The outsourcing wave rolls on

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:

government reform.

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,

he added.

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