ESOP Advisors, Inc.
Press Package
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By Stephen Barr Civil service and postal employees are protected
by numerous laws against discrimination based on race, sex, religion,
national origin, age or disability. But for many employees, the equal employment
opportunity system has never worked smoothly. Discrimination complaints soared during the 1990s,
and agencies fell behind on investigating and closing cases. Efforts to
streamline and revise the process began in 1999, and the tally of new and
backlogged complaints dropped by 4.5 percent from fiscal 1999 to 2000. Despite such signs of progress, numerous employees
put little faith in the ability of agencies to conduct fair-minded or
comprehensive EEO investigations. Now, the U.S. Postal Service has started thinking
about a new approach. Its proposal calls for turning over postal EEO
investigations to a private, employee-owned company in hopes of bringing more
independence to the probes, said Laree Martin, manager of the Postal
Service's national EEO compliance and appeals program. She said EEO investigations could be performed
outside the Postal Service because they "are not a core business
process. . . . They don't necessarily lead to better productivity on the part
of employees." According to the proposal, the Postal Service
would give its EEO investigators the opportunity to move to an employee stock
ownership plan. ESOPs are operated and owned by employees, who control the
business through shares of stock and often reap substantial tax advantages. ESOPs are a rarity in the government. The first
conversion came in 1996, when the Office of Personnel Management shifted 700
employees in its investigations division -- which performed background checks
on federal job applicants -- into an ESOP. According to the Postal Service proposal, the
agency would select a trustee to represent employee interests and to hire a
management team to bid for a sole-source, three-year contract. Overall, the Postal Service has about 450 people
who work on EEO and related issues. Slightly more than 100 work directly on
EEO complaints, and 65 hold jobs as investigators. Martin acknowledged that the 65 investigators are
"anxious about all this," with some looking forward to the prospect
of working for an employee-owned company and others fearful of losing postal
employment and benefits. The ESOP proposal comes at a time when
discrimination complaints have declined at the Postal Service. Complaints hit
their peak in 1998, when 14,397 were filed. They dropped to 10,553 in 2000,
primarily because of a new mediation program that brings in outsiders to
settle bias disputes before they escalate into formal complaints. The postal EEO investigators are represented by
the National Association of Postal Supervisors, which has not taken a stance
on the proposal,said Vincent
Palladino, the association president. But, he added, "if they have to go out and
get all new people who know nothing about the Postal Service, they will fall
way, way behind and not catch up. They need all 65, or at least three-quarters
of them, to make this a success." Spokesmen for unions representing rank-and-file
employees said they had not been consulted on the proposal. "I don't
think it will have any impact on employees," said William Burrus, executive vice president of the American
Postal Workers Union. "I don't think it will provide for any better
decisions or improve the confidence of employees in the system." The Postal Service hopes to award the contract in
February with the expectation that the ESOP would start conducting
investigations in June. But, Martin stressed, "almost nothing has
been decided. . . . We are supposed to be eliminating discrimination here,
and that you have to take seriously. You can't outsource that because you
think it is a fun thing to do. . . . It has to make good business sense. "If it doesn't work out, I'm perfectly
satisfied to be doing the investigations internally. We'll just improve our
internal processes." Federal Diary Live Please join me at Stephen Barr's e-mail address is
barrs@washpost.com. © 2001 The
Washington Post Company Related Links
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Postal Service to create employee-owned firm to handle EEO complaints
By Kellie Lunney
klunney@govexec.com
The U.S. Postal
Service plans to create a private, employee-owned company by June 2002 to
investigate equal employment opportunity complaints, an agency official said
Monday.
Current EEO
investigators at the agency will be considered first for jobs with the new
company, said Laree Martin, manager of the Postal Service’s national EEO
compliance and appeals program.
“We are trying to
create an environment that takes care of as many people as possible,” Martin
said. The agency hopes that the maximum number of agency employees eligible
will choose to work with the new firm, she said.
The Postal
Service currently has about 117 full-time employees nationwide working directly
on EEO complaints filed against the agency. In fiscal 2000, Postal Service
employees filed about 10,500 EEO complaints.
The Postal
Service plans to convert its EEO compliance and appeals program into an
employee stock ownership plan (ESOP), a type of tax-qualified employee benefit
plan in which most or all of the assets are invested in the stock of the
employer.
In 1996, the
Office of Personnel Management’s investigations office, which conducts
background checks of potential employees for federal agencies, was the first
federal organization converted into an ESOP. OPM investigators left the government
and became employees and owners of the private firm, U.S. Investigations Services Inc.
Martin said the
Postal Service is using U.S. Investigations Services as a model.
After reviewing
business plans and cost proposals, the agency will award a three-year
sole-source contract with two one-year renewal options in February 2002, Martin
said. The agency hopes to complete the transition to a new ESOP-based private
company handling EEO complaints by June 2002.
The Postal
Service will select a trustee to represent the employees’ interests and recruit
a management team qualified to bid for the contract. The trustee will also help
employees make the transition from the government to the private sector.
Martin said the
Postal Service will also seek authority to offer voluntary early retirement to
ease the transition to the ESOP. According to Martin, opinions on the prospect
of switching from government to industry vary among EEO investigators.
“Those who are
eligible for retirement and can cash in are generally excited and optimistic
about the change,” she said. “Other employees who have been working for five or
10 years and have kids in college are less optimistic; they feel that federal
employment is more secure than a job in the private sector.”
Martin said the
Postal Service is outsourcing its EEO caseload to streamline its operations and
focus on its core missions. Concern over agency bias and neutrality in EEO
investigations also led to the decision to give an independent, private firm
authority over EEO complaints. “There is a broad perception throughout the
Postal Service that an outside investigator will be more objective,” she said.
According to
Martin, the Postal Service previously tried to outsource its EEO complaint
workload in 1994. The agency had limited success, however, because the
contractors hired to perform the work did not have the expertise or experience
with the EEO complaint and investigation process that agency investigators
possessed. The Postal Service eventually reverted to handling EEO complaints
internally since the contractors were “calling us all the time anyway” for
assistance, she said.
The current
effort, which would outsource the work, but would hire EEO complaint
investigators from the agency, attempts to combine the best of both worlds.
Martin said
outsourcing EEO complaint investigations won’t save the agency much money. She
said other agencies that have handed over their EEO caseloads to private firms
spend between $2,000 and $2,500 on each claim. The Postal Service currently
spends roughly between $1,800 and $1,900 per claim, and that figure could
increase with outsourcing, Martin said.
The Postal
Service is looking for the most cost-effective bid. Its large number of
complaints could actually work in its favor when it comes to the contract’s
price tag, Martin said.
“We have more investigations, and more volume could get us more cost-savings,” she said. “We have to decide what it is worth to us to have more objectivity [in investigating complaints].”
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Shipyard
Workers Go Private to Keep Jobs By George Cahlink Federal
workers at two closing Navy shipyards have found a novel way to preserve
their jobs: by marketing themselves and their specialized skills to the
private sector. In September, two environmental cleanup teams, totaling about
350 civilian workers at closing Navy shipyards in The
difference, however, is that the employees will be hired as teams by
private-sector organizations to continue the work they have been doing for
five years as federal employees. Their
work involves removing asbestos and other hazardous material from shipyards
and other military facilities, performing inspections and audits of military
facilities for hazardous materials, and monitoring and cleaning up
contaminated ground water and soil at those facilities. "This
is like agencies franchising and selling services to each other, but it takes
it a step further by selling their services to the private sector," said
Stephen Sorrett, director of government contract
services at Grant Thornton LLP, of Federal
employees with highly specialized skills, such as environmental cleanup and
medical and science skills, are attractive candidates for hire by companies,
said Steven Else, director of the Center for Public-Private Enterprise in "This
is an option for those with a very unique skill set as government
downsizes," said Else, adding that encouraging government units targeted
for downsizing to join with companies is cheaper than offering employees buyouts or early retirement. By
partnering with private firms, the teams gain the marketing and
infrastructure support of the companies they join. The companies profit by
recruiting employees who are trained in highly specialized areas. Plenty of
Work The
Navy agreed to spend $2.5 million to retrain workers in environmental cleanup
as an alternative to laying them off. Under the arrangement, the workers
would perform cleanup work at the bases until they hit retirement age. Those
not reaching retirement were slated to lose their jobs when the bases were
permanently shut in 1996. In
1996, however, workers not yet at retirement age approached the Navy about
forming environmental detachment units, or teams, based in "We
really wanted to take a good look at becoming a federal franchise," said
Rod Pieper, head of the environmental detachment unit in Federal
franchises are business units agencies set up to market and sell their skills
or services to other agencies. Franchises must generate enough money to
support themselves independent of their agencies. The
teams have had little trouble generating business at military bases, completing
cleanup work worth more than $150 million in 22 states since 1996. But
Pieper said the unique work the teams did made it
difficult to fit into the traditional franchise structure. "There
was a demand for the work, so we decided we should consider becoming an
employee-owned business [instead of franchising]," said Earl Dear-hart,
head of Both
units agreed to hire Grant Thornton to study the feasibility of forming an
employee stock ownership program, or ESOP, when the deal with the Navy
expired. The study however, suggested forming strategic partnerships with
industry. "We
looked at the market for environmental cleanup, found it was consolidating
and decided it would be too difficult to start up a new company alone,"
said Mike Mendelevitz, managing director for ESOP Associates Inc., of Pieper
said most of the 225 "Weston
liked their track record. They had an extremely satisfied customer
base," said Peter Ceribelli, vice president of
the firm's construction division. The
unit will work on both government and private-sector cleanup jobs, Ceribelli added. Dearhart said He
said nearly all the unit's workers have accepted jobs at comparable salaries.
Dearhart said SCRA
would provide investment capital, marketing and infrastructure and
administrative support over the next five years and later spin off the
detachment unit as its own company. Dearhart said the
business could grow to $20 million to $30 million per year over the next
decade. He said any company spun off would be majority-owned by the former
detachment workers. Larry
Druffel, president of SCRA, said the |
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Naval Sea Systems Command The In an innovative strategy, the Naval Sea Systems Command (NAVSEA) will move 380 employees in two locations to the private sector in September. Under the terms of this transaction, once the employees are transitioned to the private sector, they will be available to perform much of the same type of work as they had been providing as Navy employees, at the same locations, with the same customer base. The Navy employees are currently in two environmental
detachments in NAVSEA, using the skills of Grant Thornton, Inc. and ESOP Advisors Inc., examined a wide range of business alternatives - including the formation of an Employee Stock Ownership Plan (ESOP) company - before arriving at the recommendation that the detachments select 'strategic partners' to ensure a successful transition to the private sector. This transaction is the first of its kind for the Department of Defense (DOD). Command officials say it is a testament to the creativity and imagination of the employees of the two environmental detachments and to the commitment of NAVSEA that "people are our top priority." The detachments were established in 1996 as a result of Base Realignment and Closure (BRAC) to assist in the environmental clean up of the shipyards at Charleston and Mare Island. The detachments have executed work valued at over $150 million for over 75 customers in more than 22 states and have completed more than 218 projects, including cradle to grave management of over 9,500 tons of hazardous waste and performed BRAC inspections at over 6,600 facilities. "These Navy employees have truly undergone a defense
conversion, said Roy Rogers, NAVSEA Naval Shipyard BRAC Program Manager. "Four
years ago they were performing critical repairs and modernization of the
Navy's Submarine Force. Today they have integrated those skills with
additional environmental training and experience to Due to the their overwhelming success, NAVSEA explored options to outplace these synergistic teams rather than disband them. A feasibility study determined that the units had the potential to survive and flourish in private industry if they could be aligned with Strategic Partners. Navy selected Grant Thorton to serve as the employee representative of the environmental detachments to assist them in selecting a Strategic Partner. The Strategic Partners chosen by the employees are: South However, as private sector employees, they will be encouraged to pursue new commercial and government customers, and will be able to more directly realize the rewards of their success. The Navy, along with other potential customers, will also benefit from this transaction as the environmental detachments continue to provide valuable technical capabilities as they have been all along. For more information, contact Pat Dolan, Deputy Director, NAVSEA, Congressional and Public Affairs, at (703) 602-1575 or DolanPK@NAVSEA.NAVY.MIL] Related Resource Office of Personnel Management, Excerpt from 1996 Annual Report of the then National Performance Review (now the National Partnership for Reinventing Government) |
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DAILY BRIEFING Navy
employees privatize themselves By Brian Friel With layoffs looming over them, a group of Navy employees have banded together and privatized themselves. More than 400 employees involved in environmental clean-up activities at two closing Navy shipyards were scheduled to lose their jobs next month as part of the Defense Department's base realignment and closure process. The shipyards, one in The retrained workers did so well in their new line of work that other Defense Department units sought out their expertise. With a growing base of satisfied customers, the environmental clean-up detachments decided to find a way to stay in business. After various options within the government didn't pan out, they decided to privatize. "There was no requirement to privatize these environmental detachments," said Pat Dolan, spokeswoman for the Naval Sea Systems Command (NAVSEA), which oversees the two units. "But they've done a tremendously great job and they have extremely marketable skills. So rather than each individual employee seeking work on their own, the units basically sold themselves, their services, to other companies." The roughly 300 employees in Two consulting firms, Chicago-based Grant Thornton LLP and Washington-based ESOP Advisors Inc., helped move the employees into the private sector. The employees were skeptical of their own worth after the government decided to cut their jobs, said Roger Neece, president of ESOP Advisors. But the employees learned that their skills were highly valued in the private sector. When the word got out that the Navy employees were looking for a new employer, more than 75 private firms expressed interest in hiring them, Neece said. The firms were eventually narrowed down to six; three
firms bid on the "Everybody who wants to go to these firms is being offered a job," Neece said. "People have other opportunities both within federal government and outside. That's part of reason why the firms offered very good packages. They wanted these people. It shows federal employees and managers have a lot of value in the private sector." The strategy of seeking an outside company to acquire a
unit of employees is called strategic partnering. ESOP Advisors facilitated
another strategic partnering arrangement two years ago, when the U.S. Army
Management Engineering College became the In 1996, the Office of Personnel Management's Office of Federal Investigations was converted into an entirely new company, U.S. Investigations Services, Inc. Neece said the strategic partnering strategy, rather than the creation of a new company, was used for the Navy detachments because the environmental clean-up industry isn't as capable of sustaining a new company as was the investigative services industry when the OPM office was privatized. |