Published: September 15, 2003

Ten Reasons Why Outsourcing Is Bad Business


Despite a current ratio of three contract employees for every civil servant, President Bush ordered agencies to solicit corporate bids to replace 425,000 civil service jobs, nearly one-quarter of the permanent federal work force, by the next election. This scheme was euphemistically labeled competitive sourcing.

But in recent congressional testimony, the Office of Management and Budget announced it would drop governmentwide review quotas, blandly stating, "With experience, OMB recognized that its initial numerically based directions were inadequate" an understatement of the huge problems it has caused. Rather than merely slow this disastrous program, policy-makers should consider these 10 reasons to send it back to the drawing board:

1. It is highly disruptive. Because Congress has not appropriated money to implement it, hundreds of millions of dollars for outsourcing reviews are taken from operational budgets. National Park Service Director Fran Mainella wrote in a July 28 Federal Times commentary that the program was "improving our service to park visitors," but in an internal memo this spring she argued that costs would force cutbacks in service. Meanwhile, the Forest Service is spending about $100 million, 10 times more than it publicly claimed. Not only is repair work being shelved, but firefighting accounts have also been raided.

2. Savings are illusory. Most federal work is contracted out already. While there are instances where contracting can save money, there are horror stories where taxpayers lose money. Initial savings are often lost when contractors increase prices over time. Significantly, OMB is unable to forecast any budgetary savings from its massive outsourcing effort.

3. It reverses diversity progress. Because it targets lower-level jobs, competitive sourcing threatens to reverse gains of the past three decades to diversify the federal workplace. For example, Mainella admitted that the program could devastate efforts in her agency to ethnically integrate. Nearly 90 percent of jobs targeted in Washington would, in her words, negatively "affect diversity of our work force" with similar results expected in other urban centers.

4. It requires effective contract management. Increased outsourcing calls on agency managers to effectively oversee contractors a rare skill in federal service. In fact, the most contract-dependent departments NASA, the Pentagon and the Energy Department are plagued by the most intractable management problems.

5. It privatizes the public interest. Under new OMB rules, jobs previously off-limits are on the auction block. In the park service, private operators may replace park biologists, archeologists and interpretive rangers. Private consultants wanting contracts renewed are more likely to shade inconvenient truths. At the same time, government scientists and environmental specialists risk replacement for giving accurate but politically unwelcome answers.

6. It blurs accountability. Increasingly, workers the public encounters in national parks and forests do not answer to the superintendent or forest supervisor. Instead, they work for private companies and are answerable only to corporate headquarters.

7. It is a political agenda masquerading as management reform. The reason for the hurry-up schedule is to meet an election agenda set by Karl Rove, Bush's top political adviser. Unionized civil servants will be replaced by grateful contractors who will, in turn, further swell Republican coffers while stripping Democratic-leaning unions of members. This plan recalls the old spoils system where the incumbent party fires opponents and lines cronies' pockets.

8. It is run by and for the contractors. It is private contractors who are designing agency outsourcing programs. Ironically, most of these contractors are selected without competitive bidding, despite the program's stated purpose of promoting competition. The contractors' incentive is to maximize their own market for future contracting.

9. It is one-sided. Contractors can compete for civil-service jobs but not vice versa. Employees get no notice of what they are competing against and what the rules are. The first 500 jobs competed in the park service saw more than one-third directly converted to contractors before employees had any notice. The balance of jobs are still being studied, but thus far only six of the 500 survived this first round of competition.

10. It destroys employee morale. Placing several hundred thousand federal jobs out to bid has been the opposite of a morale booster. It signals that careers in public service are not valued.

Jeff Ruch is the executive director of Public Employees for Environmental Responsibility, a national nonprofit alliance of local, state and federal resource professionals dedicated to protecting the environment.