Applicability of OMB Circular A-76 to Personnel Reductions in the Department of Health and Human Services

In response to a congressional request, GAO reviewed the Department of Health and Human Services' (HHS) plan to reduce its staff in the Office of the Secretary. It was alleged that HHS did not perform cost-comparison studies to justify the change from in-house to contract work, as required by Office of Management and Budget Circular A-76, and that HHS employees, whose positions were being abolished, were performing services that could have been procured from private contractors.

GAO found that the basis for the planned reduction was: (1) a decline in new HHS programs without the reductions in personnel; (2) duplication of Office of the Secretary work by other HHS offices; and (3) that some Office personnel who performed duties for only one division would be better placed in that division. HHS planned to absorb the reduction of staff without impeding the agency's performance by streamlining some activities, transferring functions to other units, and eliminating unnecessary tasks. HHS closed several offices and transferred their work loads to other organizations, but had assumed that the Equal Employment Opportunity Commission would handle its equal employment opportunity complaint investigations. However, the extent to which the Commission could absorb the work load and the extent to which use of contractors could be used for the work caused problems. HHS presented a modified plan which stated that it would: (1) maintain a limited staff in the Office; (2) rely on the Commission to handle a certain number of cases per year; and (3) use contractors at about the same level it had been using them. GAO found that, because HHS had transferred, eliminated, and contracted for certain functions previously performed in the Office of the Secretary, cost-comparison studies were not required.