The outsourcing wave rolls on
- By William Matthews
- Sep 25, 2000
If predictions by industry and government studies are correct, more federal
information technology jobs will be turned over to the private sector in
coming years. The only question is whether the numbers will be modest or
Look for "steady, moderate growth" in government agencies' use of contract
IT workers over the next five years, says Input, a Virginia-based market
research company. By 2005, Input projects that the federal government will
be spending $40.3 billion a year on IT services and systems — $10 billion
a year more than is being spent this year. And much of that new money likely
will be used to hire contractors, said Kevin Plexico, Input's vice president.
However, Plexico does not envision federal worker layoffs. "There is
not wholesale support for getting rid of [federal] employees and starting
over" with contract workers, he said.
Although layoffs may not occur, the Bureau of Labor Statistics predicts
a shrinking federal IT workforce. BLS' projections, which cover a 10-year
period from 1998 to 2008, foresee a loss of 164,000 federal jobs that will
bring the workforce down to 1.6 million — a 9 percent loss.
Retirements and voluntary departures for jobs in the private sector are
likely to account for some of the decline.
At the same time government IT employment is projected to shrink, job
growth in private IT companies is expected to explode. BLS projects a 117
percent increase in private-sector IT employment, making that segment of
technology "the fastest growing industry in the U.S. economy."
Growing competition with private employers for IT workers is one of the
toughest problems federal managers face. In a survey earlier this year,
federal chief information officers agreed that IT outsourcing would surely
increase. They cited difficulties hiring, retaining and retraining federal
workers as key reasons for turning work over to the private sector.
But according to Plexico, there is another critical factor encouraging outsourcing:
Legislation such as the Federal Activities Inventory Reform Act and
administration directives such as the Office of Management and Budget's
Circular A-76 require agencies to identify IT functions that can be contracted
At the same time, laws such as the Paperwork Reduction Act and the Paperwork
Elimination Act require greater use of paperless IT. Combined with other
growth in e-government, the trend suggests a growing need for IT workers.
The General Accounting Office reached a similar conclusion after studying
outsourcing earlier this year. In a report, GAO told lawmakers it could
not forecast how many jobs are likely to be outsourced. But it noted that
the government as a whole spends more to buy services, including those for
running computer systems, than it spends buying supplies and equipment.
And that trend is not expected to reverse.
After conducting their survey, the federal CIOs concluded that the federal
government "is not likely to have the skilled technical workforce required
to implement and support electronic government. This will increase the reliance
on industry partners."
That trend is already evident at the Treasury Department, said Fred
Thompson, program manager for IT workforce improvement at Treasury. Two
of the agency's subsidiaries, the Internal Revenue Service and the Customs
Service, "are planning major IT initiatives and are looking for significant
contractor support," he said.
"I don't see dramatic cutbacks or layoffs" among federal IT workers,
Thompson said, but to fill new jobs, Treasury is counting on contractors,
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