17:0661(96)NG - AFGE Local 1923 and Health Care Financing Administration, Baltimore, MD -- 1985 FLRAdec NG



[ v17 p661 ]
17:0661(96)NG
The decision of the Authority follows:


 17 FLRA No. 96
 
 AMERICAN FEDERATION OF GOVERNMENT 
 EMPLOYEES, AFL-CIO, LOCAL 1923
 Union 
 
 and 
 
 HEALTH CARE FINANCING ADMINISTRATION, 
 BALTIMORE, MARYLAND
 Agency
 
                                            Case No. 0-NG-895
 
                DECISION AND ORDER ON NEGOTIABILITY ISSUES
 
    The petition for review in this case comes before the Authority
 pursuant to section 7105(a)(2)(E) of the Federal Service
 Labor-Management Relations Statute (the Statute) and concerns the
 negotiability of one Union proposal.  Upon careful consideration of the
 entire record, including the parties' contentions, /1/ the Authority
 makes the following determinations.
 
                              Union Proposal
 
          If the Administration makes a cost comparison to determine the
       cost performance of work in-house versus performance by a
       contractor, the following criteria will apply to the in-house cost
       estimate:
 
          (1) Basic Wages used will be the actual basic wages of affected
       employees at the time of the cost study.
 
          (2) Fringe benefit factors used shall be the actual fringe
       benefit rates which pertain to the Administration's own true costs
       for affected employees at the time of the cost study.
 
          (3) Material and other costs shall be the actual costs to the
       Administration for the affected activity.
 
          (4) If any increases are computed in 1, 2, or 3 above to cover
       inflation, expansion of function, change of mission, etc., such
       increases shall be fair and reasonable.
 
    This proposal conflicts with the Agency's right to "make
 determinations with respect to contracting out" pursuant to section
 7106(a)(2)(B) of the Statute.  In this regard, the Authority has
 previously determined that the right of management officials to make
 determinations with respect to contracting out encompasses not only the
 right to take such action but also the right to engage in preliminary
 discussion and deliberation concerning the relevant factors upon which
 such determinations will be made.  National Federation of Federal
 Employees, Local 1167 and Department of the Air Force, Headquarters,
 31st Combat Support Group (TAC), Homestead Air Force Base, Florida, 6
 FLRA 574 (1981) (Union Proposal 1), affirmed sub nom. National
 Federation of Federal Employees, Local 1167 v. Federal Labor Relations
 Authority, 681 F.2d 886 (D.C. Cir. 1982).  Thus, the Authority has found
 proposals which prescribe standards to be utilized by management to
 evaluate the factors upon which a decision to contract out could be
 based to be nonnegotiable because they interfere with the agency's
 deliberative process.  American Federation of Government Employees,
 AFL-CIO, Local 2736 and Department of the Air Force, Headquarters 379th
 Combat Support Group (SAC), Wurtsmith Air Force Base, Michigan, 14 FLRA
 302 (1984) (Proposals 1 and 2).  Therefore, based on the reasons stated
 in Wurtsmith Air Force Base and Homestead Air Force Base, the disputed
 proposal herein which specifically prescribes the standards to be used
 in making various calculations for the cost comparison analysis, i.e.,
 some of the factors upon which a decision to contract out could be
 based, is not within the duty to bargain.
 
    In addition, and contrary to the Union's assertions, the proposal
 conflicts with those portions of OMB Circular No. A-76 (hereinafter "the
 Circular"), which concern the development of the Performance Work
 Statement (PWS) which provides a comprehensive estimate of the costs of
 performing tasks through various courses of action and is the basis for
 the cost comparison between in-house and potential contract performance.
 
    Specifically, Section 1 of the Union proposal would require that the
 Agency use "actual basic wages of affected employees at the time of the
 cost study" in determining wage costs for the in-house estimate.
 However, Part 4, Chapter 2(D)(2) of the 1983 Supplement to the Circular
 (hereinafter "the Supplement") requires that the in-house staffing
 estimate be based on "the most efficient and effective organization" /2/
 necessary to accomplish the task and makes it clear that such a staffing
 estimate might differ from the current staffing level of the Agency
 employees at the time of the study.  /3/
 
    Further, Part 4, Chapter 2(D)(3)(d) of the Supplement requires the
 Agency to use a Government-wide standard step rate (i.e., step 5 for GS
 employees and step 4 for FWS employees) or an average step rate in
 calculating the in-house wage cost rather than the actual step rates of
 affected employees.  /4/ Thus, pursuant to the requirements of the
 Supplement, the wage figures used to develop the in-house portion of the
 PWS do not necessarily correspond to the actual wage costs of agency
 employees performing the work at the time of the study.  Consequently,
 Section 1 of the proposal, which would require the Agency to use actual
 wage costs, is inconsistent with the Supplement.
 
    Section 2 of the Union proposal conflicts with Part 4, Chapter
 2(D)(3)(g) of the Supplement which mandates that when making a cost
 comparison between in-house and potential contract performance an agency
 must use various formulas, called standard factors, which calculate the
 cost of various fringe benefits as a percentage of wages.  /5/ For
 certain of these benefits, i.e., Medicare and FICA, the percentage
 formula represents the actual cost to the agency of providing the
 benefits.  For others, most notably retirement contributions, the
 standard factors are only an estimate, based on Government-wide figures,
 of the cost of providing the benefit.  Section 2 of the Union's
 proposal, however, would require the Agency to use actual costs in all
 cases to calculate fringe benefits rather than the standard factors
 mandated by the Supplement.  See American Federation of Government
 Employees, AFL-CIO, Local 1622 and The Directorate Facilities and
 Engineering Department of the Army, Fort George G. Meade, Maryland, 17
 FLRA No. 69 (1985).
 
    Section 3 of the proposal conflicts with Part 4, Chapter 2(E)(3) of
 the Supplement which requires that, when calculating the cost of
 materials and supplies, an additional percentage is to be added to the
 purchase price of materials acquired from other government agencies.
 /6/ This additional percentage is intended to account for the amount
 spent for acquisition and storage by the General Services Administration
 which is not included in the cost of the items.  Therefore, as Section 3
 of the proposal would require that the cost figures used for these
 materials be based solely on "actual costs" it is inconsistent with the
 mandate of the Supplement.
 
    Since Section 4 of the Union proposal is integrally related to
 Sections 1, 2 and 3 and cannot be considered separately from them, it is
 for all the reasons cited above, also inconsistent with the Supplement.
 
    Since the proposal is inconsistent with the Circular and its
 Supplement, it would be outside the duty to bargain if the Circular
 constitutes a "Government-wide rule o