Legislature(1999 - 2000)
09/23/1999 10:40 AM House ASC
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT ARMED SERVICES COMMITTEE
September 23, 1999
10:40 a.m.
SENATE MEMBERS PRESENT
Senator Tim Kelly, Co-Chair
Senator Drue Pearce
Senator Pete Kelly
Senator Gary Wilken
Senator Al Adams
HOUSE MEMBERS PRESENT
Representative Eldon Mulder, Co-Chair
Representative Lisa Murkowski
Representative Gene Therriault
Representative Reggie Joule
Representative John Harris
PUBLIC MEMBERS PRESENT
Dean Owen (via teleconference)
Jake Lestenkoff (via teleconference)
OTHERS PRESENT
Senator Jerry Ward
Senator Loren Leman
Representative Brian Porter
Representative Joe Green
Representative John Cowdery
Representative Allen Kemplen
Representative Sharon Cissna
Representative Richard Foster
Jim Chase, Department of Military and Veterans Affairs, via
teleconference
Carol Carroll, Department of Military and Veterans Affairs
COMMITTEE AGENDA
U.S. Coast Guard Overview by Rear Admiral Barratt
Special Presentation: Army Privatization Programs
Interim Activities Report
Issues Update
WITNESS REGISTER
Rear Admiral Thomas Barratt
Commander 17th Coast Guard District
P.O. Box 25517
Juneau, AK 99802
Colonel Michael L. Sandberg
Deputy Chief of Staff for Logistics
U.S. Army Alaska
Building 1
600 Richardson Drive
Ft. Richardson, AK
Major Brian C. Hilferty
Public Affairs Officer
U.S. Army Alaska
Building 1
600 Richardson Drive
Ft. Richardson, AK 99505
Mr. John Toenes
Deputy Director, Directorate of Public Works
U.S. Army Alaska
Building 1
600 Richardson Drive
Ft. Richardson, AK
Mr. Gregory C. Endsley
Deputy Director, Directorate of Logistics
U.S. Army Alaska
Building 1
600 Richardson Drive
Ft. Fichardson, AK
Mr. Mark S. Bryant
Chief, Management Services Division
U.S. Army Alaska
Building 1
600 Richardson Drive
Ft. Richardson, AK
ACTION NARRATIVE
TAPE 99-2, SIDE A
Number 001
CO-CHAIR TIM KELLY called the Joint Armed Services Committee
meeting to order at 10:40 a.m. Committee members present were
Senator Tim Kelly, Senator Drue Pearce, Senator Gary Wilken,
Representative Eldon Mulder, and Dean Owen and Jake Lestenkoff via
teleconference.
CO-CHAIR ELDON MULDER moved to approve the minutes of the July 19,
1999 meeting. There being no objection, the minutes were approved.
CO-CHAIR TIM KELLY introduced Rear Admiral Thomas Barratt of the
U.S. Coast Guard and announced that Rear Admiral Barratt will host
a luncheon for committee members on September 24.
REAR ADMIRAL BARRATT informed committee members that he would be
happy to speak to and show committee members, as well as individual
legislators, what the Coast Guard does, how its work relates to the
state, and to provide tours of Coast Guard installations.
REAR ADMIRAL BARRATT gave the following briefing to legislators.
The U.S. Coast Guard has 2000 men and women serving in Alaska. The
responsibilities of legislators are significant and they intersect
with U.S. Coast Guard responsibilities through various operating
administrations of the state. Whether the U.S. Coast Guard is
successful in its missions in areas like fisheries enforcement or
environmental protection depends on the Coast Guard's efforts, the
laws and regulations it must enforce, the resources and training it
gets, and the relationships it has with the people and agencies it
works with.
REAR ADMIRAL BARRATT discussed his philosophy toward the Coast
Guard's mission. First, Coast Guard officers must ask themselves
if they are "doing the right thing" for themselves, their mission,
their families, and for the communities they serve. "Doing the
right thing" means providing operational excellence which requires
good leadership, teamwork and innovation. Good teamwork must be
applied to external, as well as internal operations. To be
successful, the U.S. Coast Guard must partner effectively with
agencies such as the Department of Public Safety (DPS) and the
Department of Environmental Conservation (DEC). The more the Coast
Guard is able to coordinate its efforts in operational excellence,
the better the result will be for the industry it serves.
REAR ADMIRAL BARRATT noted the second most important component of
his philosophy is that Coast Guard members must look out for each
other as well as for the communities they serve. Community
outreach efforts by the Coast Guard are very important in Alaska.
He emphasized that he always has an open ear for legislators and
believes outreach to the Legislature is important to ensure that he
fully understands what legislators' issues are in regard to their
constituents.
REAR ADMIRAL BARRATT said his last directive to Coast Guard members
is to honor the public trust they hold and to approach their jobs
with integrity.
REAR ADMIRAL BARRATT discussed the issues he faces at this time.
Oil transportation safety is an ongoing issue and the most
important. The safety of other commercial vessels is also on the
top on the list. He noted many commercial vessels dock at Dutch
Harbor and that he believes it is better to enforce safety
regulations and keep a ship in port than to find the ship out on
the rocks. Passenger vessel safety, especially in light of the
growth of the tourism industry in the state, is the second most
important issue he faces. Small passenger vessel safety is also of
concern. REAR ADMIRAL BARRATT said he first attempts to find
regional solutions to problems and to reach out to industry
representatives to avoid regulatory solutions whenever possible.
He believes the best solutions are developed with cooperation,
understanding, education, and partnerships.
REAR ADMIRAL BARRATT acknowledged that he is very personally
bothered when deaths occur that could have been avoided and he is
convinced that the Coast Guard is not doing as well as it could in
that arena. He noted two young Canadian girls drowned in a skiff
accident on the North Slope recently. The two girls were on a long
journey without any emergency or life saving equipment. He said he
will work as hard as he can to find a way to reduce the number of
preventable deaths in Alaska.
CO-CHAIR TIM KELLY asked what the equivalent is to the United
States Coast Guard in our neighboring countries.
REAR ADMIRAL BARRATT replied they have similar but not identical
organizations. He will be meeting with the director of the Russian
Federal Border Service this week. Historically, that organization
has been more of a customs agency but it is taking on the
additional responsibilities of fisheries enforcement and
environmental protection. Russia's search and rescue operations
are entirely separate from the Federal Border Service at this time.
Canada's Coast Guard has recently taken on fisheries enforcement
duties. Japan has a Coast Guard-type organization but inspection
functions are not linked to it.
CO-CHAIR KELLY asked if the Canadian agency is referred to as the
Canadian Coast Guard. REAR ADMIRAL BARRATT said it is, however it
is under the purview of the Canadian Armed Forces.
REPRESENTATIVE RICHARD FOSTER asked what function Loran stations
play now that satellites are used for navigational purposes.
REAR ADMIRAL BARRATT explained that Loran stations are used as a
back-up system and he expects them to be in place for another eight
to 10 years. Aircraft pilots use the GPS system but, because of
reliability, transmission, and redundancy concerns, the aviation
community is not willing to let go of the back-up system.
REPRESENTATIVE FOSTER asked if any Coast Guard icebreakers will be
visiting the Nome and Kotzebue area in the near future.
REAR ADMIRAL BARRATT noted the icebreaker Healy (ph) will be
visiting this fall and that although he is unaware of specific
schedules, the Coast Guard plans to occasionally operate
icebreakers in that area.
Number 285
SENATOR PEARCE asked if the Coast Guard has considered asking
Congress to change the statute and regulations governing the gross
tonnage for passenger vessels so that the Coast Guard can get more
regulatory authority over the smaller vessels that have had
problems.
REAR ADMIRAL BARRATT said nothing is underway now but when the
small passenger vessel safety task force finishes its work, he will
look at that issue. He noted that part of the problem lies in the
fact that the masters on the vessels that Senator Pearce referred
to are required to have a 100 ton license, even though the vessels
they operate are larger. He stated that naval architects can be
very creative in getting more passenger capacity and larger vessel
size while complying with existing regulations. He maintained that
the problem may lie in the regulations, but it may also lie in the
competence and training and the approaches used by the industry to
ensure that the masters are capable. He pointed out that some of
the better tourism vessel operators require three, four, or five
escorted trips to a destination before they allow a master to
operate the vessel alone.
SENATOR PEARCE stated she is not necessarily questioning the
ability of the masters on the smaller ships, however she would
prefer that pilots be hired whenever a ship is carrying a large
number of paying passengers. She noted what she thinks is
happening on these ships is that the master is trying to navigate
the boat, act as tour guide with a loudspeaker, and accommodate
tourists on the bridge deck simultaneously. She expressed concern
that because of the way the vessels were designed, the Coast Guard
cannot control the "manning" of the ships.
REAR ADMIRAL BARRATT said that is correct. He pointed out that
these vessels are traveling to areas that are inherently dangerous;
the master must pay attention to navigation and cannot "eyeball" a
route.
Number 335
REPRESENTATIVE GENE THERRIAULT indicated that the Alaska
Legislature has been debating the issue of whether to require
recreational vessels to register and pay a tax to provide a match
for federal dollars to establish a boating safety program. He
asked Rear Admiral Barratt to comment on such a program.
REAR ADMIRAL BARRATT noted that the death rates have dropped
substantially in states that have established boating safety
programs. Effective state programs involve education and minimal
regulatory requirements and use existing enforcement mechanisms.
The death rate in Alaska is 10 times higher than some other states.
He would like to work to cut that rate in half. He offered to talk
about such a program in detail with Representative Therriault at
another time.
SENATOR AL ADAMS asked if bulk fuel storage facilities fall under
the jurisdiction of the Coast Guard.
REAR ADMIRAL BARRATT said they do.
SENATOR ADAMS asked what steps the Coast Guard is taking to get
rural communities to comply with the regulations governing bulk
fuel storage facilities and whether the Coast Guard has funds for
that project.
REAR ADMIRAL BARRATT said that matching federal and state funds
have been made available to do some of the work. The Coast Guard
and DEC are prioritizing the facilities in need of repair so that
the worst situations can be addressed first. He expects this
project to take at least five years to address.
CO-CHAIR TIM KELLY thanked Rear Admiral Barratt for speaking to the
committee. He then announced that representatives of the U.S. Army
would brief the committee on the Army's privatization efforts.
CO-CHAIR ELDON MULDER introduced Major Brian Hilferty, Public
Affairs Officer; Mr. John Toenes, Deputy Director of the
Directorate of Public Works; Mr. Greg Endsley, Deputy Director of
the Directorate of Logistics; Mr. Mark Bryant, Chief of Management
Services Division and Deputy Chief of Staff for Resource
Management; and Colonel Mike Sandberg, Deputy Chief of Staff for
Logistics, U.S. Army Alaska, and the Director of Logistics for the
U.S. Army Garrison Alaska.
CO-CHAIR TIM KELLY noted that Representative Brian Porter, Senator
Al Adams, Representative Lisa Murkowski, Representative Gene
Therriault, Representative John Harris and Senator Pete Kelly had
joined the committee.
Number 400
COLONEL SANDBERG informed committee members that the U.S. Army
Alaska (USARAK) Directorates span Fort Richardson, Fort Wainwright
and Fort Greeley.
COLONEL SANDBERG pointed out that his group gave the same briefing
to the Joint Committee on Privatization on Monday. The group is
attending to inform committee members of what USARAK, as a federal
entity, is doing in the way of commercial outsourcing and
privatization. The group has no intention of telling the State of
Alaska how it should go about its efforts in that arena. He noted
Mr. Bryant would begin the presentation with a general overview,
and then he would give a director's perspective on how USARAK
prepared its workforce to accept the fact that they were being
studied for commercial outsourcing.
MR. MARK BRYANT presented a slide show consisting of 38 slides
showing the basic history, regulatory requirements, and results of
USARAK's competitive sourcing and privatization project.
Slides 1 and 2 are introductory and describe the purpose of the
presentation.
Slide number 3 contains the general philosophy behind the project
which is that government should not compete with the free
enterprise system.
Slides 4 and 5 define competitive sourcing and privatization.
Competitive sourcing is an activity in which government retains
ownership of some of the equipment and the facilities. After the
competitive sourcing study is conducted, USARAK chooses one of
three ways to have the service performed: USARAK can turn control
of the operations over to contractor performance but do the
surveillance itself; it can provide the service in-house; or the
service can be provided by another federal agency. USARAK may
instead decide to privatize a service in which it turns over its
assets to someone else and get out of the business entirely. The
choice between competitive sourcing and privatization is based on
economy. The best examples of privatizing services are the ongoing
studies on privatization of utilities and housing. The only
stipulation for privatizing services is that it must be economical,
so a cost analysis is conducted to determine if the service can be
provided cheaper by a contractor.
Slide number 6 contains a detailed definition of an A-76 cost
competition which Mr. Bryant explained is basically a full cost
competition study. The study determines all costs involved in
providing the service in-house. USARAK then solicits prospective
bids. The cost competition methodology in A-76 is specified in the
OMB circular. USARAK studies entire organizations, not only the
functions it wishes to compete. The competitive sourcing can be
done in two ways: if the organization has 10 or less appropriated
funded positions, a direct conversion is done. If the organization
has 11 or more employees, by law USARAK must do a full cost
competition study.
Slide number 7 contains the history of competitive sourcing in the
federal government. The Nichols Amendment of 1987 created a
moratorium from 1987 to 1995 at which time the Commission on Roles
and Missions was created by Secretary of Defense Cohen.
Slide number 8 shows the results of the studies from 1979 through
1996. After 468 studies were completed, a 28 percent savings
resulted.
Slide number 9 contains the results of a GAO study completed in
February of 1999. In 18 of the 53 studies, the performance work
statements had to be revised. The performance work statement is
the most important document in the entire process as it describes
what the contractor is expected to do. Of 32 contracts, 4 were
terminated for unsatisfactory performance.
Slide number 10 contains USARAK's strategy which is to achieve
greater efficiency to get the best deal for the government and the
taxpayer.
Slide number 11 shows the time limits for the studies established
by OMB Circular A-76. A single function study is limited to 18
months. A multi-function study is limited to 36 months. Congress
also set time limits for spending funds on studies that are a
little bit longer.
Slide number 12 shows the starting point as determining what
USARAK's commercial activities are and what the inherent government
activities are.
Slide number 13 contains the major categories of the functions that
can be studied according to the OMB Circular. This represents
about 320 sub-functions. The functions that can be studied are
also contained in other guides published periodically as part of
the annual appropriation acts. MR. BRYANT said if a service can be
found downtown or in the phone book, it has the potential of being
contracted out to the commercial sector.
Slide number 14 contains the definition of an inherent government
activity. MR. BRYANT said if an employee has the authority to make
a decision on behalf of the government and commit it to an action,
that position is an inherently governmental function.
Slide number 15 contains the reasons why cost competition is
important to the federal government. Basically, USARAK just wants
to perform better. MR. BRYANT credited the civil servants who have
a vested interest in the studies and know how the functions are
performed for the success of USARAK's privatization program.
Slide number 16 shows some of the perceptions of A-76 competitions.
They are seen as difficult, controversial, and as always leading to
appeals, which is not true. Of the 53 studies conducted, 10 were
appealed, and only one of the appeals was won.
Slide number 17 discusses federal employee and union roles. No
closed meetings occur and employees participate fully until the end
of the process, at which time management begins to close off the
process to the unions and employees. Employees are critical to the
process in that they document their workload and identify areas for
improvement.
TAPE 99-2, SIDE B
Slide number 18 shows the process for compiling documentation to
announce USARAK's studies. By law, the process must be announced
to Congress. The performance work statement is very detailed; the
typical performance work statement for the vehicular logistics
study fills several binders. After the performance work study is
developed over 12 to 14 months, it is given to USARAK's director of
contracting to solicit contract offers, and to a management review
team. The performance work statement and the most efficient
organization work documents are given to the U.S. Army audit agency
to check the process. The contractor proposals are evaluated for
past performance, quality, best value, and bench marking. When
completed, USARAK selects the top bid which will compete with the
in-house bid to complete a cost comparison. Standard software is
used to compare the numbers and an initial decision is made. Once
the initial decision is made USARAK automatically allows protests
and appeals for 30 days.
REPRESENTATIVE COWDERY asked if USARAK allows contractors to
"cherry pick" when bidding.
MR. BRYANT explained that most studies are multi-function studies
because of the economy of scale. USARAK requires contractors to
bid on the entire contract. Furthermore, the directors of
logistics and public works require one bid for public works
projects and logistics for both Ft. Richardson and Ft. Wainwright.
MR. BRYANT noted after the appeals process is finished, USARAK
notifies Congress and then takes 6 to 12 months to implement the
contract. The contractor's bid must beat the in-house workforce
bid, at least on personnel costs, by at least 10 percent or up to
$10 million, to compensate for the transition costs.
Slide number 19 contains the milestone requirements which are based
on the statutory and regulatory mandates for completing the
studies. In addition, headquarters gives USARAK specific due dates
for completing the studies. The U.S. Army audit agency concluded
that a large study would take about 33 months.
Slide number 20 lists the success factors of which the most
important is open communication on every activity being conducted.
USARAK publishes newsletters, a web page, and newspaper articles,
and holds meetings with the workforce and the union. Both
participate in the study. USARAK also tries to keep communities
informed about what the studies involve. USARAK promotes a
positive approach from the outset, and wants to complete the
process as soon as possible. It believes it will not have to do
large multi-function studies again for about 4 or 5 years. Current
civilians have right of first refusal by law. If a contractor wins
the bid, the contractor must first offer the displaced employees
the right to a job if qualified.
Slide number 21 shows the general lessons learned. The A-76
program has been refined and revised and is an improvement over the
program in existence in the 1980s.
REPRESENTATIVE COWDERY asked Mr. Bryant to explain the Brown and
Root award in Kodiak to committee members.
MR. JOHN TOENES informed committee members that USARAK has a
contract with a company named Brown and Root. It has a job order
contract; it is not an A-76 cost comparison study. Beginning about
10 years ago, USARAK received consecutive year reductions in its
number of civilian employees. USARAK took those reductions out of
a class of work it calls "project work" as opposed to scheduled
maintenance and services. USARAK chose to solicit a contract for
that work at Fort Richardson and Fort Wainwright and some other
small sites around the state. Brown and Root was the successful
bidder; its contract was for one year with four option years. It
is now in its second contract. Contracting for those services has
been very successful monetarily and administratively.
REPRESENTATIVE COWDERY asked how long Brown and Root has been
performing the contract.
MR. TOENES replied that Brown and Root has been providing the
services for over a decade.
SENATOR WARD asked Mr. Toenes to tell committee members what A-76
means.
MR. TOENES explained that in the 1950s, when this program first
started, the executive branch of government decided the number of
civil servants it wanted and how the agencies would be staffed.
President Eisenhower decided to contract out commercial services.
Congress, given that it had a constituency of over 3 million civil
servants, created a public law (PL 105-262, Section 81-04) which
required that anytime more than 10 civilians are involved in a
study, some kind of cost comparison must take place before those
employees can be displaced. The Office of Management and Budget,
which is part of the executive branch, built OMB Circular A-76
which prescribes the method to be used to do a cost comparison
study. A-76 was most recently revised in 1996.
Number 506
SENATOR PEARCE asked whether Congress must give approval when
USARAK notifies it of a study with more than ten civilians
involved, or whether notification is sufficient.
MR. BRYANT stated USARAK only notifies Congress of the result of
the study.
SENATOR PEARCE asked, in reference to the Brown and Root contract,
whether the union management was a part of the contract renewal
process, during which she assumed another scoring would take place.
MR. BRYANT assumed not, however he deferred to Mr. Endsley to
answer. Mr. Bryant clarified that the contracts are awarded for
five years: one year with four option years. Upon the anniversary
of the first review year, he asked Mr. Endsley if the union would
be involved with that review.
MR. ENDSLEY explained that the director of resource management that
remains at the installation oversees how well the contractor is
performing and the costs. If the director sees that performance is
poor or that costs are escalating, the government can take action
to recompete the contract and bring it back in-house. Therefore,
the union that remains at the installation will certainly be
watching to see how the contractor does.
SENATOR PEARCE asked if, at the end of five years, the review
process is much more elaborate, and whether the union is back at
the table at that time.
MR. ENDSLEY said that right now there is no allowance for that.
The contract bids are resolicited like any other government
contract, therefore there is no methodology for the government to
jump back in to compete at that time.
SENATOR PEARCE asked how many five year extensions can be granted
before the full process must occur again by law.
MR. ENDSLEY explained that at the end of five years the full
process must occur but it does not include the government part of
the competition, it is just a contract resolicitation in which the
private sector competes. The A-76 process does not allow in-house
government services to compete at that time if everything is going
well with the contract process.
MR. BRYANT added that the government could come back in and compete
but it would have to beat the contractor's bid by ten percent.
MR. ENDSLEY noted a cost transfer study allows a review of a
contractor who may become overpriced. If the study proves that the
contractor is overpriced, the government workforce could compete
but would have to beat the contractor's bid by ten percent.
MR. TOENES stated the process of commercial activities is actually
designed to ultimately result in a contract, so when a scenario in
which the in-house workforce wins, a commercial activity review is
initiated again almost immediately and is continuous until the
contract is bid again. There are only a few exceptions in which
the in-house workforce might have the chance to reparticipate in
the competition. The A-76 process is trying to guarantee that a
cost competitive contractor ultimately winds up performing the
services.
SENATOR PEARCE asked whether the bias is toward outsourcing.
MR. BRYANT said there is no bias.
SENATOR PEARCE noted that Mr. Toenes said that the process
immediately starts again until outsiders do the work.
MR. BRYANT clarified that the term "bias" is inaccurate because
this process is designed to be as fair as possible.
SENATOR PEARCE said she did not mean to use the word "bias" in a
pejorative manner, however USARAK is deliberately trying to get the
services provided by contractors.
MR. BRYANT agreed.
MR. BRYANT continued presenting the slides.
Slide 22 lists USARAK's four largest organizations under study:
the Directorate of Logistics; the Directorate of Public Works; the
Directorate of Plans, Training, Security, and Mobilization; and the
Directorate of Community Activities. All totaled, the military and
civilian personnel of those organizations represent 78 percent of
USARAK. A much smaller percentage will be competed even though the
entire organization is under study.
Slide number 23 contains the goals for USARAK's workforce. To
identify all of the services that USARAK wants to buy as accurately
as possible is the number one goal. Second, the in-house workforce
must be prepared to be the successful bidder.
COLONEL SANDBERG asked committee members to note the second goal
because he believes it is critical that the boss talk to the
workforce and alert it to USARAK's efforts to make the workforce as
competitive as possible.
MR. BRYANT noted that the third goal is to plan a smooth transition
to the performance work statement, and the fourth goal is to pursue
every avenue possible to take care of the people in the
Directorates of Public Works and Logistics.
Slide number 24 contains study time lines for the years 1998
through 2001.
Slides 25 and 26 contain examples of before and after performance
work statements for the service of lawn mowing.
Slide number 27 shows the source selection evaluation structure.
In contains a formalized process for selecting the best
contractor's bid to compete with the in-house workforce. It uses
a source selection advisory council composed of senior staff
members and a source selection evaluation board made up of 5 or 6
people. Technical experts also participate.
Slide number 28 defines privatization and lists the Army's
privatization goals and its on-going studies. The on-going studies
focus on steam, heat, electric, gas, and water and sewer
facilities, as well as housing.
Slide number 29 is a cartoon depicting USARAK's implementation
summary. USARAK may be smaller in the future but it hopes to be
more streamlined and businesslike.
Slide number 30 is entitled "Conclusion" and describes USARAK's
primary focus as mission performance with cost savings.
MR. BRYANT turned the presentation over to Colonel Sandberg for a
perspective on actual studies conducted by USARAK.
Number 375
COLONEL SANDBERG stated that he has a number of individuals who are
affected by the commercial activities studies that are underway in
the Directorate of Logistics. Most of them are in jeopardy of
losing their jobs. He discussed the last slides which pertain to
the in-house employees.
Slides 31 through 38 are a briefing given to USARAK employees in
each installation being studied. USARAK does not want its
employees to read a headline in the newspaper once the studies are
completed. USARAK is trying to prepare its in-house workforce to
compete with any contractor and to win the ability to remain a
viable government workforce. Initially, employees were trained.
They were told how the study was going to take place and what would
be expected of them so that they could prepare themselves and the
rest of their workforce. They were then told they had to arm
themselves by identifying in detail all tasks that they do, to be
truthful in the information they provide, and to be tenacious about
incorporating any changes into all study documents. Employees have
been told that USARAK has to be brutally efficient. Because the
person doing a job knows the best way to do it, employees were
asked to communicate ideas about streamlining jobs and to think
"out of the box." Employees understood that although USARAK will
be smaller, it is confident that its employees can do the job best
if the workforce can be more efficient, and that no contractor can
do the job any better, especially for ten percent less.
SENATOR WARD noted that the subcommittees of the Joint Commission
on Privatization are having some trouble getting through management
to find out what individual employees are doing.
COLONEL SANDBERG remarked that the federal sector hired a
contractor to come in and assist management to identify the tasks
done by each employee. His employees were individually interviewed
before any performance work statements were written. Before the
interviews took place, all individual and collective tasks and
functions of the subdivisions within the Directorates were flow
charted.
SENATOR WARD asked if the flow-chart exposed inefficiencies in
USARAK's operations.
MR. ENDSLEY replied that flow-charting is an incredibly good tool
for finding inefficiencies.
CO-CHAIR MULDER asked if any duplication of services was
highlighted.
MR. ENDSLEY said they found there were a number of duplicated
services, primarily among the smaller services.
REPRESENTATIVE CISSNA asked how long the flow-charting process
takes.
COLONEL SANDBERG replied that it depends on the complexity of what
one is flow-charting. Some of the flow-charts were three inches
thick. The process of creating a flow-chart takes a significant
effort on the part of everyone in the organization from the lowest
to highest level employee. In his directorate he has more than 20
people working full time to flow-chart at this time. More than 20
people worked full time to flow-chart the individual processes.
MR. TOENES said the process the Army goes through is based on Army
Regulation 5-20, however it mirrors industrial engineering
standards. It has two major components: brainstorming, the goal
of which is to identify every task performed for at least one hour
per year by anyone in the workforce; and second, to determine the
cost of every step of each product made and service performed in a
year. Flow-charting is invaluable in the process. He advised that
almost every contract that has failed did so because of a poor
performance work statement or because the contractor did not follow
the structured industrial engineering process and simply "winged
it."
REPRESENTATIVE COWDERY asked Mr. Toenes to tell committee members
about the study for the replacement of light bulbs.
MR. TOENES conveyed that the original performance specification
required that all lamps be lit. The contractor could choose two
alternatives: to replace each bulb as it expires, or to replace all
bulbs at once, based on the life expectancy of the bulb. The most
cost effective method is to replace all bulbs at once because the
highest cost (up to 80 percent) of such services is labor.
Number 187
REPRESENTATIVE CISSNA referred to Slide 34 and asked if the
training comes first.
COLONEL SANDBERG replied that his directorate did most of the
preliminary work first.
MR. ENDSLEY added that he trained all employees on how to
brainstorm and do flow-charts.
REPRESENTATIVE CISSNA asked if any materials could be shared from
that process.
MR. ENDSLEY explained that USARAK hired a firm to train its
workforce, but before that it held its own in-house training in
which it used basic management techniques of brainstorming and
flow-charting. He noted material is available at bookstores or any
consulting firm could do that type of training.
MR. TOENES added that the material provided by the contractor is
proprietary. Mr. Toenes said regarding the cost of the studies,
some nearly 400 employee positions have been covered by performance
work statements. The three year process will cost nearly $9
million.
CO-CHAIR MULDER asked what percentage of USARAK's budget the $9
million represents.
MR. TOENES replied the budget of the Directorate of Public Works
for this year will be about $160 million. He assumed the $9
million would come out of three years' budgets, costing about $3
million per year.
MR. ENDSLEY noted the Army hired contractors and paid them $1,000
per position to perform the study. The Army has discovered that
$8,000 to $9,000 per position is insufficient to hire a contractor
to perform the study. They are estimating that $13,000 to $14,000
would be adequate.
Number 120
CO-CHAIR MULDER stated that basically seven percent of the budget
is dedicated toward doing the study of efficiency.
REPRESENTATIVE KEMPLEN asked where the money comes from for the
A-76 competition and whether other projects must compete for those
funds.
COLONEL SANDBERG commented that the Army has budgeted for the
position of Assistant Chief of Staff for Installation Management
with funds to pay contractors to initiate the studies at the rate
of $1,000 per employee. USARAK has basically picked up the
remainder of the cost.
MR. BRYANT noted that the Army Headquarters knew the studies would
be difficult so it decided to centrally fund them, however it under
funded the studies. At one time they increased the amount to $1400
per position, however now the Army audit agency believes it will
cost $8,000 to $9,000 per position. About $2.6 million was given
to USARAK to do the project; $1.2 was for the Directorate of Public
Works study alone. The $9 million that Mr. Toenes referred to was
for the in-house workforce for training and meetings, and for
materials and equipment for the core team. USARAK will pay about
75 percent of that amount.
COLONEL SANDBERG stated while training, employees were not doing
their core functions within the Directorate.
MR. TOENES said that unfortunately, whether an in-house workforce
cost comparison competition is the scenario, or whether USARAK
would choose to go direct to contract should legislation allow that
and it does not, the same process must be used to come up with a
performance work statement to guarantee that the product and
services are adequately provided. Therefore, the costs of the
study would only be reduced slightly if the in-house workforce was
not included.
REPRESENTATIVE KEMPLEN asked whether the performance work statement
is included in the $9,000 per employee rate.
MR. BRYANT replied that it is not.
MR. TOENES clarified that Mr. Bryant was saying that the cost of
the contractor was not built into that cost. The $9 million amount
includes the cost of building the performance work statement which
entailed months of brainstorming and other industrial engineering
processes by management and training the in-house workforce. The
contractor's cost was not built into that amount.
REPRESENTATIVE KEMPLEN asked if there are two costs, one for the
performance work statement and the second for the A-76 study
process to determine whether the services could be provided by the
private sector.
MR. ENDSLEY clarified that the process begins with writing a
performance work statement which USARAK is doing with some outside
assistance funded by the Army. USARAK then writes its government
proposal for the contract. That is all part of the A-76 process.
Not only is USARAK writing its proposal, private firms are
simultaneously writing their proposals based on the solicitation
and they compete at the end. From the starting point of writing
the performance work statement to the cost comparison is all part
of the A-76 study. A separate management study is done by USARAK
to prepare a technical proposal, however that is just one part of
the A-76 study for outsourcing.
REPRESENTATIVE KEMPLEN asked if the state wanted to follow USARAK's
process, whether the Legislature would be obligated to provide
additional funding just as USARAK is receiving from Congress.
TAPE 99-3, SIDE A
MR. TOENES said the federal government did it in two ways. It
centrally funded some of the consulting contractors, some of whom
have been more successful in helping than others. Clearly 70 or 80
percent of the $9 million is coming out of the annual operating
budget of the Directorate of Public Works.
CO-CHAIR MULDER said it would seem that a long term savings could
result from two things, even with the additional expense. Savings
will result from outsourcing itself and they will result from the
discovery of inefficiencies even in cases where services are not
privatized.
COLONEL SANDBERG remarked that if USARAK determines that the
production of some product or service cannot be done efficiently
in-house, either because of the payroll rules involved or the
levels of skills required, whether necessary or not, it can elect
to contract the service as part of the in-house bid against which
the other contract proposals will compete. He noted that the
federal government was so sure that USARAK would realize savings,
it incurred cutbacks before it began the study.
CO-CHAIR MULDER noted the incentive for the Department of Defense
was based on the fact that it could capture and retain savings and
use them for other projects within their own department.
CO-CHAIR MULDER asked who decided which core functions could not be
studied.
MR. BRYANT replied that is done by law and it is also spelled out
in the OMB Circular. Office of Procurement policy statements are
published regularly, and Army regulations are promulgated
regularly. The basic determination was made by the Office of
Management and Budget.
MR. TOENES added that the primary criteria used had to do with the
proprietary nature of the work.
MR. BRYANT added the Defense Reform Initiative Decision Number 20
(DRID 20) pertains to inventory reform of commercial functions. It
changed the way USARAK documents what is considered to be
commercial in nature and what is not, therefore USARAK does have
further promulgating guidance. In addition the Freedom from
Acquisition Inventory Reform Act (FAIR) requires that the DRID 20
inventory be publicized in a commerce-business arena.
CO-CHAIR MULDER said that would allow someone to contest the fact
that a core function could be handled by the private sector.
MR. BRYANT said that is correct.
SENATOR WARD asked Mr. Bryant to discuss the restrictions put on
the group of people who make the final awards.
MR. BRYANT explained that all personnel who participate in the
groups within the source selection evaluation board are exempted
from the right of first refusal because they will have insider
knowledge of the bids.
MR. ENDSLEY added that the folks that put together the government's
technical proposal are also exempted from the right of first
refusal.
COLONEL SANDBERG noted that firewalls are essentially established
so that certain people are not privy to the information in the
government's independent bid. That way they do not lose the right
of first refusal which is key for the employees.
There being no further questions, CO-CHAIR MULDER thanked the group
for sharing their presentation.
CO-CHAIR TIM KELLY noted Representatives Cowdery and Cissna, and
Carol Carroll from the Department of Military and Veterans Affairs
had joined the committee. He asked Chris Nelson, JASC staff
director, to update committee members on interim activities.
Number 179
CHRIS NELSON informed committee members that committee packets
contain trip reports from the Washington, D.C. trip and the NAID
Conference, among other materials. He noted an overnight trip to
Ft. Greeley and Clear Air Station is planned for the quarterly
meeting on October 4. The purpose of the trip is to view the
proposed ground launch interceptor sites for ballistic missile
defense. By the time that meeting occurs, a few significant events
will have taken place in the ballistic missile defense program.
The Environmental Impact Statement (EIS) for the Alaska sites has
been completed and will be issued on October 1. Public hearings on
the EIS are tentatively set for the first week of November in
Fairbanks, Anderson, Delta, and Anchorage. Second, the first test
of the exo-atmospheric kill vehicle, the "bullet that will hit the
bullet", is scheduled for the first week in October. Also, while
at Fort Greeley, the JASC will be briefed on the Northern Warfare
Training Center and it will visit the Cold Regions Test Center.
MR. NELSON informed committee members that the Federal Aviation
Administration is hosting a conference on the specific issues of
privatization and joint use of military airfields on October 17-19.
Also, the conference on ballistic missile defense with the Japanese
is scheduled for November 8-9 in Honolulu, Hawaii. Mead Treadwell
from the Institute of the North is coordinating that conference.
A third conference of interest will be held in Tempe, Arizona on
January 27-28, 2000. It is being put on by NAID and the subject is
making military bases cost competitive.
MR. NELSON discussed background reading material he included in
committee member packets. The National Intelligence Council's
unclassified version of the CIA report on foreign missile
developments outlines the magnitude of the threat. An excerpt of
the Deutsch report is also included.
MR. NELSON noted that he and Senator Pearce learned that nations
like China and North Korea are financing their weapons programs by
raising capital in the Western stock and bond markets through
companies directly owned by those countries. Federal legislation
is being proposed that will require disclosure so that potential
shareholders will be aware of what they are buying when stock or
bond offerings are put on the Western stock market. Also, an
article in Investors Daily pointed out that the largest public
employee retirement system, the California system, has direct
investments in several of the companies that build Chinese
missiles.
MR. NELSON informed committee members that copies of an alternative
proposal to the national ballistic missile defense system, the
AEGIS cruiser system, is contained in committee members' packets.
The JASC is not opposing that system as it is a good supplement,
however it is not an adequate replacement for a dedicated ground
launch system.
Regarding the Base Realignment and Closure (BRAC) issue, MR. NELSON
pointed out that he and Senator Pearce were told during their
meeting with Pentagon officials that BRAC is off the table until at
least the year 2003. The good news is that Alaska will have some
time to assist its military bases in becoming more cost
competitive, however the bad news is that the two items up for
consolidation review in 2003 are depots and labs. Alaska has no
depots but the Cold Region Test Center is a lab and will be a BRAC
target.
MR. NELSON noted that the Department of Defense is looking at
privatizing all utilities on Alaska bases by the year 2003. Both
Elmendorf Air Force Base and Ft. Richardson officials are engaged
in ongoing discussions with the Municipality of Anchorage. Some
systemic problems have been discovered. The military, like other
public agencies, has a deferred maintenance problem; the existing
delivery systems are not in good shape. JASC wants to assist the
Department of Defense in its privatization efforts, however it must
be careful not to take on a white elephant.
MR. NELSON discussed proposed legislation. Staff is working with
DEC on a solution to the statutory ban on the use of smoke in
Alaska. DEC would allow the Army to use smoke on a permit basis.
If DEC does not feel it can implement a permit process in
compliance with existing statute, it will provide suggestions for
legislation before the next legislative session to modify the
existing statute.
SENATOR PEARCE asked if the dates for the public hearings on the
EIS have been set. MR. NELSON said they have not, but the target
date is the first week of November.
SENATOR PEARCE asked why the release of the EIS was delayed until
October 1. MR. NELSON replied that he is unaware of any problems
that may exist. He added that the Pentagon was originally looking
at four Alaska sites for the ground launch interceptor system, but
it has narrowed the field to two sites and is no longer considering
Eielson or the Yukon maneuver area at Fort Wainwright.
JAKE LESTENKOFF asked Mr. Nelson if he has a copy of a report by
the Pentagon that was sent to Congress in August entitled On the
Utility of Sea Based Assets to National Missile Defense. MR.
NELSON answered that committee packets contain a policy paper by
Frank Gaffney (ph) of the Institute of Strategic Studies. He
offered to send a copy of the Pentagon's report to Mr. Lestenkoff.
SENATOR WILKEN asked about the agenda for the quarterly meeting.
MR. NELSON informed committee members they will leave Anchorage at
about 7:30 a.m. and fly on National Guard aircraft to Allen Army
Airfield where committee members will overnight. The following day
the committee will fly to Clear. He noted that portions of the
trip are available to other legislators and staff as the aircraft
can accommodate them.
CO-CHAIR KELLY asked Mr. Nelson to prepare a memo to legislators to
that effect.
SENATOR WILKEN offered to coordinate travel for Fairbanks
participants who plan to drive.
CO-CHAIR MULDER suggested meeting with the City Council. MR.
NELSON said that could be added to the agenda.
CO-CHAIR TIM KELLY asked committee members to submit the names of
nominees for the Citizens Advisory Board to Mr. Nelson. He noted
Mr. Nelson is preparing a mission statement and meeting schedule
for the Board and that a meeting is tentatively planned in
December.
There being no further business to come before the committee,
CO-CHAIR KELLY adjourned the meeting at 12:40 p.m.
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