NCMA 41st Annual West Coast Educational Conference

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LABOR COSTS IN THE A-76 PROCESS
OUTSOURCING PANEL Professor Gilbert J. Ginsburg,
Co-Director, A-76 Institute, LLC Date July
17, 2003 Time 930 1045 a.m.
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The Designation of a Human Resources Advisor (HRA)

• Status and qualifications
• A. The HRA is to be
• 1. An inherently governmental agency official
• 2. A human resource expert
• 3. A participant on the MEO team and
• 4. Independent of the CO, SSA, PWS team and
  SSEB.

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Functions

• To assist the ATO in human resources related
  matters in developing the agency tender
• During development of the agency tender, the HRA
  will be responsible for
• (a) scheduling sufficient time in competition
  milestones to accomplish potential human resource
  actions
• (b) advising the ATO and MEO team on position
  classification restrictions
• (c) classifying position descriptions, including
  exemptions based on the Fair Labor Standards Act

4
Functions Continued

• (d) Performing labor market analysis to determine
• the availability of sufficient labor to staff the
  MEO
• and implement the phase-in plan
• (e) Assisting in the development of the agency
  cost
• estimate by providing annual salaries, wages,
  night
• differentials, and premium pay
• (f) Assisting in the development of the timing
  for the phase-in
• plan based on MEO requirements and
• (g) Developing an employee transition plan for
  the incumbent
• agency organization early in the standard
  competition
• process.

5
Functions Continued

• 3. To develop and classify new position
  descriptions based on the MEO but the agency
  shall not hire employees to staff these positions
  unless and until the agency is the selected
  provider.
• 4. To perform employee and labor relations
  functions, including, at a minimum the following
• (a) interface with directly affected employees
  (and their representatives) from the date of
  public announcement until full implementation of
  the performance decision
• (b) identify adversely affected employees
• (c) accomplish employee placement entitlements
  reduction-in-force procedures

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Functions Continued

• (d) provide post-employment restrictions to
  employees
• (e) determine agency priority considerations for
  vacant positions and establish a reemployment
  priority list(s) and
• (f) provide the CO with a list of the agencys
  adversely affected employees, as soon as possible
  after the performance decision is made, regarding
  the right of first refusal for a private sector
  performance decision.
• The HRA does not make a determination of whether
  a Federal
• employee is qualified re right of first
  refusal. This is the
• contractors decision.

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Cost Comparisons

• Contractor Labor
• 1. As bid in the proposal price.
• 2. New SCA wage determinations (WDs) go into
  the contract with every option exercise or
  renewal.
• 3. The initial price and annual labor cost
  increases for service employees controlled by the
  SCA Price Adjustment clause (FAR 52.222-43 or
  -44).
• 4. For base support contracts, the new
  Davis-Bacon Act (DBA) WDs are required for
  every option exercise or renewal.

8
Cost Comparisons Continued

• 5. There is no standard FAR clause for measuring
  how a contractor is to be compensated for
  increased wage rates in DBA WDs individual
  agencies or COs are allowed to choose one of four
  ways to handle the increase.
• 6. The contractors pricing of out year costs
  for DBA covered employees is dependent on the
  DBA escalation clause used in the solicitation.

9
Cost Comparisons Continued

• B. Government Labor
• 1. The pricing calculation is governed by
  Attachment C to the Circular. Attachment C
  mandates the use of COMPARE software to develop
  cost estimates.
• 2. Pay raise assumptions and inflation factors.
  OMB issues a transmittal memorandum in the
  Federal Register to identify changes to the
  federal pay raise assumptions and inflation
  factors (based on the Presidents annual budget).
  These annual pay raise assumptions and inflation
  factors shall be used . . . as follows

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Cost Comparisons Continued

• through the end of the last performance period
  for
• pay and non-pay categories of cost that are not
  subject
• to an economic price adjustment, and
• (b) through the end of the first performance
  period for
• pay and non-pay categories of cost that are
  subject to
• an economic price adjustment.
• COMPARE automatically computes inflation on a
  daily basis,
• which is calculated using 365.25 days per year to
  account for
• leap year.

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Cost Comparisons Continued

• C. Labor calculation
• 1. Civilian wages and pay. Calculate civilian
  pay and wages
• for cost estimates using
• (a) local pay salaries and wages at a rate of
  step 5 for GS and step 4 for FWS, positions
• (b) the mid-grade, or mid-band and mid-step
  level for pay-banded or demonstration project
  positions
• (c) the locality pay for the location, or each
  location in a multi-location competition and
• (d) the length of time in grade for each grade
  in a developmental series, as determined by the
  HRA.

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Cost Comparisons Continued

• 2. Fringe Benefits.
• (a) Full-time and part-time permanent civilian
  positions -- 32.85 of the positions basic pay.
  The 32.85 is the sum of the standard civilian
  position retirement benefit cost factor (24.0),
  insurance and health benefit cost factor (5.7),
  Medicare benefit cost factor (1.45), and
  miscellaneous fringe benefit cost factor (1.7).
• (b) Retirement cost factors for special class
  civilian
• positions are 33.0 of basic pay for air
  traffic controllers (27.9 retirement pension
  plus 5.1 for retiree health) and
• (c) 38.2 of basic pay for law enforcement and
  fire protection (33.1 retirement pension plus
  5.1 for retiree health).

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Cost Comparisons Continued

• (d) The full benefit factor is not applied to
  temporary and intermittent civilian positions.
  Use the FICA cost factor for intermittent and
  temporary civilian positions. The FICA cost
  factor is currently 7.65 of salaries or wages
  subject to federal income tax, comprising 6.2
  for Old Age and Survivors benefits and 1.45 for
  Medicare benefits with an annual maximum earnings
  limitation of 87,000 for the Old Age and
  Survivors benefit portion of the FICA tax.
• Uniformed services labor.
• Agency and public reimbursable sources may
  include uniformed services labor in tenders, only
  under the following conditions

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Cost Comparisons Continued

• (a) uniformed services positions in the tender
  shall not exceed the number of precompetition
  uniformed services positions performing the
  activity and
• (b) civilian employee positions shall not be
  converted to uniformed services positions.
• If uniformed services labor is used in a tender,
  the agency or public reimbursable source shall
  develop productive hours for the uniformed
  services position that include annual leave, sick
  leave, administrative leave, training, and other
  nonproductive hours.

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Cost Comparisons Continued

• 4. Labor Escalation.
• An economic price adjustment for services and
  construction labor is determined by the SCA, the
  DBA and FAR Part 22. . . .COMPARE automatically
  computes the applicable inflation costs based on
  the user input selections in accordance with the
  following
• (a) If a solicitation does not include either
  FAR clause 52.222-43 or 52.222-44, an agency
  shall apply inflation to all civilian positions
  for all performance periods through the end of
  the last performance period stated in the
  solicitation.
• (b) If a solicitation does include either FAR
  clause 52.222-43 or 52.222-44, agency and public
  reimbursable sources shall inflate labor costs in
  cost estimates as follows

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Cost Comparisons Continued

• (e) for civilian positions that are subject to
  an economic price adjustment (i.e., . . . the
  position is nonexempt under the Fair Labor
  Standards Act), inflation is applied only through
  the end of the first period of full performance
  or
• (f) for civilian positions that are . . .
  exempt under the Fair Labor Standards Act,
  inflation is applied for all performance periods
  through the end of the last performance period
  stated in the solicitation.
• 5. Davis-Bacon Act (DBA).
• (a) Generally, in base support contracts, there
  is a DBA requirement in addition to the SCA.

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Cost Comparisons Continued

• (b) In base support contracts DOL requires that
  a new DBA WD be included with every option
  exercise or renewal.
• (c) There is no uniform FAR treatment for
  compensating a contractor for annual increases in
  DBA WDs the Government may choose one of four
  ways to measure it.
• (d) For the agency tender, Attachment C does
  not separately treat escalation for DBA
  increases. The result is that if the
  instructions are followed, COMPARE will escalate
  or not escalate construction labor in the
  situations where the contract would escalate the
  SCA WD increases without regard to the specific
  DBA escalation clause used in private sector
  contracts by the agency.

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Cost Comparisons Continued

• 6. Effects of Human Error.
• The effects of escalating wage figures when
  escalation is not required can be disastrous.
• In a recent DFAS A-76 procurement, the MEO labor
  costs were escalated when they should not have
  been the effect was a 32 million overstatement
  of the MEOs labor costs.
• The 32 million error caused a 30.2 million
  cost advantage for the MEO to instead become a
  1.8 million cost advantage for the private
  sector offer.
• DFAS is facing serious problems in taking
  effective corrective action.

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Labor strike plans

• The agency tender is not required to include a
• labor strike plan.