STATEMENT THE CONSULTANT REFORM ACT OF 1980 (H.R. 7674) for submission to the SUBCOMMITTEE ON HUMAN RESOURCES of the HOUSE COMMITTEE ON POST OFFICE AND CIVIL SERVICE for the CHAMBER OF COMMERCE OF THE UNITED STATES by Mark Schultz* On behalf of the U.S. Chamber and its members, I appreciate this opportunity to share our views on H. R. 7674, the Consultant Reform Act of 1980. Unless amended, we must oppose this legislation. The U.S. Chamber is the world's largest business federation composed of more than 97,000 business firms, 2,700 chambers of commerce in the United States and abroad, and 1,300 trade and professional associations. Of our business members, approximately 80% are small. Therefore, it is fair to say that the U.S. Chamber represents the interests of business, large and small. Accordingly, we have a vital stake in eliminating the obstacles to and burdens of doing business with the federal government via the procurement process. OVERVIEW The U.S. Chamber recognizes the significance of any proposed changes in federal procurement policy, which now involves more than one-seventh of the federal budget. Government procurement has a major impact on the nation's businesses, their employees, government employees, and on a broader level, all American taxpayers. The policies ultimately adopted not only affect immediately the expenditure of $65 billion or more in taxpayers' money each year, but also guide the government's procurement activities for years to come. In view of the above, it would be difficult for us to overstate the importance of close Congressional scrutiny of the total impact of any proposed changes to ensure that they do, in fact, contribute to the nation's longstanding policy of reliance on the private sector for needed goods and services. * Associate Director of Government and Regulatory Affairs for the U.S. Chamber. - - - Unfortunately, while some recent governmental policies actively promote this policy for example, the revisions to OMB Circular A-76, the document governing federal procurement policy there are other proposed changes which do not. In fact, some proposed changes such as H.R. 7674 would be counterproductive in that it would permit the perpetuation of inefficient and costly in-house performance of functions that can and should be contracted out at great savings to the taxpayer. Specifically, the bill encourages agencies to bring activities currently being performed by business in-house. Unless these proposed changes which militate against the achievement of the nation's expressed contracting out policy are rejected, the overall positive effects of revised OMB Circular A-76 will be mooted. ADMINISTRATIVE PROCUREMENT POLICY: RELIANCE ON THE PRIVATE SECTOR The longstanding federal policy has been, and continues to be, that the government should rely on the private sector for needed goods and services. As early as 1955, the Eisenhower Administration enunciated its position that the government shall not provide services that put it in competition with private industry. All subsequent administrations, regardless of political persuasion, have adhered to this policy. During the Johnson Administration, the Bureau of the Budget, OMB's predecessor, issued Circular A-76 which reiterated "the Government's general policy of relying on the private enterprise system to supply its needs." Now, more than a decade later, the Carter Administration has taken its stand in support of the same proven policy: When there's a choice to be made between the private sector and the Government sector, my option would be for the private sector to assume the responsibility. Consistent with his pre-inaugural thoughts, President Carter stated after he took office: Part of our task is to keep the Government out of areas it should not be in and improve the way it works in those areas where In his State of the Union Message of January 19, 1978, President Carter stated that "(p)rivate business and not the government must lead the expansion in the future." In full accordance with the President's expressed Administration position, then Acting OMB Director James T. McIntyre issued a statement, in connection with issuance of OMB's proposed revisions to Circular A-76, which included the following as the first principle on which the new policies were to be built: ...(T)he principle that the Government CONGRESSIONAL POLICY: LESS CONTRACTING OUT We concur. However, over the past few years, Congress has placed or threatened to place moratoriums and/or restrictions on contracting out, posing a serious threat to this time-honored policy. For example, in Section 852 of the DOD Appropriation Act of FY '78, Congress adopted a moratorium provision preventing contracting out of defense support functions. All defense support functions at military installations nationwide had to be performed by federal employees, and no new contracts could be let for performance by the private sector. Congress is considering amending the Service Contract Act so as to impose further governmental controls and regulations on contractor wages and salaries. This legislation, if enacted, would result in a reduction of products and services contracted for by government. During the 96th Congress, the House passed the "Kazen Amendment" to the DOD Authorization Act for FY '81 which gave federal employees the right to seek judicial review and injunctive relief when contract awards "adversely affected" their jobs. This, too, would have a chilling effect on contracting out. During the 96th Congress we also witnessed the introduction of H.R. 4717, one of the most serious threats to contracting out. H.R. 4717 is an insidious piece of legislation, using words like "cost-effectiveness" and "personnel ceilings" words which usually bring comfort, not - headaches, to the business community. However, upon closer inspection, one finds that this bill spelled trouble for federal contractors as well. The most recent threat to contracting out is H.R. 7674, the Consultant Reform Act of 1980, introduced by Representative Herbert E. Harris II (D-Va.). CONSULTANT REFORM ACT OF 1980 - WHAT DOES IT DO? Over the past year and a half, the House Subcommittee on Human Resources, chaired by Congressman Harris, and the Senate Subcommittee on Civil Service and General Services, purports to have discovered patterns of waste, mismanagement and conflicts in consulting contracts which threatened the very integrity of the governmental process. Two recently issued reports by the General Accounting Office on the use of consultants, which were initiated by Congressman Harris and Senator Pryor, purportedly further document "serious and pervasive" problems which have continued unabated for the past twenty years. According to the bills' sponsors, the major problems uncovered by the Pryor/Harris hearings and GAO investigations into the use of consultants by the federal government include: * Use of non-negotiated and sole-source contracts which * Rush by agencies to expend remaining funds on questionable * Use of consultants to perform work of a policy making * Development of government policies by consultants who stand to profit from the very policies they are In order to stop these alleged abuses and to bring the so-called "invisible Federal workforce" into sunshine, the Pryor/Harris bill: * Requires federal agencies to itemize the amount of funds for all procurement including consulting services * Limits spending on procurement in the last two months of the fiscal year to no more than 20%. * Requires full disclosure of all information relevant to Its sponsors aver that the Consultant Reform Act of 1980 will not add lengthy new steps to the actual procurement process. However, they argue it will insulate the policy making process from inappropriate influence and bring much needed sunshine into the procurement process. CHAMBER CRITIQUE: H.R. 7674 The observations outlined below represent the Chamber's reaction to the scope of H.R. 7674 and its most important provisions. Among those issues deserving serious attention by the Subcommittee are the following: (1) The title of H.R. 7674, the Consultant Reform Act of 1980, is a misnomer. Since the statement of policy, statement of findings and definition of contract make reference to "goods and services," the bill should be renamed properly the "Federal Procurement Regulatory and Disclosure Act of 1980." If the purpose of the bill is to address simply the alleged abuses in the use of consultants by the federal government -- as implied in the present title then the statement of policy, statement of findings, and definition of contract need to be modified accordingly. Conversely, if the intent is to include both consulting and contracting practices, the bill should be renamed. Also, if this is intended to be an omnibus procurement bill, the abuses on the government side need to be addressed as well. - (2) The bill will add a layer of regulation and This bureaucracy on the federal procurement process. Also, the bill will generate an enormous paperwork burden for all procurement agencies. would be antithetical to the current trend in Congress of less regulation, not more regulation. More significantly, this bill ignores the years of hard work that went into passage of P.L. 95-507, the Federal Acquisition Act, revision of OMB Circular A-76, promulgation of FAR regulations, and the Department of Defense's work on organizational conflicts of interest. H.R. 7674 has the potential of overlapping, duplicating, and contradicting the above measures - at a time when the President's Regulatory Council and Congress are taking affirmative steps to eliminate this regulatory morass. (3) The "sunshine in government" provisions of the bill lend themselves to possible abuse. For example, the bill clarifies that except for national security reasons, all contracts are considered public information, and requires agencies to make available to the public a list of contracts along with specific contract related information. Specifically, Section 203 (d) provides that the information which other subsections make available to the public "shall not be construed to limit the availability of other contractor related information." The vagueness of this provision is disturbing herein lies the potential for disclosure of |