OVERVIEW OF KEY PROVISIONS IN FY12 DoD AUTHORIZATION ACT

Summary of Important Sourcing and Workforce Management Provisions in the FY12 National Defense Authorization Conference Report

Conferees wrapped up their work late Monday night. There are many provisions of general interest to Department of Defense (DoD) civilian employees. The conference report will be voted on by the House and Senate later this week. There is a chance that the President might veto the legislation over completely unrelated reasons. 

1. OMB Circular A-76:

a. The House version of the bill would have, effectively, lifted the suspension on DoD’s use of the OMB Circular A-76 privatization process by eliminating the FY10 requirement that DoD first finish an inventory of service contracts. 

b. The Senate version did not include comparable language. 

c. Ultimately, the House provision was dropped, and the DoD-specific suspension of the A-76 process remains in effect for FY12. 

d. We should expect DoD and the contractors to make a big push to finally end the suspension in the FY13 bill, regardless of what progress has been made on the long-delayed contractor inventory. 

e. AFGE opposes any repeal of the A-76 suspension until 

1. longstanding problems and inequities in the privatization process have been fixed; 
2. the DoD civilian workforce is no longer subject to arbitrary constraints (like the “Efficiency Initiative”); 
3. DoD has insourced all privatized inherently governmental functions, 
4. DoD has reviewed for insourcing all closely associated with inherently governmental and critical functions, 
5. DoD regularly reviews contractor work for cost-related insourcing; and 
6. DoD finally finishes compiling the inventory of service contracts and integrates the results into the budget process. 

2. “Efficiency Initiative”: 

a. Ultimately, the best response would be to lift the arbitrary constraint that DoD has imposed on the civilian workforce (i.e., capping it at FY10 levels, which will result in substantial reductions, particularly in the Army and the Air Force), but not the contractor workforce, which DoD would allow to expand significantly. However, although both the House and the Senate share AFGE’s concerns, neither is willing to go that far. 

b. Instead, the House included provisions (Sections 931-936) in the conference report that require DoD to explicitly adopt a Total Force Management (TFM) approach. Under TFM, DoD is supposed to better plan how to use its military, civilian, and contractor workforces, particularly by 
1. better accounting for the cost and size of the contractor workforce, and 
2. not applying arbitrary constraints on the cost and size of the military and civilian workforces. 

c. Since DoD is already violating broader and long-established laws that prevent the imposition of arbitrary constraints on the civilian workforce, it is not expected that these new laws will make much of a difference. 

d. Of greater significance is a Senate provision (Section 808) that was included in the conference report that would cap service contract spending at FY10 levels, the same cap that DoD has imposed on the civilian workforce. 
1. This contractor cap will reduce the incentive for DoD to use contractors instead of civilian employees. 
2. DoD can raise the statutory cap on contractor spending if it increases the number of positions allowed under its own cap on the civilian workforce. 
3. This Senate provision requires DoD to eliminate the positions of any contractors performing inherently governmental functions. 
4. It also requires DoD to reduce funding by 10% in FY12 and by another 10% in FY13 for contracts for the performance of closely associated with inherently governmental functions and staff augmentation contracts. 
5. Compliance will be key, given the absence of an inventory of service contracts that would allow DoD to identify and control service contract costs. 

3. Insourcing: Contractors’ attempt to eliminate insourcing was beaten back. 

a. The House provision would have allowed contractors to perform inherently governmental work. That effort was defeated. 

b. The House provision would have based insourcing determinations for closely associated with inherently governmental, acquisition, and critical functions on cost, rather than the traditional legal and regulatory basis of risk. That effort was defeated.

c. The House provision would also have narrowly defined critical functions. And that effort was defeated. 

d. A minimum cost differential (i.e., the 10%/$10 million rule, which already applies when DoD tries to contract out our work) was imposed on DoD before it can insource contractor work for cost reasons, thus requiring civilian employees to be marginally more efficient than contractors before contractors-to-civilian conversions can take place. Given the results of the recent study by the Project on Government Oversight—that contractors usually cost almost twice as much as federal employees—overcoming the minimum cost differential should not be a problem for insourcing. 

e. Now, that the rules are settled in Section 938—AFGE Activists should press their managers to insource for cost reasons, so that substantial savings can be generated. In FY10, DoD saved $900 million through a very modest insourcing effort. Moreover, all inherently governmental work must be insourced immediately. And all closely associated with inherently governmental functions must be performed by civilian employees to the maximum extent practical.

4. Contractor CompensationTaxpayers specifically reimburse contractors for tens of billions of dollars for their pay and benefits. Currently, only a tiny handful of contractor employees are capped at the current level of $700,000. The conference report (Section 803) would extend the cap to cover all contractor employees, although DoD would be allowed to establish “targeted exceptions” for scientists and engineers” if necessary to ensure “continued access to needed skills and capabilities”. 
This is a good beginning, but it is just a beginning. Here is where we need to go next year:

a. We need to significantly lower the cap for all contractor employees—at least down to $400,000.

b. We need to eliminate exceptions, targeted or otherwise. DoD already employs scientists and engineers who are even more talented than their contractor counterparts but who work for much less. Much of this hyper-expensive contractor scientific and engineering work can be insourced. 

c. And we need to take the fight to the non-DoD agencies.When AFGE Activists hear proposals from Congress or the Administration to freeze federal employee pay and reduce federal employee benefits, tens of billions of dollars can be saved by reducing our over-reliance on service contractors. In particular, we can save vast sums without having any impact on services by simply capping at a much smaller level taxpayer reimbursements for contractor compensation.