Army gears up for contractor cuts

The Army is calling on all commands to prepare for cuts in the civilian government and support service contract workforce starting in 2008. The cuts, driven by a directive from the Army chief of staff, aim to reduce the government civilian workforce by 5 percent and the contractor workforce by 10 percent by 2013.

An April 7 memo from the chief of staff asks all commanders to identify inefficiencies in their workforce. The memo requires detailed reporting on contractor and civilian numbers, and each command is expected to project which areas of the workforce they could reduce, according to multiple sources familiar with the document.

The Army acknowledges the memo but remains tight-lipped about the details. The service has not targeted specific programs for reductions, an Army spokesman said.

Dean Sprague, a public affairs officer at the Program Executive Office for Enterprise Information Systems, said the memo is a “rounding of the troops” document.

PEO-EIS is in the process of responding to the Army’s request for information. “It’s early,” Sprague said. “We’re still assessing the information that was provided to us. We don’t know how it’s going to affect us.”

The cuts could come through attrition, early retirement and the natural expiration of some contracts, he said. Each command will be responsible for showing how it can meet the guidelines and operate more efficiently.

The Air Force is apparently undertaking a similar effort. A document called an Air Force Program Budget Decision, dated Dec. 20, 2005, outlines various organizational and process efficiencies for fiscal 2007 to 2011 that are intended to make more money available for transformation.

Army complicates hiring process
A Feb. 23 Army memo outlined a new policy for the hiring of contractors and civilian employees. A command cannot hire a service contractor or civilian without approval from a principal at Army headquarters or a senior commander. The memo also mandates monthly reports on all hiring decisions, including tallies of net cost savings.

Hiring or contract officers must complete a hiring request form, which was attached to the Feb. 23 memo, and submit it to supervising officers. The policy requires officials to justify all new hires or new workers on existing contracts. Contractors are worried that performance could suffer with the delay or denial of new employees needed to complete an ongoing contract.

In addition, some in industry fear the policy could create delays just by adding another layer of bureaucracy to the hiring process.

“When you have a demand for personnel, essentially it’s going to end up on one person’s desk in each command,” said Trey Hodgkins, director of defense programs at the Information Technology Association of America. “Our concern is that it’s creating a mechanism [with] the potential for a bottleneck.”

The Feb. 23 memo defends workforce adjustment as part of the Lean Six Sigma reforms under way at the Army. “As we begin to implement Lean Six Sigma throughout the Army, the workload performed by our civilian employees and contract services personnel will decrease,” the memo states. “Consequently, it is essential that the workload match the workforce.”

Lean Six Sigma is a set of management tools that companies and industries worldwide have embraced. The Lean management principles derive from the Toyota Production System of the 1980s and focus on efficiency. Six Sigma refers to a statistical methodology for eliminating defects in any process. Motorola pioneered Six Sigma in 1986.

The Army is implementing Lean Six Sigma initiatives with the help of consultant Michael George, chairman of the George Group.

Most analysts agree that Lean Six Sigma is a positive initiative for the Army. “It’s actually pretty amazing that government has glommed onto this,” said Pierre Chao, director of defense industrial initiatives at the Center for Strategic and International Studies. “In some ways, it reflects how forward-thinking they’re trying to be. Clearly, the goal is to increase efficiency and reduce the amount of total people you need to do things.”

Contractor cuts not always wise
Although contractors and civilian government employees are often the first people to go, that is not necessarily the smartest way to make cuts.

“Everybody thinks it’s an easy place to find savings,” Chao said. Contractors are an easy target because contracts can be canceled, and civilian positions are easier to cut than soldiers’. However, the demand for people to do the needed work won’t abate, he said.

Dan Heinemeier, president of the Government Electronics and IT Association, said using contractors often saves money. Contracting adds flexibility and gives managers prerogatives in places where in-house staff would be more expensive, he said.

The Army’s IT community is uniquely susceptible to cuts in contractor and civilian jobs. The IT business in the Army moves at a high speed and is therefore dependent on vendors and contractors for the latest technologies. Because of short cycle times, it’s difficult to project IT needs and programs over longer periods.

Also, in dealing with technology issues, there is a sense of immediacy that might not apply to other support services, such as installation maintenance, Heinemeier said.

“You can’t have it both ways,” he said. “You can’t look to contracting as a means of cutting costs and then say, ‘We’re going to keep the contracting to a minimum as well.’ ”