[00:00:11] Speaker 00:
May it be short?

[00:00:13] Speaker 00:
The last of the six days of furlough that were at issue in this case happened in September of 2013.

[00:00:21] Speaker 00:
Just days later, on October 1st, there was a shutdown of the federal government, or worse, of the federal government.

[00:00:28] Speaker 00:
All of the appropriated fund employees on that day had to stop working.

[00:00:32] Speaker 00:
The employees at issue in this case have both water bleed arsenal and letter Kenny army depot remained working.

[00:00:40] Speaker 00:
And we think that distinction starts the discussion about why the furloughs in this case make no sense and can't possibly meet the efficiency of the service standard.

[00:00:50] Speaker 04:
Did you actually make the efficiency of the service argument before your reply brief?

[00:00:57] Speaker 00:
Yes, I mean from the get-go we operated under Chapter 75 and the entire standard upon which we made was saying under Chapter 75 requires an efficient service standard.

[00:01:10] Speaker 04:
Well it certainly does, but I understood your argument to be that the reason that the furloughs were not appropriate here is because

[00:01:21] Speaker 04:
they were looking at the wrong agency for purposes of deciding whose efficiencies were at issue.

[00:01:26] Speaker 00:
Well, it's tied up in the same.

[00:01:29] Speaker 01:
analysis so if you're I mean your argument is if you look at the local agency the LEAD or the other one that there there's not the efficiency of the standard met right it's sort of where you look so obviously there's no dispute that there was a cut to appropriated funds at the national level

[00:01:51] Speaker 00:
There's also really no dispute in the record that there was abundant funding from custom orders at the local level.

[00:01:58] Speaker 04:
The agency has maintained and argued to the board and to the arbitrators that you just only look at the DOD level, you don't look at the local level to determine whether this was a reasonable... But the argument you made in your gray brief was that even if you look at the DOD level, there's no evidence that there was actual efficiencies gained.

[00:02:21] Speaker 04:
That's the issue I'm asking about.

[00:02:24] Speaker 04:
That seems to have been waived because you don't raise that alternative argument until you reply to it.

[00:02:30] Speaker 00:
Well, we were rebutting their argument, which we started with.

[00:02:34] Speaker 00:
We believe Chapter 75, the proper construction of 75, is you work at the local level.

[00:02:39] Speaker 00:
These are the individual employees, and that's what you do for the other actions under Chapter 75.

[00:02:44] Speaker 00:
in rebuttal to their arguments that we'll know you have to look at the national level, we made an argument that even if you look at the national level, it's customer orders that drive the funding of these local facilities and there's no evidence at the national level that they moved money or saved money and sort of

[00:03:03] Speaker 00:
just pointing out that there's also a dissent in the board that these cases came out after the case of here, but in the Einbrunn case that same issue came up before the board and we're just pointing out that this is an issue that's recurring because even if you look at the national level, there's really no indication that savings actually occurred because

[00:03:24] Speaker 00:
until the customer, and it's very market driven, until the customer either slows down its spending or cuts its spending or retrieves its spending, I guess, there are no savings.

[00:03:37] Speaker 00:
And as member Wagner at the time pointed out, there's nothing in the record

[00:03:42] Speaker 00:
In those cases, and there's nothing in the record in this case that they ever notified Congress or otherwise did something to transfer the money out of the working capital fund.

[00:03:49] Speaker 02:
I guess I have a bit of the same question that Judge Romali does.

[00:03:54] Speaker 02:
I don't haven't sort of gotten a clear answer from you thus far about it, which is so there's all kinds of arguments you made.

[00:04:03] Speaker 02:
You made the argument that we shouldn't be looking at DOD and DOD aggressive or we should be looking at the agency level and that there was no efficiency of service for this agency for looking at the agency.

[00:04:14] Speaker 02:
level.

[00:04:14] Speaker 02:
If we're looking at only the agency, that there was no efficiency.

[00:04:18] Speaker 02:
That argument I think you've made consistently.

[00:04:20] Speaker 02:
But the argument that appeared in the reply brief felt like for the first time for me also was an argument that, well, wait a minute, even if we look at the DOD level, these furloughs in this agency, the money saved there was not available for DOD to otherwise satisfy the budget issues it was having.

[00:04:40] Speaker 02:
That argument is discreet and it's different.

[00:04:42] Speaker 02:
It's not

[00:04:43] Speaker 02:
DOD, is there efficiency of service for DOD if we look at the agency level?

[00:04:46] Speaker 02:
It's not, is there efficiency of service if we're tunnel visioning only at the breakdown lower level, local level.

[00:04:54] Speaker 02:
Your argument all of a sudden in the reply brief, which resonates with me, but I'm afraid isn't something that was consistently made so that it's not performing because they didn't get to address it, is that even if we look at the DOD level,

[00:05:06] Speaker 02:
Those cuts don't provide money that DOD can use.

[00:05:10] Speaker 02:
That's a different efficiency of the service argument seems to me than the one that focused on DOD and everything related to it or focused on the agency and everything related to it.

[00:05:25] Speaker 00:
from the get-go, there's no dispute that customer orders are taken from this revolving fund and then placed at a particular facility, whether it's Letter County or Waterville East.

[00:05:36] Speaker 02:
But there is a question, and I would have loved to have known what the government would have had to say about it, but they didn't get a chance to because you didn't make it to your body.

[00:05:43] Speaker 02:
There is a question for me about whether or not money saved by

[00:05:48] Speaker 02:
agency by furloughing those people was or was not available for redistribution and repurposing the DOD more generally.

[00:05:55] Speaker 02:
That is a specific fact-based question that I have no idea of the answer to and I didn't get a chance in any briefing to know what they might say about it because it wasn't there until the reply brief.

[00:06:11] Speaker 00:
suggested during the hearing, we had two arbitration hearings, we had witnesses testify we don't know how savings would occur without deallegating money at the local level.

[00:06:22] Speaker 00:
That's why we see it as one and the same.

[00:06:26] Speaker 00:
If you don't de-obligate money at the local level, it can't revert back up to this revolving fund.

[00:06:31] Speaker 00:
Therefore, any furloughs at the local level are not really creating the type of savings or flexibility that the Army was arguing that had to happen at the national level and that the local people wouldn't know about.

[00:06:43] Speaker 04:
There were some de-obligations, were there not?

[00:06:45] Speaker 00:
So, in the Letterkenny case, interestingly enough, their chief of resource management got on the stand and said there had been $37.5 million.

[00:06:55] Speaker 00:
Now, I don't believe he ever said when that occurred, but even taking that as true, if you look at Letterkenny, I would refer you to Joint Appendix page

[00:07:10] Speaker 00:
303, where it's the chart that has the funding.

[00:07:29] Speaker 00:
And what's interesting about that chart is even if $37.5 million had been deobligated, if you look at that net carryover, on June 30th, right before the first furlough was taken, they were calculating $733 million was going to be carried over to the next fiscal year.

[00:07:48] Speaker 00:
They were so overfunded at the local level,

[00:07:50] Speaker 00:
that they were going to carry over $733 million.

[00:07:55] Speaker 00:
An interesting comparison is if you say, oh, the Hale document, the Hale Declaration says we needed $500 million in savings from Army Working Capital Fund, at least in theory, the Army could have gotten all $500 million in savings from this facility alone.

[00:08:09] Speaker 00:
This facility would have been fully funded for 2013 and still carry $233 million into the next fiscal year.

[00:08:16] Speaker 00:
Nothing they have to do that.

[00:08:17] Speaker 02:
That gets into the discretionary decision of how they're going to go about choosing to affect the savings.

[00:08:25] Speaker 00:
In this part of the government, those decisions are driven by the customer.

[00:08:29] Speaker 00:
And so when the board says we're not going to second guess spending per se, our position is we're not either.

[00:08:37] Speaker 00:
We're going to look at what did the customers do with that money.

[00:08:40] Speaker 00:
And if the customers spent the money at the local level, then the employee shouldn't be furloughed.

[00:08:44] Speaker 00:
If the customers at the national level don't spend the money at the local level, then sure, for all of the employees, because there's now a lack of work or lack of funds.

[00:08:51] Speaker 04:
Does it have to be, does there have to be evidence that they used the money for something else, or is it sufficient, as the government has used it, that they created the possibility, the flexibility to use the money?

[00:09:04] Speaker 00:
Right.

[00:09:05] Speaker 00:
Well, we dispute both.

[00:09:07] Speaker 00:
You can't create the flexibility until you've de-obligated the money.

[00:09:10] Speaker 00:
Other than this $37 million, which had no real impact on the local facility, in the water delete case, we had the chief of resource manager testify for us in that case.

[00:09:19] Speaker 00:
He said, no money is de-obligated, so where's the flexibility coming from?

[00:09:22] Speaker 00:
Right there, that's your first question about whether there really was flexibility created, because until the customer takes the order back and puts the money back at the national level for that flexibility, we don't think- Funds were de-obligated from LEED, right?

[00:09:39] Speaker 00:
Right.

[00:09:41] Speaker 00:
Maybe.

[00:09:42] Speaker 00:
Again, I think if you look at the record closely, that witness didn't really specify when that occurred.

[00:09:47] Speaker 02:
Well, the Augustrator's decision says.

[00:09:50] Speaker 00:
Yeah, sure.

[00:09:50] Speaker 00:
And my point on that, though, is even if that was, even if LEED contributed $37.5 million to the flexibility that the Army needed, they're still overfunded, that there's still no sufficiency of a service

[00:10:05] Speaker 00:
for furloughing the employees that leave because they've contributed their money to the flexibility.

[00:10:08] Speaker 04:
But again, you're assuming that the efficiency of the service is being measured at the local level.

[00:10:14] Speaker 00:
Sure, sure.

[00:10:15] Speaker 00:
I mean, that is our primary argument because Chapter 75 has always been interpreted that way.

[00:10:20] Speaker 00:
Does the employee misconduct require that the individual employee needs to be

[00:10:25] Speaker 00:
suspended or suspended?

[00:10:29] Speaker 04:
Is there any other context, either in the statute or a regulation or a case in which any WCS have been treated as agencies?

[00:10:39] Speaker 00:
Well, I think we'd have to look.

[00:10:43] Speaker 00:
And I wasn't sure to answer your question, but not exactly that we opposed it.

[00:10:47] Speaker 00:
Because again, that's why we point to the shutdown.

[00:10:49] Speaker 00:
The Army already delineates between funding types, because otherwise these employees wouldn't work during the shutdown.

[00:10:56] Speaker 00:
There was no appropriate funds.

[00:10:58] Speaker 00:
So the odd part of this is that there's like a 10% cut to funding and the appropriate funds, but you can't work.

[00:11:03] Speaker 00:
But there's a 100% cut to appropriate funds.

[00:11:06] Speaker 00:
Well, you can keep working because you're funded.

[00:11:08] Speaker 00:
So the agency already distinguishes between the funding.

[00:11:12] Speaker 04:
Right, but part of the problem is that the statutory position that we're operating under uses the word agency.

[00:11:18] Speaker 04:
Sure.

[00:11:19] Speaker 04:
And so it doesn't say, you know, local employing entity.

[00:11:23] Speaker 04:
It doesn't say, you know, the funding entity.

[00:11:28] Speaker 04:
It says agency.

[00:11:30] Speaker 04:
So how do we get around the fact that that's what the statute says?

[00:11:33] Speaker 00:
Well, because just like every case that comes up here from the court of misconduct, it's always the employee versus the larger agency.

[00:11:40] Speaker 00:
But it's still the agency's job to prove at the local level that the employee either deserved a suspension or should have been reduced in grade.

[00:11:47] Speaker 00:
I mean, the proof, the preponderance we have still always goes to the individual employee or the similarly situated employees.

[00:11:53] Speaker 00:
which is our main argument here, is these employees, if you look at the funding, it is distinct.

[00:11:58] Speaker 00:
They're very distinct at the local level.

[00:12:01] Speaker 00:
And so it is not, and also obviously distinct because when there's a shutdown, they don't have to work, or they keep working.

[00:12:09] Speaker 00:
So the Army already looks at the local level to see whether, or that commonality is already there at the local level.

[00:12:16] Speaker 00:
It's not like water belief funding and lead funding is intermixed and you can't figure out the two.

[00:12:20] Speaker 00:
When you look at the record, it's very clear.

[00:12:22] Speaker 00:
They have to manage their own operation.

[00:12:24] Speaker 00:
They have to go out and market themselves.

[00:12:26] Speaker 00:
They have to bring in orders and they work off those orders.

[00:12:29] Speaker 00:
The market already takes care of itself.

[00:12:33] Speaker 00:
If they lose their customer base, even if there's lots of appropriations or it's fiscal

[00:12:40] Speaker 00:
are very good, those particular facilities may still have the furlough because they have the manager workforce via the customer base, not whether Congress is appropriating funds.

[00:12:49] Speaker 00:
I'm into my rebuttal time.

[00:12:52] Speaker 02:
Thank you very much.

[00:12:56] Speaker 03:
Mr. Stern.

[00:13:00] Speaker 03:
Good morning.

[00:13:00] Speaker 03:
May it please the court?

[00:13:02] Speaker 03:
Petitioners' opening brief set the parameters of their arguments on appeal.

[00:13:06] Speaker 03:
And that brief's sole argument that petitioners made was that under Chapter 75, only the arbitrator should have looked to the Working Capital Fund's organizations where the petitioners were employed, rather than the Department of Defense.

[00:13:21] Speaker 03:
In our response, we demonstrated that the statutory definition of an agency covered the Department of Defense.

[00:13:27] Speaker 03:
The Department of Defense met that statutory definition, and the Working Capital Fund organizations actually did not meet that statutory definition.

[00:13:36] Speaker 03:
Also, when we look at the efficiency of the service standard, the board has held, and this court appeared to endorse in its Berlin decision, that the proper standard in a furlough situation is whether the agency has made a reasonable management decision to meet the financial circumstances under which it's operating.

[00:13:56] Speaker 03:
In this case, given the evidence of the interrelationship between the budgets of the working capital funds organizations and the budget of the Department of Defense as a whole, it was certainly a reasonable management decision for the department when they were hit with this

[00:14:11] Speaker 03:
Department of Defense wide budget shortfall to look at the interrelated budgets and to make decisions based on the agency's budget as a whole.

[00:14:20] Speaker 04:
But when you say a reasonable management decision, doesn't that management decision still have to tie into anticipated efficiencies for the service?

[00:14:29] Speaker 03:
Absolutely does, Your Honor.

[00:14:31] Speaker 03:
And the furlough decision has to be judged at the time that the decision was made and not sometime later after the furloughs have been instituted down the line.

[00:14:40] Speaker 03:
So at the time the furloughs were made, the Department of Defense had a $37 billion shortfall in their budget.

[00:14:47] Speaker 03:
They had already tried every which way to avoid furloughing employees.

[00:14:51] Speaker 03:
And in fact, $35 billion of that furlough, excuse me, of the budget shortfall were made up in other ways, by cutting back on programs, by cutting back on travel, training, equipment.

[00:15:04] Speaker 03:
But there was still a $2 billion shortfall that could not be met without looking to furloughing employees.

[00:15:11] Speaker 03:
And of that budget shortfall, one quarter came from the working capital funds organizations.

[00:15:17] Speaker 03:
There's an affidavit in the record from Deputy Secretary Hale, who's basically the Chief Financial Officer for the Department of Defense.

[00:15:25] Speaker 03:
He went through an analysis of why that shortfall could be in part made up from the working capital funds organizations.

[00:15:33] Speaker 03:
Secretary of Defense Hale's memo where he outlined which employees were going to be furloughed really indicates that the Department of Defense thought very carefully about which

[00:15:43] Speaker 03:
employee furloughs would result in actual savings that could be recaptured and which could not.

[00:15:49] Speaker 03:
So certain categories of employees, even the savings of not paying their salaries, it was determined that those would not in fact result in actual savings to the department that could potentially be shifted elsewhere.

[00:16:00] Speaker 03:
But the working capital funds employees, it was determined that those funds could potentially be shifted.

[00:16:06] Speaker 03:
And again, potentially because the furlough has to be judged at the time that it's implemented.

[00:16:11] Speaker 03:
The fact that

[00:16:12] Speaker 03:
Six months later, the agency was able to get approval from Congress to reprogram certain monies or was able to save some money in other areas and therefore in the end didn't need to recapture and repurpose those savings.

[00:16:27] Speaker 03:
That's not the base of so much the furlough is judged.

[00:16:30] Speaker 03:
It's judged at the time, like every adverse action, it's judged at the time that it's imposed.

[00:16:36] Speaker 03:
At the time these furloughs were imposed, the government saw that it could save X amount of dollars, I believe it was $500 million in working capital funds employee salaries and that those savings would provide the Department of Defense the flexibility to partially meet its huge budget shortfall.

[00:17:00] Speaker 04:
I guess I understand that there are predictions that were made about the potential for this filling the budget shortfall or correcting the gap.

[00:17:13] Speaker 04:
I guess I still am having a hard time factually seeing the connection between these salaries and the bigger DOD budget shortfall.

[00:17:22] Speaker 04:
And I don't see in those affidavits that you're referring to anybody actually explaining to me how the funds transfer occurred and what happened to those funds.

[00:17:34] Speaker 03:
Well, they didn't actually occur because by the time further down the road, the Department of Defense actually got permission.

[00:17:44] Speaker 03:
They had pending or Congress some requests to reprogram

[00:17:49] Speaker 03:
funds that had already been authorized by Congress to be spent on certain programs.

[00:17:53] Speaker 03:
They had requested permission to reprogram those funds to be spent elsewhere.

[00:17:57] Speaker 03:
When the furloughs were imposed, those reprogramming requests were pending before Congress.

[00:18:03] Speaker 03:
They weren't authorized until July after the furloughs had already been decided and the notices issued.

[00:18:10] Speaker 03:
So that allowed the agency to save some money that we couldn't predict back when it was first imposing the furloughs.

[00:18:17] Speaker 03:
The agency was also able to realize some other savings down the road just by tightening the budget in various ways.

[00:18:23] Speaker 03:
So eventually, ultimately, they did not need

[00:18:27] Speaker 03:
to recapture the savings that were realized by not paying employee salaries for six days, but they could not have known that at the time that the furloughs were imposed.

[00:18:37] Speaker 03:
At that time, they were operating under one set of facts that required them to find $2 billion in employee savings salaries.

[00:18:46] Speaker 03:
It's no different than

[00:18:48] Speaker 03:
Often when we're talking about the national budget, we kind of refer to a household budget.

[00:18:53] Speaker 03:
I'm going to use that analogy here.

[00:18:54] Speaker 03:
If you had two spouses both working and one of them loses their job, then the two spouses may look at each other and say, wow, our income has now just been cut in half.

[00:19:06] Speaker 03:
We need to sell the car because we're going to have all these expenses coming up in the next few months.

[00:19:11] Speaker 03:
We have the cable bill and we have food and we have rent.

[00:19:13] Speaker 03:
Let's sell the car.

[00:19:14] Speaker 03:
It's possible that two months later, the spouse that lost his job finds a new job that requires him to have a car and they end up having to buy a different car for even more money.

[00:19:25] Speaker 03:
So that ultimately when you look back at 2020 hindsight, say, wow, we would have known that you were going to get a job.

[00:19:31] Speaker 03:
We would never have sold that car.

[00:19:33] Speaker 03:
But at the time, the decision was made to sell the car.

[00:19:36] Speaker 03:
That couple knew that they had a shortfall, they had expenses coming up, they didn't see a way to meet it other than to sell the car.

[00:19:43] Speaker 03:
That's what happened here.

[00:19:44] Speaker 03:
The secretary saw that there was a big budget shortfall, that part of that could be made up by saving salaries.

[00:19:50] Speaker 03:
Yes, six months later, eight months later, down the road, it turned out that they were able to make up the shortfall with authorization from Congress to repurpose, to reprogram funds with savings that they were able to realize other places at the time.

[00:20:04] Speaker 02:
Exactly how would they have gotten that money?

[00:20:06] Speaker 02:
Exactly how, given the separateness of the working capital funds and their funding sources, how would that money that was saved in the six days of employee furlough have ever been transferred over and repurposed to DOD?

[00:20:21] Speaker 03:
In two ways, Your Honor.

[00:20:21] Speaker 03:
First of all, they're really not as separate as the petitioners would like to make out.

[00:20:25] Speaker 03:
And that's what the arbitrator found.

[00:20:26] Speaker 03:
Because the monies that flow into the working capital funds organizations are, in fact, appropriated fund monies.

[00:20:32] Speaker 03:
No, they're not appropriated directly from Congress.

[00:20:35] Speaker 03:
But they are paid from other Department of Defense organizations that receive appropriated funds.

[00:20:42] Speaker 03:
So those organizations are taking appropriated funds from Congress and transferring them to the working capital funds.

[00:20:48] Speaker 03:
So they are, in fact, appropriated funds that can be deobligated at any time.

[00:20:52] Speaker 04:
But they would have this huge amount of deobligation before you would ever tap into the savings from these salaries, right?

[00:21:00] Speaker 03:
Not necessarily.

[00:21:01] Speaker 04:
And there was evidence that they were all overfunded by a lot.

[00:21:04] Speaker 03:
Yes, but the Department of Defense did, there was, there's evidence in the record that the Department did anticipate the obligating of funds, that funds had been de-obligated in the past.

[00:21:15] Speaker 03:
Some funds were de-obligated in 2013, and again, this was all based on projections.

[00:21:19] Speaker 04:
But given that the statute says that it will improve the efficiency of the service, wouldn't it have made a lot more sense for them to wait and see if funds were going to be de-obligated to the point where

[00:21:31] Speaker 04:
furloughing employees actually made sense versus just furloughing employees without any consideration of the status of the de-obligation?

[00:21:41] Speaker 03:
Well, I would say it was reasonable for the agency to conclude that they didn't have the luxury of waiting.

[00:21:45] Speaker 03:
They had to make a decision.

[00:21:46] Speaker 03:
They had about half of the fiscal year left with an enormous budget hit, and they had to figure out where that money was coming and give people enough notice.

[00:21:55] Speaker 03:
both in their personal lives and the agency.

[00:21:58] Speaker 02:
The problem is, you know, it's like you're saying 1% is enough to meet the preponderance of the evidence standard.

[00:22:05] Speaker 02:
That's the way I feel like your argument is going.

[00:22:08] Speaker 02:
It's like you're saying the fact that maybe if a lot of stuff was decommissioned such that the money went way, way, way down, then we could actually benefit from the furlough cutoff.

[00:22:20] Speaker 02:
Given, you're right, we have to look at what was the state

[00:22:24] Speaker 02:
of the agency, of the DOD, of the fact pattern at the exact time the furlough decisions were made.

[00:22:29] Speaker 02:
Well, at that time, there was a lot of money committed to these WCFs.

[00:22:34] Speaker 02:
So much of it would have to be pulled back and decommissioned, an amount that sort of would be historical in nature, quite frankly, looking at the history of the commissioning process.

[00:22:44] Speaker 02:
Under those circumstances, was it a reasonable decision to assume that that money from furloughing those people for those six days would be able to be repurposed to DOD?

[00:22:55] Speaker 02:
Not if there are a possibility it could have been.

[00:22:58] Speaker 02:
But Judge O'Malley is correct.

[00:23:00] Speaker 02:
It will promote the efficiency of service.

[00:23:03] Speaker 02:
Will, not might, not possibly could, not on an alternate Tuesday.

[00:23:08] Speaker 02:
And so looking at that fact pattern as all of those financials existed on that day that decision was made,

[00:23:14] Speaker 02:
doesn't seem reasonable to me.

[00:23:15] Speaker 03:
On that day that that decision was made, the agency knew for a certainty that that decision was saving them, and for all the working class funds, $500 million that would give them the flexibility.

[00:23:28] Speaker 03:
And it was that flexibility that promotes the efficiency of the service.

[00:23:33] Speaker 03:
not whether after the fact the agency did repurpose it or whether it definitely would.

[00:23:37] Speaker 03:
It's too harsh a standard.

[00:23:39] Speaker 03:
That's the standard that's suggested in the Einboden descent, that it's going to happen, basically.

[00:23:45] Speaker 03:
That's too strict a standard to impose on an agency.

[00:23:47] Speaker 04:
Even if it doesn't have to be that far, you're talking about, you keep saying that it's going to give them the flexibility, but flexibility to what?

[00:23:54] Speaker 03:
Deobligate everything?

[00:23:56] Speaker 03:
Flexibility to take that salary savings, even putting aside the deobligating of the funds,

[00:24:00] Speaker 03:
Flexibility to take that salary savings for the six days that those employees were not working, money was saved by not paying their salaries.

[00:24:08] Speaker 04:
Those salary savings could not be transferred?

[00:24:11] Speaker 03:
They could be transferred.

[00:24:13] Speaker 03:
They absolutely could be transferred because the agency has the authority to take money saved at the working capital funds and transfer them elsewhere in the organization and repurpose them elsewhere.

[00:24:26] Speaker 03:
in the department.

[00:24:27] Speaker 03:
They have that authority.

[00:24:28] Speaker 03:
That's the arbitrator found.

[00:24:30] Speaker 03:
That was the interrelated nature of these organizations that those funds from the salaries themselves, that those savings could be repurposed elsewhere.

[00:24:40] Speaker 03:
And that was foreseeable at the time.

[00:24:42] Speaker 03:
And that gave them flexibility.

[00:24:44] Speaker 02:
I guess I just somehow missed what you're saying now.

[00:24:46] Speaker 02:
I understood that decommissioning could occur and thereby money could move.

[00:24:51] Speaker 02:
But you're telling me the agency could transfer that money directly.

[00:24:55] Speaker 02:
We don't need to even think about decommissioning, that the agency had the ability to just transfer those savings directly right away to DOD to be used for the shortfall.

[00:25:05] Speaker 03:
To the best of my understanding, the money saved from the salaries themselves, money from working capital funds organizations, including salary money,

[00:25:17] Speaker 03:
could be used elsewhere.

[00:25:18] Speaker 04:
How do they do that though if they're separately appropriated funds?

[00:25:23] Speaker 03:
Because all the funds come under the authority of the Department of Defense.

[00:25:26] Speaker 03:
The Secretary has authority over all of them, over the working class funds.

[00:25:29] Speaker 03:
It's just another fund.

[00:25:31] Speaker 03:
It's just another budget.

[00:25:31] Speaker 04:
It's just like they had to go to Congress to ask to move appropriated funds.

[00:25:35] Speaker 04:
They would have to go to Congress to ask to move those funds.

[00:25:38] Speaker 03:
And they were going to Congress

[00:25:39] Speaker 03:
regularly during this time to ask to reprogram.

[00:25:43] Speaker 04:
But you're saying that they could just take it.

[00:25:45] Speaker 04:
Isn't true.

[00:25:45] Speaker 04:
They would have had to go to Congress to ask to take it.

[00:25:47] Speaker 03:
Yes, of course.

[00:25:48] Speaker 03:
But saving the money in the first place would give them the flexibility to be able to go to Congress and ask for permission to transfer those particular funds to other parts of the Department of Defense.

[00:25:57] Speaker 03:
If they didn't save the money in the first place, then the money wouldn't be available for them to do that.

[00:26:05] Speaker 01:
The day-to-day salaries of the people at these working capital fund entities, are they paid by the money from the projects that come in?

[00:26:20] Speaker 01:
Yes.

[00:26:22] Speaker 01:
What would happen if, for some reason this is hypothetical, but in a year, in a given year

[00:26:29] Speaker 01:
a particular entity had no business.

[00:26:32] Speaker 01:
In other words, what if none of the components of DOD sent any sort of contracts to that entity?

[00:26:38] Speaker 01:
What would happen?

[00:26:40] Speaker 03:
Well, again, these are revolving funds, so generally they have a carryover.

[00:26:44] Speaker 03:
Hard to imagine, but given that high... No, I understand.

[00:26:47] Speaker 03:
Yeah.

[00:26:47] Speaker 03:
Yeah.

[00:26:48] Speaker 03:
Presumably they would have a carryover from prior years because it's a revolving fund if they had

[00:26:54] Speaker 03:
no money in their funds area.

[00:26:58] Speaker 03:
I really don't know the answer to that question.

[00:27:00] Speaker 03:
I'm sorry to say.

[00:27:01] Speaker 01:
Because I thought some reference to the fact that initially these entities are set up with appropriated funds.

[00:27:07] Speaker 03:
I was just going to come back to that.

[00:27:09] Speaker 03:
I'm just going to make that point.

[00:27:11] Speaker 03:
That initially when they are set up, they are set up with appropriated funds.

[00:27:14] Speaker 03:
So I don't know that this is for a fact what would happen in that hypothetical situation.

[00:27:20] Speaker 03:
But since they were initially set up with appropriated funds,

[00:27:23] Speaker 03:
In fact, there were no funds coming in for a year.

[00:27:25] Speaker 03:
I suppose perhaps they could get an appropriation.

[00:27:28] Speaker 03:
Again, I really don't know the answer to that.

[00:27:32] Speaker 03:
Thank you.

[00:27:33] Speaker 03:
Thank you.

[00:27:36] Speaker 00:
I'm actually happy to answer that question.

[00:27:40] Speaker 00:
Like any business, if your customer base dries up, you eventually have to change your workforce because you've lost the infusion of money that happens to your company.

[00:27:50] Speaker 00:
And these facilities work like any company.

[00:27:52] Speaker 00:
You have to go out and get customers.

[00:27:54] Speaker 00:
Your customers obligate funds.

[00:27:56] Speaker 00:
And then you either have the money to do the work or you don't have to do the work.

[00:27:59] Speaker 00:
And that actually is our exact point here.

[00:28:01] Speaker 00:
The efficiency of the service at these facilities takes care of itself.

[00:28:05] Speaker 00:
If there's money, if the customers like the product and they buy the product, then the employees work the product and they earn their money.

[00:28:13] Speaker 04:
But it is true that it also has another advantage like a business that most government entities don't have, which you're allowed to carry funds over from year to year.

[00:28:24] Speaker 00:
Sure.

[00:28:26] Speaker 00:
They ably pointed out in their brief that it's a no-year fund, so it's either obligated or not obligated.

[00:28:32] Speaker 00:
And so, you know, Letter County, for example, had so many orders that they couldn't even do all the orders in one year.

[00:28:37] Speaker 00:
It spread out over time, and so they carry over

[00:28:41] Speaker 00:
excess amount of money.

[00:28:42] Speaker 00:
They were actually carrying over $311 million above the max of what they're supposed to be carrying.

[00:28:48] Speaker 04:
Right, but they don't have to do like most government entities do, which is to return money at the end of the year.

[00:28:53] Speaker 00:
Right, they don't, exactly.

[00:28:55] Speaker 00:
And so the efficiency of service takes care of itself in these facilities because if the customer orders, if the government's going to save money, the customers are going to take back their orders.

[00:29:06] Speaker 00:
And then if the customers take back their orders and reprogram the money, then the employees might get furloughed and it makes sense, right?

[00:29:13] Speaker 00:
So if you are funded by an appropriated fund like the majority of DOD employees, you are directly impacted by a cut to the appropriations.

[00:29:22] Speaker 00:
These employees are indirectly

[00:29:24] Speaker 00:
Funded their salaries make up a portion of what the order amount is that comes in So if you place a five hundred million dollar order fifty million dollar order You know the labor costs are factored into that fifty million dollar plus parts and the other things like that and and so the efficiency of service takes care of itself because If the orders dry up you then have to furlough the employees because there's a lack of work or lack of funds It actually works quite well under chapter 75 and the definition of a furlough

[00:29:56] Speaker 02:
Okay.

[00:29:57] Speaker 02:
I thank both counsels for their arguments.

[00:29:59] Speaker 02:
The case is taken under submission.