However, we found that DOL lacks a  departmentwide process for tracking and addressing deficiencies and  recommendations for improvement. We examined all of DOL’s  initial PCARs completed as of July 2008 (18 total), and we found that  DOL’s policy and procedures generally were followed in conducting the  reviews. As a result, DOL is  hindered in its ability to systematically monitor performance trends and  determine if the winning service providers are performing more efficiently  than the prior service providers. DOL Competitive Sourcing Cost Reports Are Not Comprehensive or Reliable

DOL’s savings reports for competitive sourcing, while adhering to OMB  guidance, exclude a number of substantial costs and also are unreliable. By using projections rather than actual  values in estimating savings, DOL excluded the higher actual personnel  costs for fiscal years 2004 and 2005, even though actual numbers were  available. Because of this, it cannot be known for certain if the same level of work  was being performed. About 79 percent (248 workers) were  reassigned to new positions at the same federal grade and salary level (see  fig. All 16 workers who were demoted, and all 6 workers  who were laid off, were African-American. In contrast, of the 15 workers  who were promoted, 10 were Caucasian, 3 were African-American, 1 was  Hispanic/Latino, and 1 was Asian/Pacific Islander. Selected Employees’ Views on Implementation and Morale Issues

Although DOL management stated that they made their best efforts to treat well  those employees whose positions were competed in the competitive sourcing  process, almost all DOL employees we spoke with who assisted with  competition activities, and whose positions were affected by the competitions,  reported that the competitive sourcing process has had a negative impact on  morale. Though not a representative sample  of all those involved in the process, these interviews included employees who  were responsible for assisting with competition activities, as well as employees  whose positions had been competed. Conclusions

As the Commercial Activities Panel report describes, the government’s  goal for competitive sourcing is to obtain high-quality services at a  reasonable cost and to achieve outcomes that represent the best deal for  the taxpayer. DOL has conducted public-private competitions under its  competitive sourcing program for 4 years and has set up performance and  cost reporting systems to track its progress in meeting such goals. Yet  these systems have a number of weaknesses, and unless these weaknesses  are addressed, they will continue to inhibit DOL’s ability to reliably and  comprehensively assess whether the cost of the work performed by the  winning service providers—whether in-house government service  providers or contracted private sector service providers—achieves the  savings promised through the competitive sourcing process. In the interest of providing agency decision makers and policymakers with  more complete information on the total costs associated with competitive  sourcing, we recommend that in addition to the current cost reports that  OMB requires agencies to prepare, the Director of OMB should:  require agencies to systematically report all costs associated with  competitive sourcing, including regular FTE staff wages for time spent on  planning and conducting competitions, as well as all other precompetition,  transition, and implementation costs, including postcompetition  monitoring or accountability reviews. To improve the reliability and comprehensiveness of DOL’s performance  assessments and savings estimates in its competitive sourcing program, we  recommend that the Secretary of Labor take the following three actions:  implement a consistently applied, departmentwide system to track  identified deficiencies and recommendations for improvement in each  of the competitions and the program overall;  implement a system to track the full costs associated with managing  DOL’s commercial management activities, including—but not limited  to—all costs associated with competitive sourcing; and    develop and implement a review process to ensure the accuracy of  competitive sourcing savings reports to Congress. Appendix I: Objectives, Scope, and Methodology

As required unde directed by the House Committee on Appropriations, this report examines  the use of competitive sourcing at the Department of Labor (DOL). In response, GAO’s  review focused on the following:  r the Consolidated Appropriations Act, 2008, and as  1. Personnel  actions resulted. Personnel  actions resulted.
Why GAO Did This Study

Competition between federal and private organizations to provide services--referred to as "competitive sourcing"--can be one way to help achieve greater efficiency in government. Under guidance from the Office of Management and Budget (OMB), competitive sourcing has been implemented at various executive branch agencies over the years. As required under the Consolidated Appropriations Act, 2008 and directed by House Report 110-231, this report examines the use of competitive sourcing at the Department of Labor (DOL). Specifically, GAO examined the comprehensiveness and reliability of DOL's performance and cost assessments in accordance with OMB and DOL guidance as well as the impact of competitive sourcing on certain DOL workers. To address these issues, GAO reviewed relevant statutes, guidance, reports and personnel actions; and interviewed OMB and DOL officials and 60 DOL staff, grouped by role, in four locations.

What GAO Found

DOL first began conducting public-private competitions as part of its competitive sourcing program in fiscal year 2004, and since that time, it has set up performance and cost reporting systems to monitor progress in meeting the goals of competitive sourcing--that is, to obtain high-quality services at a reasonable cost and to achieve outcomes that represent the best deal for the taxpayer. For the most part, we found that DOL's policies and procedures were followed in conducting competitive sourcing activities; however, a number of weaknesses inhibit DOL's ability to reliably and comprehensively assess whether competitive sourcing achieves the outcomes promised. DOL lacks a departmentwide process for tracking and addressing deficiencies and recommendations for improvements that are identified in postcompetition accountability reviews. Though consistent with OMB guidance, DOL excluded a number of substantial costs in its reports to Congress--such as the costs for precompetition planning, certain transition costs and staff time, and postcompetition review activities--thereby understating the full costs of this contracting approach. DOL's savings reports are not reliable: a sample of three reports contained inaccuracies, and others used projections when actual numbers were available, which sometimes resulted in overstated savings. Because of these and other weaknesses, DOL is hindered in its ability to determine if services are being provided more efficiently as a result of competitive sourcing. Moreover, though not a representative sample of DOL personnel, in GAO's interviews with 60 employees involved with five competitions (including employees who assisted with competition activities, as well as employees whose positions were affected by the competitions), most said that they were dissatisfied with how the competitive sourcing process was implemented and that it had a negative impact on morale. Overall, DOL's competitions have resulted in few job losses or salary reductions. Among the 314 workers who experienced a personnel action, 263 were reassigned to new positions with the same title and pay or were promoted. In addition, of the 16 workers who were demoted, 14 were able to retain their same grade or pay. At the same time, certain groups have been impacted more than others. For example, though small in numbers, all 22 of those who were either demoted or laid off were African-American, while 10 of the 15 workers who were promoted were Caucasian. OMB recently issued new guidance that directs agencies to use a variety of tools to manage their commercial activities, including--but not limited to-- competitive sourcing. However, unless agencies are required to comprehensively track all the costs associated with competitive sourcing, it will be difficult to assess which tool may provide the best outcome in terms of efficiency in the management of commercial activities.