President's Personnel Office Shows Privatization Gains

President's Personnel Office Shows Privatization Gains
September 1, 2004

No one thought bringing competition to Washington, DC would be easy. Upon entering office, President George W. Bush issued the President's Management Agenda, a 64-page Office of Management and Budget (OMB) report aimed at making government more efficient--a dramatic reform proposal to put performance ahead of patronage in the federal government. One goal included changes in the strategic management of human capital--government employees.

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 White House's Office of Personnel Management (OPM).OPM has generally supported competitive sourcing and also has backed other personnel management reforms outlined in the President's Management Agenda. Three years into the effort, the program's successes are real but decidedly modest.



Agency Achieved "Satisfactory" Grade

In all, OPM, which serves as the federal government's human resources manager, has completed 11 competitions for outsourcing, resulting in a projected savings of $52.4 million over five years in the human capital segment of the federal budget.

The outsourcing efforts of the office reflect the mixed success so far of the president's plan to bring competition to Washington. In the past few months, for example, OPM completed several competitions for private provision of network management, employee benefits, and mail services. James noted at the time, "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," James said. "The result is the best value for the taxpayers of this great nation."

In 2004 OPM also completed competitions for its billing and collection activities and trust fund and administrative accounting. It also announced plans for a competition for filling clerical, technical, and administrative support positions.

The agency also awarded a contract 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, earlier this year.

OMB's latest scorecard detailing the progress of the president's management agenda, released earlier this year, cited OPM as one of three to achieve a "green"--or "satisfactory" grade on its competitive sourcing initiative.



Turf War Impeded Progress

OPM's competitive sourcing agenda has made little progress in one very important area: human resources. OPM directly competes with private-sector vendors in providing human resource (HR) services, and it has not opened those functions to competition.

In fact, OPM tried to prevent federal agencies from posting jobs on their own Web sites and proposed instead to require them to post only on USAJobs, in effect monopolizing the job listing and application process. It attempted this even though nearly three times as many jobs are filled by the agencies themselves as are filled through OPM's Web site. It eventually took congressional action, in the FY2004 Omnibus Appropriations Act, to rein in OPM's efforts.

Bruce McCracken, writing in The Outsourcing Journal, a Web publication that examines outsourcing as a strategic business decision, noted between 40 and 60 percent of American and European companies outsource HR functions.

Clearly, opening OPM's HR services to competition would show a greater commitment to the president's management agenda. Doing so would drive improved performance and efficiency of federal HR programs by helping agencies fill their personnel needs, create better public service, and save taxpayers money.


Geoffrey F. Segal (geoffrey.segal@reason.org) is director of privatization and government reform policy for the Reason Foundation.