Force Base Employees Under the Circular A-76 Process

The rules for an A-76 competition are reasonably clear, but what were the effects of this “competition” on the people whose work was targeted for privatization?

According to the rules, an A-76 standard competition could last no longer than 12 months [p.9], while streamlined competitions could not exceed 90 days. [p.8 ] However, in practice, the time limits have been treated more as suggestions than as binding rules. For example, the Sheppard Air Force Base’s A-76 process extended through the presidencies of two privatization proponents – Bill Clinton and George W. Bush – and into the first few months of the Obama presidency.

The chronology is tracked below based on Gary Johnson Protest Solicitation No.FA3002-07-R-0021. Consider the effects on the employees’ efficiency in what would become a decade-long march through the A-76 process.

1996 – The Air Force initiates “Project Jumpstart,” aka “Pick-a-Base,” to identify which Air Force bases would be good candidates for privatization. The stated goals were to improve quality and efficiency, generate savings and sustain readiness to perform their missions

June 4, 1998 – In testimony before the Senate Subcommittee on Oversight of Government Management, Restructuring, the associate director of federal management and workforce issues pledged to promote a “more active” Circular A-76 program, but the government lacked data needed to determine costs of functions or activities targeted for an A-76 competition. It would be years before the DOD could provide accurate and reliable cost data.

January 1999 – Sheppard Air Force Base support services, that is, civilian work that supports the work of the military, are chosen as a candidate for privatization, with the winner of the competition to take over those functions in April 2002.

September 1999 – Sheppard Air Force Base announces that support services work by 568 military and civilian employees has been chosen for a privatization study.

December 2001 – The Government Accountability Office (GAO) puts all ongoing A-76 studies on hold because the GAO held that a conflict of interest existed when a federal employee and a private consultant wrote and edited the performance work statement – the document that defines the work that is to be performed – and also prepared the plan for restructuring the work to be done by the current employees.

December 2002 – American Federation of Government Employees (AFGE) union President Bobby L. Harnage issues a 44-page critique of George W. Bush privatization policies

October 1, 2003 – The Sheppard A-76 competition is restarted after the GAO reviewed other cases and was satisfied that the conflict of interest had been resolved to determine how widespread the conflict was. The competition was scheduled to end by October 2004, with the winner taking over in October 2005.

February 15, 2005 – The Air Force posts Sheppard work for bid on fedbizopps.gov – a website that announces work available for bid by private contractors and tracks the progress of federal privatization. The Competitive Sourcing Office found that only about 75 percent of the data needed could be collected.

April 2006 – The 30-month limitation on the Sheppard A-76 studies expires.

July 11, 2006 – The DOD’s privatization official approves a request for a waiver of the competition time limit and changes the completion date to no later than 18 months from the date of the public announcement of the competition.

August 29, 2008 – Sheppard’s fitness centers, trainer development and technical training support service jobs are awarded to the “most efficient organization” teams. Private company Defense Support Services of Mount Laurel, New Jersey, was awarded 418 jobs whose work had previously been done by government employees.

September 2, 2008 – The AFGE union protests that the privatization violated the 18-month time limit for the A-76 competition and that Congress had prohibited DOD from funding A-76 competitions. Federal employee unions and good government groups respond by proposing the CLEAN UP Act of 2009 to stop waste, fraud and abuse in federal government contracting. News of horror stories of private contractor failures and scandals [p.8], growing out of failed reconstruction efforts in Iraq, the bungled Hurricane Katrina recovery efforts and conditions at Walter Reed Army Medical Center, raise public concerns about privatization. In addition, failures of “competitive sourcing” across federal agencies showed that costs of A-76 privatization reviews often exceeded savings. [p.8].

March 4, 2009 – President Obama announces that the Circular A-76 Process would be placed on hold as a result of its many failings. It remains on hold today.

Who Benefits from the A-76 Process?

The A-76 process centers on holding competitions, but they are not competitions in the normal sense of the word. At best, they are theoretical competitions based on comparing estimated costs from a narrow range of predicted costs, essentially limited to pay. Federal employees may “win” the competition in the sense of keeping their job functions – but work for a contractor for poor or no benefits and dismal working conditions.

While the process is called a competition, it lacks the qualities of a true competition. There is no head-to-head competition that compares which group actually performs the work better and for less cost. Instead, the competition is more of a prediction as to which group is better.

To the extent costs to the taxpayers matter, the A-76 process focuses only on employee pay and benefits, while ignoring the costs that go into making the decision as to who gets to do the work. Making that decision requires hiring consultants and people to decide which group of employees gets the work.

There are also less-tangible costs. For example, the GAO study of privatization at the Department of Labor found that levels of employee stress were high and morale was low, even when they did not lose their jobs. No one made a study of the effects the decade-long A-76 process had on Sheppard Air Force Base employees, but it is fair to assume that it was not likely to promote efficiency and productivity.

Now that the A-76 process is on hold, we should use this time to demand that President Obama put an end to an expensive structure that does not promote the interests of the American people.