NEWS FLASH

CONTRACTOR WASTE SO RAMPANT IN DOD THAT NOW EVEN INSOURCING IS IMPERILED Secretary Gates knows the Department of Defense must reduce its excessive reliance on expensive service contractors. That’s why he has directed the department to slash by almost one-third the taxpayer dollars spent on service contractors over the next three years. Insourcing, using reliable and experienced civilian employees to perform services in certain circumstances instead of contractors, continues to be a valuable tool to reduce contractor expenses. As Secretary Gates himself noted recently in The Washington Post, “federal workers cost 25 percent less than contractors”. However, even those insourcing savings are now considered insufficient because of the imperative to drastically drive down service contractor costs. Rather than replace contractors with civilian employees, in many instances, according to Secretary Gates, contracts will simply be eliminated or downsized.

DoD’s budget is unsustainable because, as the Secretary has noted, one of every three taxpayer dollars is wasted on service contractors. Although arbitrary goals are not ideal, there is no question that DoD should look very closely at its vast army of service contractors for substantial savings. Savings of 30 percent from service contracting expenses would obviously be welcomed. However, DoD should not forsake opportunities to achieve savings of less than 30 percent through insourcing, whether it’s the Secretary’s own estimate of 25 percent, or smaller percentages.

The department’s budget is in critical condition because of decades of excessive privatization. Surely, we should not give up on the promising but short-lived insourcing effort after just one year. Because it has not yet implemented the contractor inventory and then integrated those results into the budget process, as required by law, the department lacks the capacity to determine costs and savings from insourcing. Indeed, the department is unable to distinguish the savings from insourcing from the costs of increased contracting. Costs are going up because the savings from insourcing are more than offset by the increased costs from contracting. One year is clearly insufficient to determine whether the insourcing initiative can work.

In-house personnel freezes have repeatedly proven to be bad public policy. In many instances, such freezes result in increased service contracting. Agencies still have to perform their mission. If they can’t use reliable and experienced civilian employees, they outsource, often at higher cost and invariably with less accountability. By law, the department may not apply arbitrary constraints on insourcing and must manage the civilian workforce by workload. We will work with the Congress and the department to ensure that DoD continues to be able to hire civilian employees to perform critical and sensitive functions that never should have been outsourced as well as functions that can be performed more efficiently in-house. The department has a statutory obligation to use civilian employees when they are more efficient, even if the savings from insourcing aren’t 30 percent.

The Pentagon must implement the contractor inventory so it can determine, contract by contract, which ones include functions too important or sensitive to outsource, which ones can be eliminated or scaled back, and which ones can be performed more efficiently in-house. Contractors know that increased visibility will inevitably lead to increased accountability, which is why the contractor inventory has still not been implemented, even though the requirement was first imposed in 2007. No quotas, no arbitrary goals, no unrealistic budget assumptions just common sense and rigorous accounting. That is the sourcing reform policy that is best for taxpayers and all Americans who depend on the federal government for important services. That is the sourcing reform policy that is codified in law. And that is the sourcing reform policy for which AFGE will continue to aggressively advocate for the Department of Defense and the rest of the federal government.