Walter Reed Army Medical Center (WRAMC) and Office of Management and Budget (OMB) Circular A-76: Implications for the Future

Congressional research reportAug 20, 2008

Ask Donna

What actually matters in this document.

Text

ȱȱ¢ȱȱȱǻǼȱ

ȱȱȱȱȱȱǻǼȱ

ȱȬŝŜǱȱ ȱȱȱȱ

ȱ¢ȱ ȱ

ȱȱȱȱ

ȱŘŖǰȱŘŖŖŞȱ

ȱȱȱ

ŝȬśŝŖŖȱ

ǯǯȱ

řŚŗŚŖȱ

ȱȱȱ

Prepared for Members and Committees of Congress

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

¢ȱ

This report examines the issues surrounding the Walter Reed public-private competition

conducted under Office of Management and Budget (OMB) Circular A-76 and its potential

impact on future Department of Defense (DOD) competitions. Circular A-76 is a policy and a

process first initiated in 1966 that was designed to determine whether federal employees or

private sector contractors are best to perform activities deemed commercial. A series of articles

that first appeared in the Washington Post chronicled the dilapidated conditions and the

substandard medical treatment afforded to returning veterans. Media reports surrounding the

competition have suggested that one possible contributing factor to the Walter Reed controversy

was the decision to privatize base support services.

What caused the problems at Walter Reed? To what extent were the problems related to the A-76

competition? Did it go badly because A-76 is an inherently flawed policy, or was it a convergence

of events? Should Congress draw any conclusions from the outcome of the Walter Reed

competition for future competitions on military medical facilities? While it may be hard to draw

conclusions of cause and effect, there may be lessons learned applicable to future competitions.

Some have suggested that constrained Army resources, due to a convergence of events, may have

caused and/or contributed to the problems in the competition and led to the attrition of skilled

base support services staff. Other factors that may have affected the process were the entry of the

United States into combat operations in Iraq and Afghanistan, a 2005 Base Realignment and

Closure Commission recommendation for the consolidation of Army and Navy military medical

services into a single tertiary hospital at the campus of the Bethesda Naval Hospital (effectively

closing the Walter Reed campus), a surge in the number of outpatient medical care visits for

veterans returning from the war, and the Army’s push to achieve the Bush Administration’s

competitive sourcing goals.

P.L. 110-181, the FY2008 National Defense Authorization Act (NDAA), includes several

provisions that affect A-76 competitions. H.R. 5658, the House-passed version of the FY2009

NDAA, contains several new provisions which could impact the conduct of future competitions,

including Section 321, which would limit the conduct of A-76 competitions to 540 days (about 18

months); Section 322, which would require the analysis and development of a single governmentwide definition for the term “inherently governmental function;” and Section 325, which would

temporarily suspend DOD A-76 competitions and prevent the conversion of civilian functions to

performance by contractors.

This report will be updated as events warrant.

ȱȱȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Introduction ..................................................................................................................................... 1

What Is OMB Circular A-76? ................................................................................................... 2

Major New Developments ........................................................................................................ 3

The Performance Work Statement (PWS) Team and the Most Efficient Organization

(MEO) .................................................................................................................................... 4

Competitive Sourcing Goals Under the Bush Administration .................................................. 5

Policy Questions........................................................................................................................ 6

Background ..................................................................................................................................... 7

Key Events in the WRAMC A-76 Competition .............................................................................. 8

Oversight Issues ............................................................................................................................ 10

The Role of the Independent Review Group........................................................................... 10

Panel Conclusions and Recommendations ....................................................................... 10

The Army’s Perspective ...........................................................................................................11

Competition Took over Six Years............................................................................................ 12

Observations About the Length of the Competition ......................................................... 14

Attrition of Skilled Base Operating Support Staff ............................................................ 14

Cost Comparison Between the Government MEO and the Contractor................................... 16

Implications for Future Competitive Sourcing.............................................................................. 17

Options for Congress..................................................................................................................... 19

Require Specific Reporting on the Status of Ongoing A-76 Competitions............................. 19

Prohibit the Establishment of Numerical Quotas for A-76 studies ......................................... 20

Declare All Activities at Military Medical Facilities to Be Inherently Governmental............ 20

Prohibit the Inclusion of Health Care and Retirement Costs from the A-76 Cost

Comparison Process............................................................................................................. 21

Establish a Team of Acquisition Professionals to Rotate Service as Agency Tender

Officials................................................................................................................................ 21

Require an Enforcement of the A-76 Rules ............................................................................ 21

Grant Federal Employees the Same Rights as Private Sector Contractors ............................. 22

Encourage Alternatives to A-76 .............................................................................................. 23

Cancel A-76 Studies Under the Pre-2003 Circular ................................................................. 23

¡ȱ

Appendix. ...................................................................................................................................... 24

Author Contact Information .......................................................................................................... 28

ȱȱȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

The Walter Reed Army Medical Center (WRAMC) was the subject of a controversy that called

attention to several issues, including the policy and process governing the conduct of OMB

Circular A-76 competitions, the state of the military health care system, and a planned Base

Realignment and Closure (BRAC) action.1 A series of articles that first appeared in the

Washington Post chronicled the dilapidated conditions and substandard outpatient treatment given

to some returning veterans. The articles were written by two Washington Post reporters who

conducted a four-month investigation on the campus reportedly without the knowledge or

permission of Army officials.2 Since their investigation, WRAMC was the subject of several

investigations and congressional hearings. The investigations have focused primarily on the

military health care system, yet another important element of this situation is the outcome of the

U.S. Army’s decision to conduct a public-private competition (or competition) for base support

services under Circular A-76.3 Some media reports had suggested that one of the factors that may

have caused or contributed to the substandard conditions, existing at some of the facilities at

Walter Reed, was the push to privatize base support services.4

Competitive sourcing through managed competitions was a major initiative of the first-term Bush

Administration’s Presidential Management Agenda, and one of five government-wide initiatives

to improve the management and performance of the federal government.5 In 2003, the Bush

Administration revised the Circular as a recommendation of the Commercial Activities Panel.6

Army Vice Chief of Staff General Richard Cody testified that the Army accepted full

responsibility for the substandard conditions and that being on the BRAC list did not give

WRAMC priority for repairs or building replacement.7 Several Members of Congress introduced

legislation to either cancel the WRAMC A-76 competition or prohibit the appropriation of funds

for the conduct of future studies at military medical facilities. As a result of the issues raised at

The 2005 Defense Base Realignment and Closure (BRAC) Commission recommended that DOD establish a new

Walter Reed National Military Medical Center (WRNMMC) on the site of the current National Naval Medical Center

(NNMC) in Bethesda, Maryland. For further information, see CRS Report RL34055, Walter Reed Army Medical

Center: Realignment Under BRAC 2005 and Options for Congress, by (name redacted) and JoAnne O’Bryant.

Priest, Dana and Hull, Ann. “Soldiers Face Neglect, Frustration at Army’s Top Medical Facility.” Washington Post,

February 18, 2007, p. A01.

Several different individuals and opinions represented the Army in this competition. From media reports and other

records, the varying perspectives of the Army included (1) Army Medical Command (MEDCOM) at Fort Sam Houston

in San Antonio, TX; (2) WRAMC management officials General Weightman, Garrison Commander Garabaldi, and

Deputy Garrison Commander King; (3) Attorneys at the GAO protests; (4) Army Audit Agency; and (5) senior Army

leadership.

Mandel, Jenny. “Officials Say Outsourcing Partly to Blame for Walter Reed Failures.” Government Executive, March

5, 2007.

For a discussion on OMB Circular A-76, see CRS Report RL32017, Office of Management and Budget Circular A76: Selected Issues, by (name redacted).

Section 832 of the FY2001 National Defense Authorization Act (P.L. 106-398) directed the Comptroller General to

“convene a panel of experts to study the policies and procedures governing the transfer of commercial activities for the

Federal Government from Government personnel to a Federal contractor, including : (1) procedures for determining

whether functions should continue to be performed by Government personnel; (2) procedures for comparing the costs

of performance of functions by Government personnel and the costs of performance of functions by Federal

contractors; (3) implementation by the Department of Defense of the Federal Activities Inventory Reform Act of 1998

(P.L. 105-270; 31 U.S.C. 501 note); and (4) procedures of the Department of Defense for public-private competitions

pursuant to the Office of Management and Budget Circular A-76.”

Kennedy, Kelly. “Injured Troops Describe Woes at Reed Hearing.” Military News, March 6, 2007.

ȱȱȱ

ŗȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

WRAMC, both private and public sectors have identified flaws in this competition specifically, as

well as in the policies governing A-76.

This report will examine the issues surrounding the WRAMC public-private competition

conducted under OMB Circular A-76 and discuss some options that Congress may want to

consider in its oversight role. The WRAMC competition raised questions that are likely to shape

competitions for years to come; lessons learned may help Congress to determine whether A-76

cost-comparison studies are the most appropriate way to achieve costs savings and efficiencies in

the activities of the federal government. Several legislative provisions in H.R. 4986, the proposed

FY2008 NDAA, would impact the conduct of future competitions.

The Army has since announced its plan to cancel all its competitions at its medical facilities for

2007 and 2008. Prior to this decision, future competitions were already planned for various Army

facilities, including Fort Detrick (Maryland), and the range of activities would have included base

operations support, pharmacy, radiology, pathology and ambulance services, at Fort Detrick and

other locations.8

ȱ ȱȱȱȬŝŜǵȱ

The OMB Circular A-76, first issued in 1966, defines federal policy for determining whether

recurring commercial activities should be performed by the private sector or federal employees.

In addition to the Circular, a companion piece of legislation called the Federal Activities

Inventory Reform (FAIR) Act of 19989 requires Federal agencies, on an annual basis, to prepare

and submit inventories of their commercial activities performed by Federal employees to the

Office of Management and Budget (OMB).

The Circular requires federal executive agencies to prepare annually lists of activities that are

considered both commercial and inherently governmental. In general, commercial activities are

subject to competition, while inherently governmental activities are not. The determination of

how activities are classified ultimately depends on several factors. The Circular describes what

makes activities inherently governmental.

An inherently governmental activity is an activity that is so intimately related to the public

interest as to mandate performance by government personnel. These activities require the

exercise of substantial discretion in applying government authority and/or in making

decisions for the government. Inherently governmental activities normally fall into two

categories: the exercise of sovereign government authority or the establishment of

procedures and processes related to the oversight of monetary transactions or entitlements.

An inherently governmental activity involves: (1) binding the United States to take or not to

take some action by contract, policy, regulation, authorization, order, or otherwise; (2)

determining, protecting, and advancing economic, political, territorial, property, or other

interests by military or diplomatic action, civil or criminal judicial proceedings, contract

management, or otherwise; (3) significantly affecting the life, liberty, or property of private

persons; or (4) exerting ultimate control over the acquisition, use, or disposition of United

States property (real or personal, tangible or intangible), including establishing policies or

Castelli, Elise. “Army cancels job competitions at medical facilities.” Army Times Publishing Company, April 23,

2007, pg. 5.

P.L. 105-270.

ȱȱȱ

Řȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

procedures for the collection, control, or disbursement of appropriated and other federal

funds.10

The Circular was revised in 2003 at the recommendation of a Commercial Activities Panel

(CAP). CAP also recommended abolishing OMB Circular A-76 and replacing it with an

“integrated competition process” based on a combining of elements of Federal Acquisition

Regulations (FAR) and the A-76 Circular.

In general, many federal employees and labor organizations believe that the A-76 process is

unfairly slanted in favor of the private sector, while private sector contractors generally believe

that government employees have an unfair advantage in A-76 competitions. For example, among

some A-76 observers, the attrition of skilled personnel may be viewed differently. The National

Treasury Employees’ Union (NTEU) President Colleen Kelley blamed the exodus of key

personnel at WRAMC to conditions which were “a not-at-all surprising result of the federal

contracting process that drives experienced federal employees from their jobs and seeks to

replace them with unaccountable private contractors.”11 However, another observer, President of

the Professional Services Council (PSC) Stan Soloway stated that Walter Reed’s deterioration

reflected on WRAMC’s poor management capability, and not the work of the contractor. The

issues at WRAMC, he said, “are resources and facility capability, long-standing problems that

may have caused federal employees to leave in the first place.”12 He points out that the contractor

at WRAMC cannot be held accountable because it did not begin contract work until February 4,

2007.13

ȱ ȱȱ

H.R. 5658, the House-passed version of the FY2009 National Defense Authorization bill, has a

provision (Section 2721) that would halt the closure of the Walter Reed Army Medical Center and

discontinue the construction at the National Naval Medical Center and Fort Belvoir, VA of

replacement facilities (beyond the construction necessary to complete the foundations of the

replacement facilities) until the Secretary of Defense certifies to the congressional defense

committees that each of the conditions imposed has been satisfied, and a period of seven days has

expired following the date on which the certification is received by the committees.14 Another

provision in the bill (Section 325) would temporarily suspend the conduct of future DOD publicprivate competitions (regarding the conversion of functions performed by DOD civilians to

performance by contractors) from the date of the enactment of the bill until September 30, 2011.

S. 3001, the Senate-proposed version of the FY2009 National Defense Authorization bill, has a

provision (Section 1101) that requires DOD to develop a strategic human capital plan designed to

improve the civilian acquisition workforce. As part of this provision, DOD would be prohibited

OMB Circular A-76, Performance of Commercial Activities, revised May 29, 2003. http://www.whitehouse.gov/

omb/circulars/a076/a76_incl_tech_correction.html

Statement from Colleen Kelley, NTEU

Statement of Stan Soloway, Professional Services Council.

An interview with an official from IAP Worldwide Services was held on April 23, 2007.

H.R. 5658, Section 2721. Conditions on Closure of Walter Reed Army Medical Hospital and Relocation of

Operations to National Naval Medical Center and Fort Belvoir.

ȱȱȱ

řȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

from conducting any public-private competition under A-76 or any other law or regulation

without first addressing the filling of “gaps” in the current workforce.15

P.L. 110-181, the FY2008 NDAA (H.R. 4986), was signed by the President on January 28, 2008.

The bill contains several provisions that affect the conduct of future public-private competitions

as described here.

•

Section 322 requires that retirement costs be compared and that any potential

retirement and health insurance benefits offered by potential contractors be

comparable to current benefits.

•

Section 323 amends 10 U.S.C. 2461 by not requiring DOD to automatically

conduct a public-private competition under OMB Circular A-76, or any other

provision of law, at the end of a performance period.

•

Section 324 provides for the insourcing16 of certain new and contracted out

functions, including Section 2463 which requires the Under Secretary of Defense

for Personnel and Readiness to prescribe guidelines and procedures to ensure that

federal employees are considered to perform work currently performed by

contractors; the provision also requires that special consideration be granted to

certain activities, including those activities associated with the performance of

inherently governmental functions.

•

Section 325 limits the influence of the Office of Personnel Management (OPM)

over DOD’s conduct of public-private competitions or direct conversions.

•

Section 326 amends the definition of who is an “interested party” and grants bid

protest rights to those employee representatives who are designated as the agent

for the majority of affected employees.

•

Section 3557 grants certain authority to the Comptroller General to expedite

actions in protests of public-private competitions under Circular A-76, and grants

other rights to interested parties.

•

Section 327 amends the Office of Federal Procurement Policy Act by requiring

that a public-private competition be conducted (for executive agency functions

performed by 10 or more agency civilian employees) before any activities may

be converted to performance by contractors, with certain conditions.

•

Section 1676 prohibits the announcement or conduct of any at military medical

facilities, unless certain conditions are met.

ȱȱȱȱǻǼȱȱȱȱȱ

ȱ£ȱǻǼȱ

Once a business case analysis has been performed to determine if the work should be subject to

competition, a Performance Work Statement (PWS) team develops a statement of the work to be

Section 1101(f) (2) refers to such gaps in the workforce as shortcomings in the number of employees possessing

certain skills and competencies, as well as shortcomings in the availability of those skills and competencies.

Insourcing is the opposite of outsourcing; functions previously performed by contractors, as well new functions

resulting from new requirements, may be considered for performance by federal civilian employees.

ȱȱȱ

Śȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

performed. The statement is used as the basis for the competition. An agency must insure that

both the government’s bid proposal and the private sector contractor’s proposal reflect all of the

functions and personnel called for in the Performance Work Statement.

The Most Efficient Organization (MEO) is developed by a team made up of federal employees

and a private sector contractor. The team is usually made up of managers and bargaining unit

employees who have knowledge of the tasks to be performed. For that reason, and to insure that

there is fairness in the competition, the rules call for a “firewall” that would prohibit all

communication between members of the MEO and members serving on the Performance Work

Statement (PWS) team.

The MEO is comprised of a group of federal employees, and management’s bid to perform the

work. It represents a streamlined reorganization of personnel, fewer people doing the work. If the

MEO wins a competition, it takes over the work of the existing government function. The MEO

does not exist unless it wins the competition. When the MEO wins a competition, a letter of

obligation implements the decision; when a contractor wins a competition, a contract is

awarded.17

The A-76 policy establishes a minimum cost differential, meaning that no activities can be

converted to or from performance by in-house federal employees to the private sector unless there

is a minimal cost differential of $10 million or 10%. This means that in order to win the

competition, the MEO is required to show a savings of at least $10 million or 10% over the

private sector contractor’s costs. The minimum cost differential is established so that the

Government will not convert to contractor performance for “marginal estimated savings.”18

ȱȱ ȱȱȱȱȱ

Competitive sourcing through managed competition was a major initiative identified in 2001 by

the first-term Bush Administration’s Presidential Management Agenda (PMA) and one of five

government-wide initiatives to improve the management and performance of the federal

government.19 The scorecard identifies a list of requirements used to evaluate the performance of

each federal agency. Progress on each initiative is charted using a red-yellow-green stoplight

indicator called a “scorecard” with green as the highest score and red as the lowest score.20 OMB

has implemented a progress management scorecard to communicate the PMA status of federal

agencies. In 2003, the Bush Administration revised the OMB Circular to direct federal agencies to

evaluate whether more jobs could be considered for competition.

According to the A-76 Supplemental Handbook, “The Most Efficient Organization (MEO) refers to the

Government’s in-house organization to perform a commercial activity. It may include a mix of Federal employees and

contract support. It is the basis for all Government costs entered on the Cost Comparison Form. The Most Efficient

Organization (MEO) is the product of the Management Plan and is based upon the Performance Work Statement

(PWS).

OMB, Circular A-76 (Part II, Preparing the Cost Estimates). Accessed online at http://www.whitehouse.gov/omb/

circulars/a076/a076s2.html

For a discussion on OMB Circular A-76, see CRS Report RL32017, Office of Management and Budget Circular A76: Selected Issues, by (name redacted).

http://www.army.mil/ESCC/cm/hcm1.htm.

ȱȱȱ

śȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Reportedly, as of July 2006 the Army was coded “red” on the PMA. By the end of FY2009, the

Army’s goal is to study 77,873 positions for competition under A-76. The Army Installation

Management Agency (IMA) planned to study 1,574 positions in FY2006, and 13,500 positions by

FY2009.21

¢ȱȱ

The WRAMC competition is seen as an important one to examine. It is a competition where

many things reportedly went wrong, and it occurred in the midst of a larger controversy. Some

have described the events at Walter Reed as “the perfect storm.” In his testimony before the

House Subcommittee, The Honorable Jack Marsh, former Secretary of the Army and Co-Chair of

the Independent Review Group, described the situation at Walter Reed:

Others have described what occurred at Walter Reed as the “perfect storm”- the confluence

of three forces that compromised the ability of the hospital to deliver to some patients the

standard of care consistent with the traditions of its past. These forces were: the unexpected

casualty load of the Iraq War; the “contracting out requirements” imposed by the A 76

program, which is administered by OMB, and dragged on for over five crucial years; and the

decision to close Walter Reed pursuant to BRAC action. An action that was ratified by the

Congress.22

The difficulties at Walter Reed were also acknowledged by President George W. Bush when he

stated “The problems at Walter Reed were caused by bureaucratic and administrative failures. The

system failed you, and it failed our troops. And we’re going to fix it.”23 This A-76 competition

may serve as an object lesson in what can happen when a federal agency fails to manage

numerous conflicting and competing goals and objectives. Some have also surmised as to whether

the culture of the Army caused and/or contributed to a failure to take appropriate action. Others

have questioned whether the desire to reach the Bush Administration’s competitive sourcing goals

overrode other considerations. In light of these observations, there are at least three policy

questions that Congress may want to consider, in the exercise of its oversight role over the

conduct of future A-76 studies.

•

Are the decisions made during the course of the WRAMC competition likely to

shape future public-private competitions?

•

Do problems uncovered during the WRAMC competition reveal problems

inherent in the Circular A-76 policy itself?

•

Are there fresh approaches, new options, or alternatives that Congress may want

to consider as it evaluates the efficacy of the A-76 policy?

Presentation, Directorate of Information Management, Competitive Sourcing In-Process Review, July 13, 2006.

Opening Statement, The Honorable John O. Marsh, Jr., before the Subcommittee on Military Personnel, House

Armed Services Committee, June 26, 2007.

Speech by President George W. Bush. Walter Reed Army Medical Center, Washington DC, March 30, 2007.

http://www.whitehouse.gov/news/releases/2007/03/20070330-6.html

ȱȱȱ

Ŝȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

In many ways, the WRAMC competition was unique and had characteristics unlike other A-76

studies. For example, the competition began under the second term of the Clinton Administration,

ended under the second term of the Bush Administration, took over six years to complete, and

was one of the longest DOD A-76 studies ever conducted.24 Three WRAMC base commanders

(dual-hatted as hospital commanders) presided over Walter Reed during the course of the

competition.25 The OMB Circular A-76 published before 2003 governed the conduct of the

competition.26 The United States entered combat operations in Iraq in 2003. After 2003 a

significantly higher number of injured troops were treated at WRAMC, a military base with aging

and reportedly substandard facilities.

Another contributing factor may have been the announcement of the base realignment. During the

course of the competition, the 2005 Defense Base Realignment and Closure (BRAC) Commission

voted unanimously to realign Walter Reed, agreeing with DOD that the facility be combined with

the Naval Medical Center (NNMC) in Bethesda, Maryland. DOD planned to combine personnel

and services of the two hospitals into a new facility called the Walter Reed National Military

Medical Center (WRNMMC), a joint medical center that will provide care to members of all

military services. The effect of this realignment action would be the closing of what is known as

the Walter Reed campus.27

At least one other competition has taken longer. Two studies were conducted at Keesler Air Force Base A-76 in

Biloxi, MS. The first competition, known as “Big BOS,” began in 1999 and affects about 330 civilian and 400 military

employees in base operating support functions (including civil engineering, supply, supply and mission support).

Keesler announced its tentative decision on August 18, 2005, to award DynCorp a 10-year contract at a cost of $280

million. When Hurricane Katrina struck on August 29, 2005, the competition was placed on hold. Since then, the Air

Force conducted a damage assessment and review, the outcome of which was to proceed forward. AFGE is appealing

the decision. A second competition, referred to as “Little BOS,” was conducted for 175 civilian and military employees

in the communications area, and was awarded to the MEO. The private sector contractor is appealing the award

decision. For further information, see the Keesler AFB Home page, at http://www.keesler.af.mil; Press Release,

Keesler A-76 Public Review Begins March 1, Keesler News, February 26, 2007; and Griggs, Susan. “Union, Contractor

File A-76 Appeals.” Keesler News, April 18, 2007; and “A-76 Picks Up Where It Left Off Before Katrina,” Keesler

News, Vol. 67, No. 8, March 1, 2007, p. 1.

Some observers have suggested that the nature of the command structure may have made accountability and

management of the process difficult. In the case of Walter Reed, jurisdiction at the command level for medical

functions is under the U.S. Army Medical Command (MEDCOM), and jurisdiction at the command level for base

operations support functions is under the U.S. Army Installation Management Command (IMCOM). MEDCOM is

commanded by a lieutenant general who is dual-hatted as the Army’s Surgeon General. The headquarters of MEDCOM

is located at Fort Sam Houston, San Antonio, Texas. MEDCOM includes the North Atlantic Regional Medical

Command as well as five other regional medical commands—Europe, Great Plains, Pacific, Southeast, and Western.

The headquarters of the North Atlantic Regional Medical Command is located at WRAMC.

IMCOM is commanded by a lieutenant general who is dual-hatted as the Army’s Assistant Chief of Staff for

Installation Management. Army Installations Management Command (IMCOM) is headquartered in Ft. Monroe,

Virginia.

The new circular established new deadlines for the completion of A-76 studies - 12 months for standard

competitions, and 90 days for streamlined competitions. Under this competition, DOD was limited by law to a 30month time frame. The new Circular also required agencies to appoint competitive sourcing officials, such as the

Human Resource Advisor (HRA), Agency Tender Official (ATO), Performance Work Statement (PWS) Team Leader;

Source Selection Authority (SSA); Contracting Officer (CO), and Competitive Sourcing Official (CSO).

Part of that recommendation is the realignment of WRAMC, which entails the transfer of many functions from

organizations currently located on its Georgia Avenue main post in the District of Columbia and Forest Glen annex in

suburban Maryland to other defense installations.

ȱȱȱ

ŝȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Perhaps another factor was the competition outcome. First, the Army ruled that the federal

employees (known as the Most Efficient Organization, or MEO) had won the competition in a

contest between the MEO and IAP Worldwide Services, a private sector contractor.28 Then

protests were filed with GAO, while appeals were filed with the Army Audit Agency (AAA).

Finally, the Army reversed its earlier decision and announced that IAP would be awarded the

$120 million, five-year contract.

DOD announced the IAP contract award on November 9, 2006.29 According to press reports, IAP,

based in Cape Canaveral, had delivered ice to the Gulf Coast after Hurricane Katrina30 and helped

to maintain Afghanistan’s air traffic control system. In 2006, reportedly the firm had $393 million

in military contracts. IAP had worked at Walter Reed since 2003, providing housekeepers,

computer analysts, and clerks under a Department of the Treasury contract.31

¢ȱȱȱȱȱȬŝŜȱȱ

In June 2000, the Army announced the competition for base operations support positions,

including positions in information technology, clerical support, hospital services, and

maintenance. In September 2000, the Army awarded a contract to Grant Thornton LLP, a private

contractor, to assist the federal employees in developing a bid proposal.32 In August 2001, the

Army provided Grant Thornton with the Performance Work Statement (PWS).33 In March 2003,

the United States entered combat operations in Iraq.

Between May and June 2003, the Army issued requests for bids from private sector contractors,

and selected Johnson Controls World Services as the contractor to compete against the federal

employees. During May 2003, OMB revised the A-76 Circular. Johnson Controls and the federal

employees submitted proposals. The solicitation period closed in September 2003. During

According to the website, IAP’s activities include support for ongoing DOD activities, disaster relief, base operations

and maintenance services, and temporary staffing services for government agencies. See http://www.iapws.com.

IAP World Services, Cape Canaveral, Fla., was awarded on November 7, 2006, a $25,800,095 cost-plus-award-fee

contract for Base Operations Support at Walter Reed Army Medical Center. Work will be performed in Washington,

D.C., and is expected to be completed by November 3, 2011. The U.S. Army Medical Command, Fort Sam Houston,

Texas, is the contracting activity (Contract Number W81K04-07-C-0003). (Press Release No. 1141-06, November 9,

2006)

IAP was criticized for their handling of a contract with the Federal Emergency Management Agency (FEMA) for the

purchase of ice during Hurricane Katrina. See Shane, Scott, and Lipton, Eric. Stumbling Storm-Aid Effort Put Tons of

Ice on Trips to Nowhere. New York Times, October 2, 2005.

Vogel, Steve and Merle, Renae. Privatized Walter Reed Workforce Gets Scrutiny. Washington Post, March 20, 2007,

p. A03. According to the article, IAP is owned by Cerberus Capital Management LP, an asset-management firm

chaired by former Treasury secretary John W. Snow. The company is headed by two former high-ranking executives of

KBR, formerly known as Kellogg Brown & Root. Al Neffgen, IAP’s chief executive, was chief operating officer for a

KBR division before joining IAP in 2004. IAP’s president, Dave Swindle, is a former KBR vice president.

Grant Thornton, LLP is based in Chicago, IL, has about 50 U.S. offices, and provides management consulting. See

http://www.grantthornton.com.

The development of the PWS is critical to the A-76 process. The PWS describes the work that is to be performed

under the competition. It is used to compare the MEO’s cost estimates with the contractor’s cost estimates, and includes

all responsibilities and requirements; performance standards, acceptable deviations from the standards, and how the

contract will be monitored. The IRO provides an analysis of the PWS for clarity and completeness. Its analysis will

provide the baseline for all cost estimates. See the A-76 Competitive Sourcing Internet Library and Directory, at

http://www.dla.mil/J-3/a-76/IRPWS.html.

ȱȱȱ

Şȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

October 2003, DOD requested permission from OMB to use the pre-2003 Circular rules. In

November 2003, OMB gave DOD the authority to extend the competition until September 30,

2004, which the DOD Competitive Sourcing Official gave as the projected completion date. By

April 2004, the Army Audit Agency (AAA) independently reviewed and certified the MEO’s bid

proposal. In July 2004, the Army revised the solicitation, amended it for the 16th time (resulting in

about 1,500 changes) and revised the Performance Work Statement. By September 2004, bid

proposals were received from the MEO and the contractor. On September 29, 2004 the Army

announced that the MEO won the contract.

According to media reports, when the Army announced that the government’s in-house group, the

MEO, had won the initial decision in September 2004, the evaluated government MEO proposed

price was $124,479,881. The private sector contractor’s evaluated proposed price was

$132,019,150, meaning that the government MEO won by a difference of $7,539,269.34

The competition was challenged by protests filed with GAO and appeals filed with the AAA.35 In

March 2005, IAP Worldwide Services, Inc. acquired Johnson Controls and became the company

of record. On May 13, 2005, the 2005 BRAC Commission announced its recommendation to

realign Walter Reed.36 During June 2005, the AAA withdrew its certification of the MEO. In June

2005 the Army notified Congress that IAP will be awarded the contract.37 In August 2005, the

AAA announced they could not reconstruct the basis to certify the MEO’s bid proposal, and

would request approval to cancel the A-76 competition. The Army denied their request.

In January 2006, the AAA reversed its earlier decision, and declared IAP the winner. The revised

government MEO evaluated proposal price for the competition was $140,490,286. IAP’s revised

evaluated proposal price was $133,028,548. This result meant that IAP would win the

competition by $7,461,737.38 While in the first award decision, the government MEO’s bid was

$7 million less than that of IAP Worldwide Services, significant changes in the solicitation

resulted in a recalculation of the bids by all parties. As a result, IAP’s bid came in at $7 million

lower than the MEO’s bid.

As a result, IAP was awarded a five-year, costs-plus contract valued at over $120 million.

Immediately, Alan King, acting in what he believed to be his capacity as the Agency Tender

Official (ATO) filed a protest with GAO on behalf of the MEO. Mr. King asked the American

Federation of Government Employees (AFGE)39 to represent the MEO because it lacked both

expertise and money. AFGE agreed to do so, but was unsuccessful. GAO dismissed Mr. King’s

protest.40

Little, Bernard S. A-76 appeal denied, cost comparison to be redone. Stripe, March 24, 2006.

The four bid GAO protests decisions are: (1) Decision No. B-295529, dated January 11, 2005; (2) Decision No. B295529.2 and -.3, dated June 27, 2005; (3) Decision No. B-295529.4, dated August 19, 2005; and Decision No. B295529.6, dated February 21, 2006.

BRAC Commission recommends passage of the plans for the WRANMMC.

The Independent Review Panel reported that the bids were later recalculated, and the private contractor’s bid was

more favorable by the same $7 million amount.

Little, Bernard S. A-76 appeal denied, cost comparison to be redone. Stripe, March 24, 2006.

http://www.afge.org. AFGE is the largest federal employee union representing 600,000 federal and D.C. government

workers nationwide and overseas.

ATOs were not allowed under the pre-2003 A-76 rules, but were included under the revised 2003 Circular. Alan

King, the Deputy Garrison Commander, filed a protest acting in what he argued was his capacity as the Agency Tender

Official (ATO). His protest was denied. See GAO Decision B-295529.6, February 21, 2006.

ȱȱȱ

şȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

From June through August 2006, Congress took up legislation to block the implementation of

IAP’s contract award.41 The transition to IAP, originally projected for November 2006, was

predicated by a series of events that were mandated by law.42 The Army had to give Congress at

least 45 days notice of the pending reduction-in-force (RIF), and give WRAMC employees at

least 60 days notice of a pending RIF. The Army notified Congress and Walter Reed employees

that a reduction-in-force would begin, and authorized IAP to begin work on February 4, 2007. On

February 4, 2007, IAP began work.

ȱ ȱ

The WRAMC competition had several dimensions which made it both complicated and complex.

What made this competition complicated was the length of time for the Army to make a decision;

the number of appeals and protests filed by the government and the private sector contractor; and

efforts made by Congress to resolve the issues. What made the competition complex was the

convergence of several factors which came together to create difficult challenges for the Army.

ȱȱȱȱ ȱ ȱ ȱ

Following the media reports of the deplorable conditions at some WRAMC facilities, Secretary of

Defense Robert Gates commissioned an independent panel, known as the Independent Review

Group (IRG) to examine both the current outpatient rehabilitative care and administrative

processes at both WRAMC and NNMC. The panel was established on March 1, 2007, consisted

of nine members, and co-chaired by two former Secretaries of the Army, Togo D. West, Jr. (19931997), and John O. Marsh, Jr. (1981-1989). The panel submitted its report to Secretary Gates on

April 11, 2007.43

ȱȱȱȱ

The panel concluded that the BRAC decision to create the new WRNMMC contributed to

personnel staffing problems, a lack of WRAMC management’s attention to day-to-day base

operations, and a lack of resources for capital improvements to base facilities. The Panel found

that the BRAC action created additional pressures for WRAMC management and complicated

management’s ability to manage outpatient services, including factors such as “military to civilian

conversions, retention and recruitment of quality staff members; facilities maintenance and staff

attitude.”44 The Panel considered the role of A-76 in base operations, and concluded that “... the

A-76 process created a destabilizing effect on the ability to hire and retain qualified staff

The FY2007 DOD Appropriations Act (P.L. 109-289) was signed into law without any language to prohibit funding

of the IAP contract.

10 U.S.C. 1597(e) states: Involuntary Reductions of Civilian Positions. - The Secretary of Defense may not

implement any involuntary reduction or furlough of civilian positions in a military department, Defense Agency, or

other component of the Department of Defense until the expiration of the 45-day period beginning on the date on which

the Secretary submits to Congress a report setting forth the reasons why such reductions or furloughs are required and a

description of any change in workload or positions requirements that will result from such reductions or furloughs.

Rebuilding the Trust. Final Report, Independent Review Group Report on Rehabilitative Care and Administrative

Processes at Walter Reed Army Medical Center and National Naval Medical Center. April 2007.

Ibid, p. 37.

ȱȱȱ

ŗŖȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

members to operate garrison functions. The cost savings proved to be counterproductive.”45

Finally, the Panel recommended that the Secretary of Defense provide the secretaries of the

military services the opportunity to apply for regulatory relief from future A-76 studies, for

WRAMC and other military medical treatment facilities only.46

ȱ¢Ȃȱȱ

Decision making over Walter Reed was dispersed over several commands. While some Army

officials wanted to cancel the competition, still others wanted to complete it. The Army is

represented by many different points of view—from WRAMC management, who fought to

represent the employees, and attempted to get the A-76 competition canceled; Army Medical

Command (MEDCOM), which reportedly denied WRAMC management’s request to increase the

numbers of employees; the AAA, which served as the Independent Review Official (IRO) to

certify the MEO; and Army attorneys who represented the Army before GAO.

In their testimony before the Congress, senior Army officials had different reactions to the

competition.47 They include (1) Lieutenant General Kevin Kiley, formerly the Army’s Surgeon

General, and the former head of MEDCOM and WRAMC Commander from 2002-2004;

reportedly, he was relieved of command largely due to the publicity surrounding the conditions at

Walter Reed; and (2) Major General George Weightman, the WRAMC Base Commander from

August 2006 until relieved of command in March 2007. In addition, General Weightman headed

the North Atlantic Regional Medical Command.48

Colonel Peter Garibaldi, WRAMC Garrison Commander, was primarily responsible for managing

base operation support activities, including the A-76 competition.49 Efforts by Colonel Garabaldi

to solicit MEDCOM’s help in resolving the A-76 issues were made public. In September 2006

Colonel Garabaldi wrote a three-page memorandum, through Major General Weightman, to

Colonel Daryl Spencer, MEDCOM Assistant Chief of Staff for Resource Management, and

requested approval and funding to fix the problems at Walter Reed. In this memorandum, Colonel

Garabaldi stated:

Since the Army initiated the A-76 competition in 2000, the current workload in the hospital

and garrison missions has grown significantly in the past six years due to our need to care for

an support Wounded Warriors from Operating Enduring Freedom, Operation Iraqi Freedom,

Ibid, p. 70.

Ibid, p. 71.

Milbank, Dana. Two Generals Provide a Contrast in Accountability. Washington Post, March 6, 2007, p. A01.

Kennedy, Kelly. Walter Reed Chief Fired: Critics Say More Must Go. Air Force Times, March 2, 2007. Major

General Kenneth Farmer was the WRAMC Base Commander from 2004-2006.

From CRS Report RL34055, Walter Reed Army Medical Center: Realignment Under BRAC 2005 and Options for

Congress: “Each garrison was commanded by an officer assigned to the position, usually a colonel, who was

accountable for maintenance, construction, servicing, etc., on the site or sites constituting the installation. Funding for

the operation of each post was then no longer funneled through the operational chains of command, but rather through

the IMA and its regions to the individual garrisons. Garrison commanders, since the creation of the IMA and its

transition into IMCOM, have supervised the installation of contract guard forces at posts on United States territory,

military construction and building demolition, provision of supplies and services, privatization of installation utilities

and military housing, and the creation of public-private partnerships, such as the two enhanced use lease projects at the

Walter Reed installation.” Else, Daniel and O’Bryant, Joanne. Walter Reed Army Medical Center: BRAC 2005 and

Options for Congress, p. 14.

ȱȱȱ

ŗŗȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

and other outcomes of the Global War on Terrorism (GWOT). As a result, the Army

performed the competition with dated workload data and expectations created before the

GWOT began in 2001. Now in 2006, we need more personnel than the competition had

anticipated.... As a direct result of the A-76 competition, its associated proposed RIF

(reduction-in-force), and eventual Base Realignment and Closure (BRAC) of WRAMC’s

Main Post, we face the critical issues of retaining skilled clinical personnel for the hospital

and diverse professionals for the Garrison, while confronted with increased difficulties in

hiring.... Due to the uncertainty associated with this issue, WRAMC continues to lose other

highly qualified personnel.

WRAMC established its garrison command in 2002 when the Army established the

Installation Management Agency (IMA). Consequently the A-76 competition data in 2000

did not include other areas of the garrison command necessary to run a full service BASOPS

(base operations support) organization. These include the Directorate Of Logistics (DOL)

and Plans Analysis and Integration Office (PAIO); therefore, the final contractor submission

did not include positions for them. Furthermore, MEDCOM did not approve any full-time

equivalents for the Garrison DOL or PAIO functions anywhere in the Continuing Garrison

Organization (CGO). Without favorable consideration of these requests, WRAMC Base

Operations and patient care services are at risk of mission failure.50

Colonel Garabaldi’s memorandum illustrated the challenges he faced in trying to manage the dayto-day operations at Walter Reed, while at the same time managing both the numerous

responsibilities created by the BRAC decision and the surge in outpatient medical care

treatments.

ȱȱȱ¡ȱȱ

This competition took longer than most A-76 studies. The competition was announced during the

second term of the Clinton Administration, and was concluded in the second term of the Bush

Administration. While OMB reported that the average time frame for a standard public-private

competition under Circular A-76 completed in FY2006 was just over 13 months, the WRAMC

competition took over six years to complete.51 Senator Barbara A. Mikulski along with several of

her Senate and House colleagues wrote a letter to then-Secretary of the Army Francis Harvey,

requesting that the contract be cancelled, and arguing that the length of the competition violated

DOD policy and public law.

The undersigned lawmakers urge you not to enter into a contract for base operations support

services at the Walter Reed Army Medical Center (WRAMC). A September 29, 2004,

decision in favor of the in-house workforce was subsequently reversed earlier this year,

resulting in a tentative decision to contract out the jobs of 350 federal employees in favor of

a $120 million contract. The highly unusual circumstances surrounding this particular OMB

Circular A-76 privatization review, particularly the apparent violation of the Anti-Deficiency

Act, demand sustained Congressional scrutiny and if necessary decisive Congressional

intervention.

Subject: Challenges Concerning the Base Operations A-76 Competition and Resulting Reduction In Force (RIF) at

Walter Reed Army Medical Center (WRAMC). Memorandum thru MG George W. Weightman, Commander, NARMC

and WRAMC, for Colonel Daryl Spencer, Assistant Chief of Staff for Resource Management, MEDCOM, by Peter M.

Garibaldi, Colonel, MS, Garrison Commander. The memorandum can be accessed from the House Committee on

Oversight and Government Reform website, at http://oversight.house.gov.

OMB Competitive Sourcing update, May 2007. OMB reported that the FY2006 results were significantly better than

results achieved under the pre-2003 Circular, where competitions took from two to three years to complete.

ȱȱȱ

ŗŘȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

The WRAMC OMB Circular A-76 privatization review was started on June 13, 2000, under

the previous Administration. The Department of Defense (DoD) received a waiver, special

permission, from the Office of Management and Budget (OMB) to continue the WRAMC A76 review under the rules of the Circular prior to its revision on May 29, 2003. However,

OMB set certain conditions on how the WRAMC A-76 was to be conducted. OMB

“expect(ed) DoD to make final decisions for these cost comparisons (including the WRAMC

privatization review) no later than September 30, 2004, the completion date projected by the

DoD Competitive Sourcing Official in his October 24, 2003, letter to OMB.... The DoD

Competitive Sourcing Official is responsible for ensuring use of the previous Circular is

limited to timely completion or cancellation of any initiative....” However, the Army

continued the WRAMC A-76 privatization review past September 30, 2004. Under the

current Circular, DoD could not unilaterally change the terms of the waiver from OMB.

While it could have asked OMB for an extension, it appears that DoD never submitted such a

request. The WRAMC privatization review should have been cancelled when the deadline in

the waiver had expired but the Army had failed to complete the WRAMC privatization

review in a “timely” fashion.

The excessive length of the WRAMC privatization review appears to be in violation of both

DoD’s own rules, which limit A-76 privatization reviews for multi-function activities to 48

months, and, more importantly, the Defense Appropriations Bill, which limits A-76 studies

for multi-function activities to 30 months. As you might imagine, the Congress takes very

seriously any violations of the Anti-Deficiency Act. The apparent failures of the Army to

abide by the terms of the OMB waiver, its own rules, and the law, in conducting the

WRAMC privatization review long past the established deadlines, are not mere

technicalities. Deadlines for the completion of A-76 privatization reviews are established for

a very good reason: such exercises generate significant costs and can undermine

productivity. The longer A-76 privatization reviews continue, the higher their costs; and the

higher their costs, the less likely that those A-76 privatization reviews will generate any

actual savings.

We appreciate that the Army understands very well the highly unusual circumstances

surrounding the WRAMC A-76 privatization review as well as the strong arguments for its

cancellation. After all, after the sixteenth solicitation to the solicitation was issued, one

which included more than 1,500 changes, many of them involving significant increases in

workload, the in-house bid was decertified. That’s why the Army’s Assistant Secretary for

Installations and Environment reported in an August 8, 2005, letter to the contractor that the

“Army will request approval to cancel the (WRAMC privatization) study.” Given its

troubled history, that was clearly the correct course of action.

Again, the undersigned lawmakers urge you not to enter into a contract for base operations

support services at WRAMC.52

Senator Mikulski’s letter asserts that at least three apparent violations occurred because of the

excessive length of time of the competition: apparent violations of (1) DOD’s own rules which

limit A-76 competitions for multi-function activities to 48 months53, (2) the DOD Appropriations

Mikulski Stands up for Federal Employees at Walter Reed Army Medical Center. Letter to Secretary of the Army

Francis Harvey, March 16, 2006. Accessed online at http://mikulski.senate.gov/record.cfm?id=252840.

Each year, Defense Appropriation bills have contained language which prohibits the use of funds to conduct studies

outside of a specific time limit. From FY2000-FY2003, DOD appropriation bills prohibited the conduct of A-76

competitions beyond 48 months. In October 2003, Section 8022 of the FY2004 Defense Appropriations Act (P.L. 10887) prohibited the conduct of A-76 competitions beyond 30 months. OMB gave DOD a waiver to complete the Walter

Reed competition by 9/30/04 (this is the completion date projected by the DOD Competitive Sourcing Official).

Section 8022 of the FY2005 Defense Appropriations Act (P.L. 108-287) included a 30-month limitation for the conduct

(continued...)

ȱȱȱ

ŗřȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Act which limits A-76 competitions for multi-function activities to 30 months, and (3) the

Antideficiency Act.54

ȱȱȱȱȱȱȱ

The six-year delay was, in part, due to a number of factors, including congressional intervention

to seek a legislative compromise to either prohibit the appropriation of funds for the competition either to reverse the decision to award the contract to the private sector, or to stop the

implementation of the BRAC decision. Other observers of the competition point to the Army’s

decision to continue the competition even though the agreed-upon time limits were not kept. Still

others point to the fact that the Army added over 1,500 amendments (or changes) were made to

the solicitation—amendments which were later added, according to GAO, to accommodate the

surge in maintenance and upkeep activities needed at WRAMC after the start of combat

operations—as the reason why the competition took longer than expected.

ȱȱȱȱȱȱȱ

The most immediate impact of an announcement of a pending A-76 competition is often that

skilled personnel are the first to quit, while new employees are usually sought to replace those

leaving. However, some potential new employees have been reluctant to accept jobs that are in

the midst of transition. Even employees who may be part of the proposed MEO may start to look

for other jobs. Public-private competitions that take an inordinate amount of time to complete

may also raise the anxiety level among existing employees, and create uncertainty. Such

uncertainty can adversely affect recruitment. In a September 2006 memo, Colonel Garabaldi

admitted that he had difficulty in retaining and hiring skilled personnel.

To complicate matters, not only was the competition underway, but the BRAC action would

eventually close the main campus. When a military facility is facing a BRAC action, large

financial commitments are usually withheld for infrastructure improvements. Such was the case

at Walter Reed. Major General George W. Weightman, WRAMC’s Commander, testified before

Congress that the privatization of base support services, in combination with the decision by the

Pentagon to close WRAMC, contributed to the problems at the base. At the same hearing, Navy

Surgeon General Vice Admiral Donald Arthur also testified as to his experience with A-76

competitions. While he was not involved in the Walter Reed competition, his comments reveal

that the exodus of staff is not confined to the Army. He stated:

We have not had similar incidents of A-76 studies on as grand a scale as Walter Reed has.

But I would tell you in general, whenever you promulgate an A-76 competition, the very best

people that we have start looking for other jobs and we end up with a dearth of people in the

billets that are currently filled. And very often I think it comes out that a government

worker—someone on the general schedule or one of our contractors—is at least as costeffective as a privatization would be.”55

(...continued)

of multi-function A-76 competitions. However, the Walter Reed A-76 competition continued in apparent violation of

public law and the Antideficiency Act.

Title 31, United States Code (31 U.S.C. 31 U.S.C. § 1341(a)(1)(B). The Antideficiency Act prohibits government

spending in excess of available funds.

U.S. Congress. Health and the Military. Hearing of the Defense Subcommittee of the Senate Appropriations

(continued...)

ȱȱȱ

ŗŚȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Generals Kiley and Weightman stated that the combination of factors helped to destabilize the

WRAMC workforce. In their testimony before Congress, they spoke of the effect of the

competition’s length on employee morale. The longer the competition took, the more difficult it

was to manage. Here is an excerpt from a March 6, 2007 hearing where General Weightman

responded to questions posed by Delegate Eleanor Holmes Norton.

Delegate Norton: Could I ask you whether you believe that it would have been better not to

privatize the entire garrison workforce when the facility was already undergoing pressures

from BRAC and faced with those uncertainties—when you surely would have known that it

would scattered that workforce, that experienced workforce, and that your own workers had

won the competition for, in fact, keeping this facility up, including Building 18. Would it not

have been better, in light of all the uncertainty, simply to go with the workforce you had?

Why did you seek to privatize the workforce in light of the BRAC uncertainty and add to

that with the uncertainty that always attends privatization?

General Kiley: First, ma’am, I would like to say that the request—Colonel Garibaldi through

General Weightman—I approved those at MEDCOM and we resourced those requirements

from him. He was unable to execute them, which was the issue. I gave him the money he

needed, but you’ve already articulated the challenge.

General Kiley: You’ve identified the issue: When you’re not going to have a job much

longer, why should you hire one?

Delegate Norton: Therefore, why should you privatize it? It started on your watch, General

Kiley.

General Kiley: Actually, it started, as I understand it, in 2000, when it was identified as one

of the privatization efforts under A-76. And once that installation was identified to the Army

as a process....

Delegate Norton: Just let me—I’d trying to get an answer because I know they want to move

on. Would it have been the better side of wisdom not to privatize everything here except the

clinical and medical workforce, and therefore add to the stability or the instability that

inevitably comes with BRAC?

General Kiley: It did increase the instability.

NORTON: Thank you, sir.

General Weightman?

General Weightman: Absolutely. Between BRAC and A-76 it was two huge impacts on our

civilian workforce, which is two-thirds of our workforce here at Walter Reed.

NORTON: Thank you, Mr. Chairman.56

(...continued)

Committee, March 7, 2007.

Hearing before the House Committee on Oversight and Government Reform, Subcommittee on National Security

and Foreign Affairs, March 5, 2007.

ȱȱȱ

ŗśȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

ȱȱ ȱȱ ȱȱȱȱ

Here is a summary of the evaluated costs for both the government MEO and IAP Worldwide

Service in the WRAMC competition.57

Competitor

IAP

Government MEO

Difference

September 2004

January 2006

$132,019,150

$124,479,881

$7,539,269

$133,028,548

$140,490,286

($7,461,737)

It should be noted that according to this data the costs for the MEO were significantly increased

from September 2004 to January 2006, while the cost for the contractor did not significantly

increase. Later the Army responded to then-Senator Sarbanes’s request for cost information on the

WRAMC competition. The following excerpts are from a memorandum reportedly written by Mr.

William A. Armbruster, Deputy Assistant Secretary of the Army for Privatization and

Partnerships.

On May 11th, I provided an interim reply to your April 27, 2006 letter requesting cost

information regarding the Walter Reed Army Medical Center base operations support

services competition under OMB Circular A-76. The U.S. Army Medical Command

(MEDCOM) has carried the greatest cost of all the associated organizations in bringing this

unprecendented competition to a conclusion. The numerous protests and contests that caused

a two-year delay in reaching the decision state have greatly increased the cost of this

competition. The MEDCOM costs, as well as other involved organizations, are listed below:

MEDCOM

Personnel

Travel

Supplies

Contracts

Army Audit Agency

Army Contracting Agency

HDQA, including Legal/Litigation

Total Compensation Costs

$6,816,213

($3,569,374)

(247,110)

(34,565)

(2,965,164)

208,056

2,071

41,709

$7,068,049

The transition costs below are an estimate based on employee interviews during which 109

employees indicated they were “interested” in accepting the Voluntary Early Retirement

Authority (VERA) or the Voluntary Separation Incentive Pay (VSIP). If any of these

employees decide to accept a new, permanent job offer in lieu of returning or separating,

these costs, and separation pay costs, would be reduced.

Source: A-76 Town Hall Meeting, information presented by John W. Wettereau, Chief, A-76 Operations Center,

March 2, 2006 (provided by officials from the American Federation of Government Employees).

ȱȱȱ

ŗŜȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Transition Costs

VERA/VSIP

Severance pay

Civilian Personnel Administration

MEDCOM Administration

$5,716,891

($3,741,186)

(537,747)

(600,000)

(837,958)

The annual savings over the baseline costs will be about $4.5 million. The contractor’s cost

proposal for the five-year term was almost $17.5 million less than the government

workforce’s cost proposal. Even with the extraordinary expenses of this competition, the

resultant savings are significant.58

One observer of the A-76 process, John Threlkeld, an AFGE lobbyist, wrote in an analysis of the

WRAMC competition that the Army’s cost estimate is “demonstrably flawed.” Mr. Threlkeld

stated that the Army’s analysis fails to take into account the $10 million “minimum cost

differential” that federal rules require must be applied to contractor bids to account for costs

associated with disruption and loss of productivity related to the competition process.59

Threlkeld has stated that because the congressional waiver of the 30-month limit expired at the

end of FY2004, in FY2005 and FY2006 the Army was in violation of the Anti-Deficiency Act that when the A-76 competition extended beyond the deadline, DOD was spending money in

excess of the amount of money in the appropriation, which is a violation of the Antideficiency

Act. He also noted that at one point during the 16-month period between the initial decision in

favor of the MEO and its subsequent reversal in favor of an award to IAP, the Army asked DOD

if it could cancel the competition and DOD instructed the Army to finish the competition.

ȱȱȱȱȱ

What are some of the broader implications of the WRAMC competition on the future of

competitive sourcing studies under OMB Circular A-76? Are the decisions made during the

course of the WRAMC competition likely to shape future public-private competitions? Possibly

due to the Walter Reed controversy, the Army has announced its plan to cancel all future

outsourcing contracts at military medical facilities for 2007 and 2008. According to the Army

Medical Command’s Chief of Staff, William Thresher, “In light of the increased requirement for

health care assets to support the global war on terrorism, Headquarters Department of the Army

has accorded us a reprieve from participating in future A-76 efforts.”60 Future competitions were

planned for various Army facilities, including Fort Detrick (Maryland) and WRAMC, and the

range of activities would have included base operations support, pharmacy, radiology, pathology

and ambulance services.

Memorandum to the Honorable Paul S. Sarbanes from William A. Armbruster, Deputy Assistant Secretary of the

Army, Privatization & Partnerships. June 7, 2007. Also, see Mandel, Jenny. “House votes to block Walter Reed

outsourcing; Army moves forward.” Government Executive, June 23, 2006.

Mandel, Jenny. “House votes to block Walter Reed outsourcing; Army moves forward.” Government Executive, June

23, 2006.

Castelli, Elise. “Army cancels job competitions at medical facilities.” Army Times Publishing Company, April 23,

2007, pg. 5.

ȱȱȱ

ŗŝȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Is it fair to draw firm conclusions about the entire A-76 process based on the Walter Reed

competition? Do problems uncovered during the WRAMC competition reveal problems inherent

in the Circular A-76 policy itself? Is A-76 inherently flawed, or is the Walter Reed situation an

anomaly? While it may be unfair to generalize about all A-76 studies based on Walter Reed, it

appears that the Walter Reed competition was poorly executed. Such are the observations of

former Secretary of the Army Togo West. Mr. West served as the Co-chairman of the Independent

Review Group and former Secretary of the Army, Army lawyer, and Secretary of the Department

of Veterans Affairs. In May 2007, he spoke of the group’s study of the Walter Reed controversy.

JIM LEHRER: What went wrong over there at Walter Reed, Mr. Secretary? How were things

allowed to happen that did happen?

TOGO WEST: One of the things is that deficiencies in maintenance had been accumulating

over time at Walter Reed. Now, when a system, a medical center, is doing as well as that

distinguished facility was in peacetime, and without the stress of a war-time engagement,

you can miss some of that. But once you get the numbers that were forced into Walter

Reed—Jack Marsh mentioned 640; at the height, there were some 800 in the medical hold

among outpatients—then the cracks begin to show, the difficulties begin to come clear. For

example, if you go to that number of outpatients in the whole facility, and the case worker

staff stays at the same or even drops, well, then, cases are going to be unattended to, in terms

of getting servicemembers to appointments and the like.

JIM LEHRER: And why was the number of caseworkers not increased?

TOGO WEST: Walter Reed had been placed on the black list. It had been through A-76.

JIM LEHRER: What is that?

TOGO WEST: The A-76 procedure is a procedure by which a facility evaluates whether it

should take governmental assignments and convert them into private contractor assignments.

It almost freezes any hiring until that process is completed. It was a long process. Once it

was done, Walter Reed was down by as much as 37 percent among its most important

caseworker, nursing, and the like functions.

JIM LEHRER: In other words, the number of people available to do the work was going

down while the number of patients was increasing, both of them dramatically, right?

TOGO WEST: That’s right. That’s exactly right.61

Certain conclusions may be drawn from this competition. First, six years in the life of an A-76

competition is a long time, and the competition is not conducted in a vacuum. A lot can happen to

change the course of events. Given the complexity of issues and the convergence of events, the

decision to continue with the Walter Reed competition may have been unwise. The events show

how difficult it is to conduct competitions when there are numerous competing interests and

priorities. Neither BRAC nor the effect of combat operations were anticipated when the decision

was made to conduct the Walter Reed A-76 competition. Either or both events could have been

used as rationales for delaying or even cancelling the A-76 competitions.

Holman, Kwame and Lehrer, Jim. Pentagon Forms Committee to Oversee Walter Reed Repairs. Transcript, The

Online News Hour.

ȱȱȱ

ŗŞȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Second, federal agencies may be under increasing pressure to meet the numerical quotas of the

Bush Administration’s Presidential Management Agenda (PMA). According to the Army, the

Department was reportedly required to review approximately 77,873 positions for competitive

sourcing by the end of FY2009.62 How much of the decision not to cancel the competition was

driven by the Army’s desire to meet the PMA goals is unknown. One of the challenges facing

federal agencies is how to conduct competitions when there are constrained resources. Given the

constrained resources presented by combat operations and BRAC actions, the Army might have

made the decision to cancel the competition but still fallen short of the numerical quotas.

Third, it appears that if the A-76 policy is going to work effectively, it cannot be the used for

every federal activity. Some have suggested that the Army’s constrained resources was the reason

why repairs were not made to the reportedly substandard facilities at WRAMC.63 Perhaps for

some activities A-76 competitions are not appropriate, particularly for activities that affect

military health care (including base operations support, maintenance, and repair). Some would

argue that trash removal is not an inherently governmental activity; but for a medical setting,

regular maintenance and repair of health care facilities may be critical to the morale of the

patient. A case could be made that any activity that touches the military patient should be

considered inherently governmental, including, for example, trash removal on a military health

care facility.64 When the mission (like patient care) is critical, the risks of mission failure are high.

In this view, base operations support activities should be exempt from competition.

ȱȱȱ

While Congress is not compelled to pursue any action at all, there may be legislative initiatives

that Congress may want to pursue in the area of A-76 competitive sourcing policy. Are there fresh

approaches or alternatives that Congress may want to consider as it evaluates the efficacy of the

A-76 policy? Among them, Congress could require more specific reporting on the status of

ongoing A-76 competitions; prohibit numerical quotas and the conduct of competitions for

activities at military medical facilities; prohibit competitions at military medical facilities;

prohibit the inclusion of health care and retirement costs in competitions; change the rules,

enforce the law, provide parity for contractors and federal employees, and consider alternatives

like the development of “high-performing organizations.” Finally, if there are still outstanding

competitions under the pre-2003 Circular, Congress could cancel them.

ȱȱȱȱȱȱȱȱȬŝŜȱ

Congress may direct DOD to provide more detailed information on the status of ongoing A-76

studies. Congress may want to receive a quarterly update on the status of DOD competitions, to

include the following information:

Competitive Sourcing In-Process Review for the Department of the Army. Directorate of Information Management,

July 13, 2006. This data is based on a report provided by the American Federal of Government Employees (AFGE).

Lupold, Gordon. “How Decay Overtook Walter Reed.” Christian Science Monitor, March 7, 2007.

Inherently governmental activities are functions that are considered so integral to the agency’s mission that the

activity can only be performed by federal employees.

ȱȱȱ

ŗşȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

•

the number of older competitions under review, and whether these competitions

have been granted waivers;

•

the status of new standard multi-function A-76 studies, including how many

competitions are in excess of the 12-months limitation, and how many have been

granted waivers;

•

the number of competitions that are in excess of 18 months, with or without

waivers;

•

the number of competitions in excess of 30-months, with or without waivers; and

•

the demographics of the affected government employees in A-76 competitions,

and whether any particular group of employees are adversely impacted by the A76 policy, competition process or the final outcome.

ȱȱȱȱȱȱȱȬŝŜȱȱ

Congress could prohibit the establishment of numerical quotas for federal agencies. Some have

argued that the desire to meet numerical quotas (or targets) may have been a factor in the Army’s

decision to continue the competition despite the problems evolving during the competition.65

ȱȱȱȱ¢ȱȱȱȱȱ

¢ȱ ȱ

Congress could declare that any activities on military medical facilities that affect patient care

would be considered inherently governmental and not appropriate for competition. One way to

accomplish this would be to declare all activities at military medical facilities as “inherently

governmental” and not subject to competition. The case can be made that the activities at military

medical facilities at WRAMC are too critical to national security that they require performance by

federal employees.

As an example, one possible option Congress may want to consider is to declare a one-year

moratorium on the conduct of future A-76 competitions at military medical facilities. This

legislative initiative was proposed by Representative Solomon Ortiz in the House-passed version

of H.R. 1538, the Wounded Warrior Assistance Act of 2007. Here Representative Ortiz describes

the intent of the bill.

The amendment as adopted today would impose a one-year moratorium on all future A-76

competitions at the Department of Defense for work performed at medical facilities. Both the

private and public sectors have identified flaws in the program. And the problems we

discovered at Walter Reed Army Medical Center are only the tip of the iceberg. In a

September 2006 memo, the garrison commander admitted that he had difficulties in retaining

and hiring skilled personnel. This was because of the A-76 competition, the proposed RIFS

that went with it and BRAC. That is why we need to step back and review whether A-76

competitions are the right way to find cost savings and efficiencies for military medical

facilities. And we need to make sure that we have not sacrificed service or performance of

the mission. Let me make clear. This amendment addresses only future contracts for services

See proposed Section 323 of H.R. 4986.

ȱȱȱ

ŘŖȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

performed at medical facilities. It does not overturn the Walter Reed contract. It would be

irresponsible to do that. The federal workforce has gone to other federal jobs or hired by the

private contractor, who is now on the job and performing.

The amendment as approved also calls for a report that will help us determine the value of

the A-76 process.66

ȱȱ ȱȱ ȱȱȱȱȱȱ

ȱȬŝŜȱȱȱȱ

Congress could prohibit the inclusion of health care and retirement costs in the cost comparison

process. Reportedly, the Army failed to comply with the requirement in the Defense

Appropriations bill to exclude health care costs from the A-76 cost comparison process if DOD

contributed more (per employee for health care insurance) than the contractor contributed (per

employee for health care insurance). The exclusion of retirement costs might preclude the

rewarding of contractors for providing benefits that are less than those provided by the federal

government.67

ȱȱȱȱȱȱȱȱȱ

ȱȱ¢ȱȱȱ

It would appear that based on the Walter Reed Competition no one individual has overall

authority for the conduct of the competition. What happens when a competition becomes complex

or complicated, as in the situation at Walter Reed? While the Army (represented by many

different officials) and the Office of the Secretary of Defense have shared authorities and

responsibilities for A-76, these officials share what may appear to be somewhat conflicting and

confusing roles—to both advocate for the integrity of the A-76 process while at the same time

exercising their institutional roles. The Deputy Garrison Commander, as an example, attempted to

appeal the outcome of the competition. He lacked the legal standing to do so, and he also lacked

the authority and financial resources to pursue the matter.

One option could be for OMB to establish a team of experienced A-76 professionals who could

be called upon to serve as ATOs. These professionals could be selected to serve as ATOs in

competitions outside of their assigned federal agency. Also, ATOs would require sufficient funds

to represent the federal employees throughout the entire course of the A-76 competition, and may

also require a certain independence.

ȱȱȱȱȱȬŝŜȱȱ

Congress could ensure that the A-76 rules are followed. When the rules governing the conduct of

A-76 studies are not followed, there is no authority to ensure that the rules are followed, and the

process as well as the final decision may lack integrity. There appears to be no authority to ensure

that the rules are followed; as a result, many parties lose confidence in the A-76 process. Some

H.Rept. 110-68, Part 1, p. 39, which accompanies the Wounded Warrior Assistance Act of 2007.

See proposed Section 322 under H.R. 4986.

ȱȱȱ

Řŗȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

have suggested that OMB could have stopped the Walter Reed A-76 competition when it

exceeded the permitted length of time. Others have pointed out that DoD could have stopped the

A-76 competition when it exceeded the length of time as prescribed by law in the Defense

Appropriations Act. Also, some have pointed out that the Army could have excluded health care

costs from the contracting out cost comparison process, as required by the Defense

Appropriations Act. An enforcement of the rules of the Walter Reed A-76 competition may have

resulted in a different outcome.

ȱȱ¢ȱȱȱȱȱȱȱ

The right to protest is an essential element of the outcome of the Walter Reed competition. The

right to file a protest is provided in the Competition in Contracting Act.68 It should be noted that

at the time of the Walter Reed competition, the Competition in Contracting Act provided private

sector contractors the right to file protests with GAO, while federal employees were prohibited

from exercising any protest rights.69 However, P.L. 108-375 expanded the definition of who is an

“interested party” and included the Agency Tender Official (ATO).70 Federal employees also

wanted to protest directly, but were prohibited from doing so. The ATO, the federal employee

representative, tried to file a protest but GAO determined that no ATO existed (in the pre-2003

Circular) and so the ATO lacked standing. This sequence of events suggests that A-76 has not

always afforded both equity and fairness.

The issue of a lack of the right of federal employees to directly protest the outcome of the

competition is central to the outcome of this competition. GAO heard the protest filed by IAP, the

contractor; which IAP had the statutory right to file. Without this protest, the MEO would

presumably have won the competition. On the face of it, the inability to directly protest their case

put the affected federal employees at a disadvantage.

The Walter Reed competition showed that WRAMC management wanted to advocate on behalf

of its employees, but was prohibited from doing so. More importantly, WRAMC management

reported that they were unable to advocate on behalf of the federal employees because (1) they

did not have the in-house expertise to handle the appeal process, and (2) they did not have the

money to pay for outside legal counsel. They took the extraordinary step of contacting AFGE to

handle the federal employee appeal.

Congress could grant legislative authority for federal employees themselves to have direct protest

rights. While the ATO has the right to protest on behalf of federal employees, it is at the discretion

of the ATO. If an ATO decides not to protest on behalf of federal employees, there is no recourse.

Also, Congress could prohibit federal agencies from conducting competitions unless they have

The Competition in Contracting Act of 1984, P.L. 98-369.

Section 326 of H.R. 4200, the Ronald W. Reagan NDAA for Fiscal Year 2005 (P.L. 108-375), amended the

Competition in Contracting Act by providing that federal government officials, known as agency tender officials

(ATOs), may file protests with GAO in connection with A-76 competitions. ATOs may file protests on their own

initiative, or at the request of a majority of employees involved in the competition.

Under the new Circular, the ATO has the authority to file a protest on behalf of federal employees. The Alan D. King

protest decision changed the law. The reason that Alan King could not protest to GAO was because the new provision

had an effective date, and it was not that date yet. See GAO Decision B-295529.6, February 21, 2006.

ȱȱȱ

ŘŘȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

enough money to fund competitions entirely, including representation for the federal employees

during all phases of the competition, up to and including the post-award process.71

ȱȱȱȬŝŜȱ

Congress could also provide encouragement and incentives to federal agencies that seek to

explore appropriate alternatives, like creating high-performing organizations (HPO), to gain the

same (or better) efficiencies that are sought through A-76 competitions. GAO’s Commercial

Activities Panel (CAP) recommended the creation of HPOs.72 Given that federal employees are

now winning the majority of competitions, agencies like the Army might look to alternatives that

don’t have the costs and other challenges associated with A-76.

ȱȬŝŜȱȱȱȱȬŘŖŖřȱȱ

To avoid problems similar to those that resulted at Walter Reed, Congress could direct the

cancellation of any outstanding competitions conducted under the pre-2003 Circular. The

American Federation of Government Employees has recommended that the A-76 study at Keesler

AFB be cancelled. According to one media report, AFGE describes a competition at Kessler Air

Force Base that has taken at least eight years to complete.73

See proposed Section 326 of H.R. 4986.

GAO Report 04-543SP. High Performing Organizations: Metrics, Means and Mechanisms for Achieving High

Performance in the 21st Century Public Management Environment. Highlights of a GAO Forum, February 2004. CAP

recommended that federal agencies be developed into high-performing organizations, known as an HPO.

AFGE Seeks Cancellation of A-76 Plans at Keesler AFB. Federal Daily, May 2, 2007.

ȱȱȱ

Řřȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

¡ǯ ȱ

Excerpts from the Executive Summary, Chapter. Rebuilding the Trust. Final Report, Independent

Review Group Report on Rehabilitative Care and Administrative Processes at Walter Reed Army

Medical Center and National Naval Medical Center. April 2007, pp. 37-42.

IV. LEADERSHIP, POLICY, AND OVERSIGHT

Command and Control

The leadership at Walter Reed Army Medical Center did not maintain an acceptable standard of

managing outpatient services for injured and sick service members. Walter Reed’s inclusion on

the Base Realignment and Closure list and pressure to outsource traditional military service

functions through A-76 implementation, complicated leadership’s ability to appropriately manage

outpatient services. Additional factors include military to civilian conversions; retention and

recruitment of quality staff members; facilities maintenance; and staff attitude, also impacted the

efficacy of leadership’s role at Walter Reed.

Base Realignment and Closure (BRAC)

In August 2005, the Base Realignment and Closure Committee recommended Walter Reed Army

Medical Center installation, including the Armed Forces Institute of Pathology, be closed. The

Committee also recommended that the Walter Reed Army Medical Center be realigned with the

National Naval Medical Center to create the Walter Reed National Military Medical Center

(WRNMMC). The recommendation was approved by Congress in November 2005, and plans call

for the full integration to take place by September 2011.

This timeline effectively places Walter Reed Army Medical Center in a state of “limbo” regarding

its ability to make capital improvements and recruit and retain qualified staff. The complexity

surrounding the creation of Walter Reed National Military Medical Center requires significant

attention from the current leadership, resulting in time and resources being taken away from the

effective management of the hospital. There is no doubt that the facilities at Walter Reed require

replacement and the present campus is too small to accommodate the large patient load and influx

of family members resulting from Operations Iraqi Freedom and Enduring Freedom.

There are economies to be gained through the creation of Walter Reed National Military Medical

Center. The timing of the Base Realignment and Closure decision and implementation of its

timeline could not have been worse; a time when the mission to treat war wounded, sick, and

injured service members, while maintaining normal patient load, was at its highest demand at

Walter Reed. The establishment of the Walter Reed National Military Medical Center, on the

campus of Bethesda, along with the co-location with the Uniformed Services University of the

Health Sciences and close proximity to the National Institutes of Health, makes an ideal setting

for the continued cooperation between the civilian sector and the Armed Forces Institute of

Pathology. The Armed Forces Institute of Pathology is integral to the military and civilian

medical research communities of today as well as to the future of our healthcare system.

ȱȱȱ

ŘŚȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Finding:

The Base Realignment and Closure decision to create the new Walter Reed National Military

Medical Center contributed to staffing problems, inattention of leadership to day-to-day

operations, and a lack of resources for capital improvements.

Discussion:

The inclusion of Walter Reed Army Medical Center on the Base Realignment and Closure list

forced leadership to devote a substantial amount of time to the planning for integration of clinical

services with the National Naval Medical Center. At least one senior staff member indicates he

spends over 30% of his time devoted to Base Realignment and Closure issues; time that could be

spent seeing to the needs of patients and their families. The leadership complexities of Walter

Reed Army Medical Center Command are challenging and very broad in scope and span of

control. From the operation of a major military academic medical center, providing a full range of

casualty care to managing the healthcare market for beneficiaries in the National Capital Region,

the commander is also responsible for health care oversight for the northeastern United States.

The addition of the responsibilities associated with Base Realignment and Closure demanded

long term strategic focus and planning and competed with other operational requirements of daytoday leadership. Recruitment and retention of critical specialists have also been affected by the

Base Realignment and Closure decision. According to the Deputy Commander of Clinical

Services, “since the announcement of the Base Realignment and Closure decision, Walter Reed

Army Medical Center has lost six long-term highly trained anesthesiologists, a key clinical

information programmer, a senior claims attorney, patient safety officer and a candidate to run the

credentials office to name a few.” Due to the perceived instability surrounding the continued

operation of Walter Reed Army Medical Center, the Accreditation Council for Graduate Medical

Education recently reduced the accreditation of many Walter Reed Army Medical Center’s

programs from five years to two years of accreditation, making these residency programs less

desirable. The long-term effects of the accreditation change have yet to be realized.

The Assistant Secretary of the Army (Installations & Environment) made a decision to discourage

capital expenditures for facility improvement projects on Army installations scheduled for closure

as a result of the Base Realignment and Closure recommendations. Noted in a Department of

Army memo, “At installations recommended for closure, all facility projects, regardless of fund

source, not under contract or, if in-house, not started, shall be deferred pending the final Base

Realignment and Closure decision. Any exception based on legal, health, or environmental

requirements shall be addressed on a case-by-case basis to Assistant Secretary of the Army

(Installations & Environment) for decision.”

This created a decline in facility improvements, and impeded leadership’s efforts to convince

legislators of its need for critical facility improvements, such as the Warrior Rehabilitation

Training Center (Amputee Center), currently under construction. The replacement of the aging

hospital facility at Walter Reed as well as others within the National Capital Region was the target

for Base Realignment and Closure and acceleration of the processes for both the new Walter Reed

and Fort Belvoir will move all patients in the region to include the combat injured into modern

facilities faster. Current proposals for the acceleration of the new Walter Reed National Military

Medical Center move the construction completion date ahead eight months to October 2010.

Creation of the new Warrior Care Center at the Bethesda campus could be completed by October

2009, allowing use of this resource as early as possible. Similar acceleration strategies should also

be considered with the new hospital construction at Fort Belvoir with completion by August

ȱȱȱ

Řśȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

2010. During a time of war, focusing on serving the needs of soldiers and families by providing

them the best possible facilities for care and recovery is imperative.

Recommendation:

The Secretary of Defense should seek legislative approval to accelerate the implementation of the

Base Realignment and Closure Commission’s recommendations. Specifically, accelerate or waive

the Environmental Impact Competition (EIS) and release monies required to start construction of

the “new” Walter Reed National Military Medical Center.

The existing facilities should not be allowed to “die on the vine.” Expeditious integration of these

two facilities will lessen the time Walter Reed Army Medical Center is in a state of “limbo,” and

can take advantage of economies at a quicker pace while ultimately improving the treatment of

eligible servicemembers and their families. The servicemembers and their families should not

experience any delays in service during this transition. Funding must be provided to maintain full

operation until the day of closure.

A-76:

The Office of Management and Budget A-76 circular provides for public/private competition for

tasks that are not considered inherently governmental. The A-76 program was designed for the

government to select the “most efficient organization” to perform those tasks that are not

considered inherently governmental tasks. The announcement to implement the provisions of the

A-76 at Walter Reed Army Medical Center took place in 2000, almost seven years prior to the last

contract award to a private firm. During that time, the government bid on the contract to provide

base operations support, including facilities maintenance, clerical functions, and other tasks. The

government bid was originally calculated to be $7 million less than a private contractor. The bids

were later recalculated and it was determined the private contractor’s bid was more favorable by

the same $7 million amount.

The A-76 process had a huge destabilizing impact on the civilian workforce at Walter Reed Army

Medical Center. During times of declared war or military mobilization, the Department of

Defense can opt-out of the A-76 process. The revised A-76 Circular, states “The Department of

Defense Competitive Sourcing Official (without delegation) shall determine if this circular

applies to the Department of Defense during times of declared war or military mobilization.”

The Department of Defense Competitive Sourcing Official is the Deputy Undersecretary of

Defense, Installations and Environment. Had the option to exclude the Department of Defense

from A-76 been exercised, significant personnel shortages could have been avoided at a crucial

time when Walter Reed Army Medical Center and National Naval Medical Center were focused

on the treatment of wounded, sick or injured service members. With the local civilian personnel

office focused on A-76 business, non-A-76 business, such as recruitment of healthcare personnel,

was not a priority. OMB Circular A-76 rests on a policy of subjecting commercial activities to

public-private competition. Testimony received by the Independent Review Group (March 2007).

Finding:

The A-76 process created a destabilizing effect on the ability to hire and retain qualified staff

members to operate garrison functions. The cost savings proved to be counterproductive.

ȱȱȱ

ŘŜȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Discussion:

The implications of the A-76 program created yet another pressure for Walter Reed Army

Medical Center staff and leadership to overcome. The award of a contract to a private vendor for

facility maintenance resulted in a hiring freeze in June 2006 followed by a reduction in force (IF)

action of civilian employees in August 2006. The contractor, International American Products

(IAP), however, did not begin work until February 2007, which resulted in a serious shortage of

staff for an eight month period (June 2006 until Feb 2007). This action restricted leadership’s

ability to hire front desk clerks and administrative staff, resulting in critical staff shortages. The

most devastating effect of the hiring freeze was the impact on garrison and brigade functions

designed to support outpatient servicemembers and their families. The long lag time from the

announcement of the A-76 competition to contractor selection and implementation led to staff

shortages of more than 100 personnel during a time the patient load was at peak levels.

Recommendation:

The Secretary of Defense should provide the Service Secretaries the opportunity to apply for

regulatory relief from A-76 during a time of war; specifically for Walter Reed and other military

treatment facilities.

Accountability:

During a visit to Walter Reed Army Medical Center on March 30, 2007, President George W.

Bush affirmed, “The problems at Walter Reed were caused by bureaucratic and administrative

failures.” Assessments from the Department of Army indicated that leadership was aware of

complaints about administrative processes and poor facility conditions at Walter Reed Army

Medical Center and either delayed in acting or failed to act altogether.

Finding:

The Base Realignment and Closure decision to create the new Walter Reed National Military

Medical Center contributed to staffing problems, inattention of leadership to day-to-day

operations, and a lack of resources for capital improvements.

Recommendation:

The Secretary of Defense should seek legislative approval to accelerate the implementation of the

BRAC Commission’s recommendations. Specifically, accelerate or waive the Environmental

Impact Competition (EIS), and release monies required to start construction of the “new” Walter

Reed National Military Medical Center. (2) The existing facilities should not be allowed to “die

on the vine.” Expeditious integration of these two facilities will lessen the time Walter Reed

Army Medical Center is in a state of “limbo,” and can take advantage of economies at a quicker

pace while ultimately improving the treatment of eligible service members and their families. The

servicemembers and their families should not experience any delays in service during this

transition. Funding must be provided to maintain full operation until the day of closure.

Finding:

The A-76 process created a destabilizing effect on the ability to hire and retain qualified staff

members to operate garrison functions. The cost savings proved to be counterproductive.

ȱȱȱ

Řŝȱ

ȱȱȱȱȬŝŜǱȱ ȱȱȱȱ

Recommendation:

The Secretary of Defense should provide the Service Secretaries [with] the opportunity to apply

for regulatory relief from A-76 during a time of war; specifically for Walter Reed and other

military treatment facilities.

ȱȱ ȱ

(name redacted)

Specialist in Defense Acquisition

[redacted]@crs.loc.gov, 7-....

ȱȱȱ

ŘŞȱ

EveryCRSReport.com

The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the

Library of Congress, charged with providing the United States Congress non-partisan advice on

issues that may come before Congress.

EveryCRSReport.com republishes CRS reports that are available to all Congressional staff. The

reports are not classified, and Members of Congress routinely make individual reports available to

the public.

Prior to our republication, we redacted names, phone numbers and email addresses of analysts

who produced the reports. We also added this page to the report. We have not intentionally made

any other changes to any report published on EveryCRSReport.com.

CRS reports, as a work of the United States government, are not subject to copyright protection in

the United States. Any CRS report may be reproduced and distributed in its entirety without

permission from CRS. However, as a CRS report may include copyrighted images or material from a

third party, you may need to obtain permission of the copyright holder if you wish to copy or

otherwise use copyrighted material.

Information in a CRS report should not be relied upon for purposes other than public

understanding of information that has been provided by CRS to members of Congress in

connection with CRS' institutional role.

EveryCRSReport.com is not a government website and is not affiliated with CRS. We do not claim

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.