Federal Outsourcing in Michigan

Employees of federal hatcheries located in Michigan were reportedly worried early this year about a Bush Administration plan to "competitively source" the work they do in the Great Lakes State. Competitive sourcing requires certain bureaucracies or federal agencies to compete with private-sector rivals through the bidding process for the right to provide services.

The "President’s Management Agenda" was introduced in the summer of 2001 and included proposals to use competition between government agencies and the private sector to improve the cost-effectiveness of services being provided to the public.

In late July of this year, the administration issued an update on its previous report about the results of Pres. Bush’s competitive sourcing initiatives. The report stated that in fiscal year 2004 agencies underwent 217 competitions involving 12,500 federal job positions that are expected to save taxpayers about $1.4 billion over three to five years. The report also argued that an increase in fiscal 2004 savings is largely attributable to competitions between larger bureaucracies and private-sector rivals, and a better, more frequent use of a management process that enables the agencies and businesses to compete on a more level playing field.

According to the administration’s report it is competition that is the main driver of savings. The authors found that if two or more bids were submitted by the private sector to perform a service, savings of more than $30,000 per full-time federal employee might be derived. By contrast, if no bids were submitted but the public agency undertook a reform of its own practices to operate more efficiently, only $18,000 in estimated savings per FTE was found.

Some positions that had been considered for competitive sourcing were here in Michigan and were part of the federally owned and operated fish hatchery system. There are 70 national hatcheries with operations that may be competitively sourced, three of which are located in Michigan: the Jordan River operation in Otsego County, and the Sullivan hatchery and the Pendills Creek hatchery in Chippewa County.

Those involving animal husbandry were at one time up for competitive sourcing but the Bush Administration has since withdrawn these positions from the prospective outsourcing. Some administrative and maintenance positions may still be put up for bid.

Not everyone is thrilled with the competitive sourcing policies of the Bush Administration. In 2003, Paul Light of New York University and the Brookings Institution testified before the U.S. Senate and reported that competitions may "never be more than a minor lever in allocating headcount constraints more systematically." Light considers competitive sourcing to be a "blunt instrument" and suggests as an alternative a more "performance-centered system" that would allow government bureaucracies to "achieve the effects of competition more naturally."

In 2002 Michigan Privatization Report recommended in its article, "Legislators Should Spawn Hatchery Privatization," that some type of privatization occur for state-owned and run hatcheries, noting that private companies were capable of doing the same work, and for less. The hatchery privatization article can be accessed at www.mackinac.org/4742.