The playing field for competitions here is even more slanted in favor of the government. For example, the public entity's bids needn't include the cost of retirement benefits or insurance.

Change on this front would require the Pentagon to take on Congress. Assuming Defense wants to do that, it could point to the Defense Science Board's 1996 recommendation that the Pentagon reduce its reliance on public-private competitions, using waivers whenever possible. BENS has also argued this point. Theoretically, any Defense operation that can be shown to have some military or intelligence function could avoid the process and simply be contracted out to the private sector.

Hamre counters that the best way around the controversy over public-private competitions is to change the Pentagon from the inside out. In fact, he insists that focusing on public-private competitions misses the point of the department's reform effort. "The work will go away as you think about doing it in a different way," he contends. Hamre points to the department's implementation of best business practices, such as the use of electronic catalogs to order weapons and the use of commercial credit cards for transactions under $2,500 by the year 2000. Until recently, the finance office processed all transactions. In essence, a process that used to require the effort of numerous individuals within the Pentagon bureaucracy will be contracted to a private credit-card firm.

Yet skeptics doubt that such changes will result in substantial savings, at least not for many years. "It's peanuts," scoffs Concklin.

Adds DynCorp's Lombardi: "You just hope that somewhere along the line logic will save the day."

Michelle Celarier is a writer in Croton-on-Hudson, New York.

How Public-Private Competitions Work

Under the Office of Management and Budget's (OMB) rules, bureaucrats in charge of an activity slated to be outsourced take the first step by defining the activity. Then the public entity currently performing the work, or another public-sector bidder interested in doing it, presents a cost proposal. That proposal is not based on its current costs, but on what its cost structure could be if operated as what is known as a "most efficient organization," or MEO. That analysis also comes from those already working in the area being put out for bid, and isn't available to private contractors. Most important, it is only a projection.

According to DynCorp CEO Paul Lombardi, the projection caused the Reston, Virginia-based company to lose the Altus case (see main story). "We didn't have the benefit of MEO treatment, which told the government it needed, say, 10 electrical technicians, while we bid for, say, 15 because another government body told us we needed them."

Under revised OMB rules, if the public sector wins, it will be subject to a government review to determine if it is meeting the standards of an MEO. But, according to Bert Concklin, who heads the Professional Services Council, an industry lobbying group in Vienna, Virginia, there's no sanction or penalty for failing to do so. "If they have a cost overrun, they don't have to eat it; it doesn't come out of their profits," says Concklin. Would they ever be fired? "I don't know how you would find them in default of the contract," suggests Ronald Ross, president and chief operating officer of CACI, an information technology services firm based in Arlington, Virginia.­ —M.C.

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