September 11, 2006
RE: RETENTION OF KENNEDY-HATCH AMENDMENT IN FY2007 DEFENSE APPROPRIATIONS CONFERENCE REPORT
The undersigned unions strongly urge you to retain the bipartisan Kennedy-Hatch Amendment to the FY07 Senate Defense Appropriations Bill in the conference report. The Kennedy-Hatch Amendment would neutralize the impact of retirement benefits in the cost comparison process of Department of Defense (DoD) privatization reviews. It would recognize that retirement benefits are a fixed cost for in-house bids because the cost is established by Congress. And it would ensure that civilian employees are not unfairly disadvantaged in the cost comparison process when contractors provide their employees with inferior retirement benefits. Instead of rewarding contractors for providing inferior retirement benefits, the cost comparison process would focus on who can deliver services more efficiently. The Kennedy-Hatch Amendment would follow the bipartisan provision already included in the Defense Appropriations Bill which neutralizes the impact of health care benefits in the cost comparison process.
DoD will review for privatization in FY06 eight times more civilian employees than it did the previous year. The Department of the Army by itself will review for privatization an additional 45,234 civilian employees by the end of FY09. If the rest of DoD uses the same target as the Army, the number of non-Army civilian employees reviewed for privatization over the next three fiscal years would be 80,481. The drastic increase in the Army and perhaps across DoD as well is because of the imposition of numerical privatization quotas. These quotas were earlier prohibited by the Congress and then repudiated by OMB because of a bipartisan understanding that it is bad policy to review civilian employees for privatization merely because of rigid and inflexible quotas.
There is a bipartisan understanding that privatization reviews are wasteful. As Senate Energy and Water Chairman Pete Domenici concluded in report language in his FY07 Bill for the Department of Army’s Corps of Engineers: “Millions of dollars have been spent over the last several years on an initiative to contract out Government jobs in order to make the Government more efficient…The Committee fails to see any evidence of cost savings or increased efficiency by undergoing these expensive competitions. Therefore, the Committee directs that no funds provided in this account or otherwise available for expenditure shall be used to comply with the competitive sourcing initiative.” Moreover, the DoD Inspector General reported in late 2005 that DoD is unable to track either costs or quality of contracts undertaken through privatization reviews.
Despite bipartisan efforts, the Congress has been unable to stop DoD’s use of privatization quotas or force DoD to implement systems to track the costs and quality of its wholesale privatization effort. However, the Congress has managed to make the privatization process less unfair to civilian employees by ensuring through the Defense Appropriations Bill that contractors are not given an advantage in the cost comparison process by providing their employees with inadequate health care benefits. The Kennedy-Hatch Amendment would build on that bipartisan precedent by ensuring through the Defense Appropriations Bill that contractors are not given an advantage in the cost comparison process by providing their employees with inadequate retirement benefits.
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO
AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO
AMERICAN FEDERATION OF TEACHERS, AFL-CIO
COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO
DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO
INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, AFL-CIO
INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO
INTERNATIONAL FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS, AFL-CIO
LABORERS INTERNATIONAL UNION OF AMERICA
METAL TRADES DEPARTMENT, AFL-CIO
NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES, AFL-CIO
PROFESSIONAL AIRWAYS SYSTEMS SPECIALISTS, AFL-CIO
SERVICE EMPLOYEES INTERNATIONAL UNION
UNITED AUTO WORKERS, AFL-CIO