Insourcing failed, DOD's Gates says. Now what?

Obama's initiative has not brought savings, DOD head says

Defense Secretary Robert Gates has conceded the Obama administration's insourcing push has failed to save money.

“We weren’t seeing the savings we had hoped from insourcing,” as the Defense Department brought work from the private sector in-house, he said Aug. 9.

Gates has unveiled a sweeping plan to save money in a variety of other ways, including cutting entire organizations and consolidating information technology.


Related story:

Gates details plans to slash DOD budget

Defense officials hone their insourcing strategy


“The problem with contractors is — and what we’ve learned over the past year — is you really don’t get at contractors by cutting people,” Gates said at a press conference about his departmentwide changes. He said contractors get the money from a contract and then hire as many as they think is necessary to do the work. “So the only way, we’ve decided, that you get at the contractor base is to cut the dollars.”

To make DOD more efficient and less expensive, Gates directed a reduction of funding for support contractors by 10 percent a year for each of the next three years. The goal is to reduce the number of contractors that are carrying out functions that are inherently governmental, or work that only a federal employee should do.

“I concluded that our headquarters and support bureaucracies — military and civilian alike — have swelled to cumbersome and top heavy proportions, grown over-reliant on contractors and grown accustomed to operating with little consideration to cost,” Gates said.

Gates’ plan is to also add no more full-time positions in the Office of the Secretary of Defense and other defense agencies after fiscal 2010 to replace contractors, except for critical needs.

The changes will hit many people in DOD as officials look to reorganize and save money.

Robert Hale, undersecretary of defense comptroller, on Aug. 9 shied away from giving a specific number of people who will lose their jobs as a result of the changes.

“We’ve done some internal analysis to help the secretary make the decisions. Now we need to go through the detailed implementation. Only after we’ve done that are we going to have a firm idea of the personnel changes. So it’s premature to give you a number,” he said.

After being pressed for a rough estimate, Hale said the Joint Forces Command has 1,600 civilian employees, 1,200 military personnel and 3,000 contractors. The Business Transformation Agency has more than 350 civilian employees. The secretary has recommended closing both organizations.

The Obama administration has pushed agencies to insource work — jobs that are inherently governmental functions or closely associated with those jobs. The president’s March 4, 2009, procurement reform memo lays out the insourcing agenda.

Gates’ changes come as he expects to receive less money in fiscal 2012 than what it costs to run DOD.

"To preclude reductions in military capabilities that America needs today and those required for the future, that spending difference will need to be made up elsewhere in the department," Gates said.

2014 Rising Star Awards

Help us find the next generation of leaders in federal IT.

Reader comments

Mon, Jan 31, 2011 Sandy Texas

I am faced with unemployment the end of February, 2011 due to a blanket policy of government in sourcing by the Obama administration. Not all government contractors or contract employees are in it for easy money. Quite the contrary, my wages and benefits are determined by the Dept of Labor. In the 14 years I have worked for 2 government Contractors, I have had no merit raises because our salaries and benefits have always been determined by the Dept of Labor, and it is done so to save the government money. Government service contracts were created to cut costs of benefits paid to federal employees in order to save the government money. I currently earn $34,000.00 as government service contract employee. My health insurance coverage is through my husband’s employer because it provides better coverage than the policy provided through my government contractor. The pay range for the same position as a federal employee is $41,390.00 - 53.811.00 / year, a significant difference in pay than wages and benefits determined by the Dept of Labor for government service contract employees. It is a false belief that Government in sourcing will save the government money. I do my job everyday to the best of my ability because I have had a job I enjoyed for 14 years, something many workers don't experience on the job. I work with 16 others who face unemployment as I do. This blanket policy of transitioning contractors to GS is not an equal opportunity to those like me who have no preference points, and who are not status candidates when re-applying for jobs that are transitioning from contract to federal positions. I am disappointed that 14 years on the job for a government service contractor means so little to current government policy and this administration to keep dedicated and talented government service contract employees, employed in 2011 and beyond.

Mon, Jan 3, 2011 Fred

It's fact, my position contracted out costs 25% more in overhead than the equivilant government position. It's a fact, in the Air Force, it was shown that a contract position, GS-12 skill level, they paided $6000-$8000 more for the contract position for the same duty. It is fact, contractors are locked hard into only doing what they have contracted to do and no more. Now if we are comparing contract A-76 studies to reality and contracting out, let's side step current trends and address reality and do what is financially best for the American People! In many cases contract work is better. In many cases it pays to keep the work in house. We need to quit generalizing and give stronger review to the best answer. And just the dollars to contract out isn't the answer. There's loyalty of fed. employees vs contract. There's job stability and workforce flow by keeping people longer. There are many many factors to consider in the cost, many of which I'm afraid was left out of the equation. I think this seriously requires an open mind on both sides, something not very well exhibited in the initial studies and motives for contracting things out.

Thu, Sep 30, 2010 MikeR Colorado

Having been military for 25 years and a private contactor supporting the Government an equal amount of time - my assessment is as follows. Out sourcing to private contractors in many cases is more cost effective and technically beneficial in many cases. Particulalrly when a task requires a variety skills as many companies can reach across their company to put the right skills on the job only for the time needed to compelte the task or sub-task. When finished the contractor goes away. Government studies conducted just prior to this administration also concluded the same -- which raises the question why are we now going in the opposite direction?

Fri, Sep 17, 2010 Texas

In-sourcing is such a waste, it has been demonstrated over and over that contractors are actually more efficient than the government. The A-76 contracts are a good example. How many times does the government win in these solicitations and now they have been eliminated in the spirit of more government. Virginia is point on in the lack of accountability for government employees. Promote the individual rather than address the problem. No doubt in SOME cases contracts take advantage, but in the same breath, the government does the same thing but continues to grow.

Thu, Aug 19, 2010

Some one is really missing the point here, The Peter Principal is well in the government. In-sourcing is a pipe dream and as long as we have to live with the non expectations of the upper management level it will never change. Most places in the government build upper layers to protect each other. You either are or you are not bottom line. The average federal worker does not stand a chance and therefore many have given up on the job but still carry on with doing the minimum. There are no more incentives for doing a good job any more from the top down.

Show All Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above