Army | The Contracting Education Academy

February 11, 2011 By AMK

Army suspends all ongoing insourcing plans

In an about-face, the Army has suspended all of its ongoing insourcing activities, potentially savings thousands of private sector positions.

In a Feb. 1 memorandum, Army Secretary John McHugh announced he was halting the service’s insourcing initiative immediately in favor of a scaled-back approach in which his office would have to directly approve projects.

“In an era of significantly constrained resources, the Army must approach the insourcing of functions currently performed by contract in a well-reasoned, analytically based and systemic manner, consistent with law and prevailing presidential and Department of Defense guidance,” McHugh wrote in the memo, released on Thursday by the Professional Services Council, an industry group that has opposed plans to bring contractor jobs back in-house.

The memo suspends all ongoing insourcing transitions, but does not reverse efforts that already have been completed.

Army spokeswoman Anne Edgecomb said the memo is not intended to stop insourcing altogether but to ensure that the process is conducted responsibly and deliberately. “We are trying to make sure we do everything we can to be fiscally responsible,” Edgecomb said. “We see the writing on the wall.”

Edgecomb did not have figures immediately available on the number of contractor positions the policy change would effect.

The Defense Department’s insourcing program leader said on Thursday that the Pentagon did not direct Army to change its policy.

“The department is committed to meeting its statutory obligations under Title 10 to annually review its contracted services, identifying those that are inappropriately being performed by the private sector and should be insourced to government performance,” said Thomas Hessel, a senior manpower analyst in the Office of the Undersecretary of Defense for Personnel and Readiness, in a statement to Government Executive. “This includes services that are inherently governmental or closely associated with inherently governmental in nature; provide unauthorized personal services; or may otherwise be exempted from private sector performance … While some contracted services may be identified for insourcing, some services determined to be no longer required or of low priority may be eliminated or reduced in scope while others will continue to be provided by the private sector.”

All future insourcing proposals, McHugh wrote, must include “at minimum, a manpower requirements determination, an analysis of all potential alternatives to the establishment of permanent civilian authorizations to perform the contracted work, certification of fund availability and a comprehensive legal review.”

Thomas Lamont, assistant secretary of the Army for manpower and reserve affairs, along with Mary Sally Matiella, assistant secretary of the Army for financial management and comptroller, will be responsible for developing criteria to evaluate the efficiencies generated from the policy change, McHugh said.

Contractor groups, which have long criticized the Defense Department’s insourcing plans as driven by quotas and lacking any verifiable cost savings, applauded the development.

“Secretary McHugh is taking the right approach to insourcing,” PSC President Stan Soloway said. “We have said all along that all sourcing decisions for clearly commercial work — whether insourcing or outsourcing — must be done strategically with the best interests of the government mission and American taxpayer in mind.”

John Palatiello, president of the Business Coalition for Fair Competition, a group formed to challenge the Obama administration’s insourcing plans, said the memo is proof the initiative has been poorly executed.

“BCFC renews its call for a governmentwide moratorium on insourcing until common-sense standards and metrics for assuring that any insourcing is in the taxpayers’ interests, does not increase unemployment, and is focused on statutorily defined inherently governmental activities, not commercial activities,” Palatiello said.

The memo comes only a few weeks after the Government Accountability Office reported the Army had identified more than 4,200 full-time jobs in which contractors are performing either inherently governmental or unauthorized personal services. In both the inherently governmental and the unauthorized personal services contracts, the Army typically would be required to bring those functions back in-house.

Defense Secretary Robert Gates announced in August 2010 that the Pentagon was implementing a fiscal 2011 billet freeze and halting its insourcing plans because of a lack of cost savings. But, the plan affected only civilian agencies and offices. The military services were exempt from the freeze, allowing them to continue with their insourcing plans.

Soloway called on the other military services to follow the Army’s approach. “Through such a process the Army, DoD and the taxpayer will gain vital insight into the total life-cycle costs associated with these decisions, the degree to which they address the Army’s workforce needs, and more,” he said. “We hope, as they say, the Army leads the way.”

– by Robert Brodsky – GovExec.com – February 3, 2011

January 21, 2011 By AMK

GAO: Army contractors performing inherently governmental functions

The Army has identified more than 4,200 full-time jobs in which contractors are performing either inherently governmental or unauthorized personal services, according to a new watchdog report released on Tuesday.

The Government Accountability Office report, which generally focuses on the Defense Department’s approach to counting service contractor employees and functions, includes previously unreported details on the scope of work being performed by Army contractors.

Since the start of 2009, the Army has completed at least one review of 24 of its 26 commands and headquarters organizations and identified 2,357 contractor employees performing inherently governmental functions, the report said. Examples of inherently governmental activities include awarding and administering contracts, determining budget priorities, and hiring or firing federal employees. Another 1,877 contractors were identified as providing unauthorized personal services that federal employees should be performing. Personal services contracts are contracts that make private sector personnel appear, in effect, as government employees. In both the inherently governmental and unauthorized personal services contracts, the department would typically be required to bring the functions back in-house.

An additional 45,934 Army contractors are performing activities deemed closely associated with inherently governmental functions. These jobs, which include assisting in contract management or evaluating another contractor’s performance, generally are not statutorily prohibited from outsourcing but require strict oversight and management.

Army officials indicated that the reviews help them decide which functions should be performed by military personnel. The GAO report did not provide details on the number of Army positions that have been subsequently insourced, and a Defense spokeswoman did not respond to a request for comment.

Officials at the Army’s Installation Management Command in San Antonio, Texas, told GAO that most insourcing during fiscal 2010 was a result of losing statutory authority to contract for certain security guard functions. They noted that most insourcing in fiscal 2011 will be prompted by budgetary decisions. In August 2010, Defense Secretary Robert Gates announced plans to reduce funding for service support contractors by 10 percent annually from fiscal 2011 to 2013.

Agencies across government are expected to compile an annual inventory to determine the number and type of service contract employees. The Army collected the data on its centralized Contractor Manpower Reporting Application system, which captures information companies report at the contract line item level.

The Air Force and Navy have faced bigger challenges in developing their inventory of service contractor functions. According to the GAO report, the two services have decentralized approaches that rely on their major commands to review the activities of contractors listed in their inventories and report the results to headquarters.

The Air Force completed its initial review in January 2010. But for approximately 40 percent of the contracts, reviews contained inadequate or incomplete responses that could guide a decision to insource those functions, GAO said.

The Air Force Material Command, for example, identified 152 contract actions that potentially involved inherently governmental functions. The official responsible for the command’s review process, however, was unsure of the extent to which these determinations were correct.

The Navy issued guidance to its commands in September, but the results of its initial review were not yet available. The service had previously planned to establish roughly 10,000 civilian positions by fiscal 2015 through insourcing contracted services.

“DoD has acknowledged the need to rebalance its workforce, in part by reducing its reliance on contractors,” GAO said. “To do so, however, the department needs good information on the roles and functions played by contractors, which the department currently does not have.”

Air Force and Navy contracting officials told auditors they rely on processes other than the service contract inventory — such as post-award monitoring — to avoid placing contractors in inherently governmental functions.

According to the Air Force’s fiscal 2010 insourcing plan, the majority of decisions to bring work in-house would be based on analyses of whether the work could be performed more cost-effectively by government employees. Navy officials said their commands review contracts during the pre-award and option phases to prevent the award of contracts that include inherently governmental functions or unauthorized personal services.

The Defense Department reported spending on service contracts leapt from $127 billion in fiscal 2008 to $140 billion in fiscal 2009, although the surge could have been influenced by more thorough and detailed reporting by the military services, according to GAO.

In 2009, Defense officials announced they would cut 33,000 service support contractors departmentwide by 2015. The Pentagon had planned to replace those contractors during the next five years with 39,000 new full-time government employees, many through insourcing.

As of June 30, 2010, more than 16,500 civilian positions were established across the department as a result of insourcing contracted services, Thomas Hessel, a senior analyst in the Office of the Undersecretary of Defense for Personnel and Readiness, told Government Executive in September. More than half of these positions were brought in-house because the work was determined to be inherently governmental, closely associated with inherently governmental, or otherwise exempt from private sector performance, he said.

The Defense Department has halted insourcing at its Pentagon offices and commands because of a fiscal 2011 billet freeze. But the military services are not subject to the freeze, allowing insourcing to continue.

– by Robert Brodsky – GovExec.com – January 19, 2011

January 6, 2011 By AMK

Gates takes ax to Defense programs to end ‘culture of endless money’

Defense Secretary Robert Gates unveiled steep cuts to several pricey and deeply entrenched weapons programs last Thursday as part of sweeping reforms to the department’s budget planned during the next half-decade.

During an afternoon news conference at the Pentagon, Gates announced the Defense Department had identified a total of $154 billion in efficiencies over the next five years through cuts to overhead, improving business practices and eliminating troubled programs.

The service agencies will be allowed to keep and reinvest roughly $70 billion, though $28 billion from those funds would be directed to higher-than-expected operating expenses, including fuel, maintenance, health care and training costs.

The department also announced it would bring down the overall size of the U.S. fighting force by trimming the Army by 49,000 soldiers and the Marines by 20,000 starting in fiscal 2015. That decrease would be first for the armed forces since the start of the wars in Iraq and Afghanistan.

The secretary stressed that the program decisions amounted to a reduction in the overall rate of growth at the department rather than a decline in total defense spending. “My hope is what had been a culture of endless money . . . will become a culture of savings and restraint,” Gates said.

On the chopping block is the Expeditionary Fighting Vehicle, an armored, high-speed amphibious assault vehicle that has been in the planning stages since the Reagan administration. The $14 billion program has experienced multiple testing delays and cost increases. Thus far, Defense has spent $3 billion on the project.

The Marines had expected to purchase 573 of the floating tanks, but on Thursday Gates terminated the program altogether in his planned 2012 Defense budget. Gates acknowledged this was a “controversial decision,” but he noted the department could not afford a program that would “essentially swallow the entire Marine vehicle budget.” Rather, the Marines will upgrade their existing fleet of amphibious vehicles.

“Despite the critical amphibious and warfighting capability the EFV represents, the program is simply not affordable given likely Marine Corps procurement budgets,” said Marine Corps Gen. James Amos. “The procurement and operations-maintenance costs of this vehicle are onerous.”

Some industry analysts believe the department is being short-sighted with the EFV decision. Loren Thompson, who runs the Virginia-based Lexington Institute, a defense think tank, argued there is no safer way to get Marines ashore than the Expeditionary Fighting Vehicle. “The bottom line is the Marine Corps either gets EFV or it loses a lot of men doing the mission the old fashioned way,” said Thompson, who serves as an adviser to several major defense contractors.

Gates also announced plans to delay by two years the Marine Corps’ version of the F-35 fighter jet because of significant testing problems. The secretary said the program, run by Lockheed Martin Corp., would be reviewed for the next two years to see whether it demonstrates increased reliability. If the program does not show improvements, it could face termination, Gates said.

The Army also canceled plans to purchase a surface-to-air missile defense system being developed by Massachusetts-based Raytheon Co.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, stressed that the program cuts actually would “improve our readiness. We can do things smarter and more efficiently.”

The department also on Thursday elaborated on previously announced plans to eliminate $100 billion in overhead costs and inefficiencies from the Defense budget. The Air Force identified $34 billion in proposed efficiencies, while the Army and Navy found $29 billion and $35 billion, respectively, in potential savings.

Nonservice agency offices, including the Office of the Secretary of Defense, identified $54 billion in potential cuts through consolidating information technology support; a hiring and salary freeze; a reduction in generals, admirals and civilian executives; the elimination of hundreds of nonmandatory reports; and an increase in TRICARE health premiums for military retirees. In addition, a 10 percent reduction for each of the next three years in service support contracting is expected to save the department $6 billion, Gates said.

To take effect, the program cuts must still be approved by Congress, and top Republicans already are expressing skepticism.

These proposed cuts “are being made without any commitment to restore modest future growth, which is the only way to prevent deep reductions in force structure that will leave our military less capable and less ready to fight,” said Rep. Howard “Buck” McKeon, R-Calif., chairman of the House Armed Services Committee. “This is a dramatic shift for a nation at war and a dangerous signal from the commander in chief.”

Sen. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee, said the Defense proposals would be discussed as part of the normal budgeting hearing process. But he stressed the need for a new Expeditionary Fighting Vehicle. “The Marine Corps needs a next-generation amphibious vehicle,” Levin said. “The nation needs us to build and buy that vehicle at a reasonable cost.”

Gates briefed the leaders of the House and Senate Armed Services and Defense Appropriations committees on Thursday morning.

The Pentagon’s proposed budget for 2012, which includes funding for the wars, is expected to be $553 billion, or about $13 billion less than it had expected.

– By Robert Brodsky – GovExec.com – January 6, 2011

November 30, 2010 By AMK

Army issues revised RFP for ground combat vehicle

The Army on Tuesday asked industry to submit proposals for developing a new infantry fighting vehicle that could be used across the full spectrum of battlefield operations, from counterinsurgency to ground combat.

The request for proposals follows the August cancellation of a similar solicitation after Defense Department acquisition officials questioned the service’s requirements and strategy for buying a new ground combat vehicle. Army leaders have struggled with the best way to fill the service’s need for tactical vehicles after Defense Secretary Robert Gates scuttled that portion of the wide-ranging Future Combat Systems program last year.

“The Army and [Defense acquisition officials] have worked through this and are firmly committed to getting this kicked off,” Col. Andrew DiMarco, ground combat vehicle project manager, said in a conference call with reporters.

Michael Smith, the official in charge of developing concepts and requirements for the vehicle, said the Army is looking for a vehicle that can be adapted “on the fly” to changing battlefield requirements and threats.

The infantry fighting vehicle must be able to carry nine soldiers and their gear, and it must have a modular armor system that can be tailored to specific situations, according to Smith.

The technical development phase will have full and open competition, DiMarco said, adding the Army could select up to three contractors for the initial award. To control costs, the Army has set a spending ceiling of $450 million for the development phase. Per unit manufacturing costs are to be between $9 million and $10.5 million with a life-cycle cost target of $200 per operating hour.

Proposals are due Jan. 21, 2011, and the Army expects to announce awards in April, said DiMarco.

The Army eventually plans to buy about 1,800 vehicles, he said.

– By Katherine McIntire Peters – GovExec.com – November 30, 2010

November 27, 2010 By AMK

Alaska Native subsidiary got $250 million Army contract

An Army contract worth as much as $250 million awarded to a subsidiary of Cape Fox Corp., an Alaska Native corporation in Southeast, is drawing attention two years later, according to The Washington Post. The newspaper, which has been reporting on special federal contracting privileges for Alaska Native corporations, says United Solutions and Services, known as US2 and co-owned by Cape Fox Corp., got the no-bid federal contract to help the Army in “a global campaign to prevent sexual assault and harassment, without seeking outside bids.” It was an odd contract to award US2, The Post reports: US2 “had just three employees and several small contracts for janitorial services and other work. It was based in a four-bedroom colonial, where the founder worked out of his living room.” With the Army contract, US2 needed help to complete the work:

With the Army’s knowledge, the firm subcontracted the majority of it to more established companies, a Washington Post investigation has found. Federal rules generally require prime contractors on set-aside deals to perform at least half of the work, something US2 did not do on more than $100 million worth of jobs, according to interviews with Army officials and an analysis of federal procurement data. In response to The Post’s findings, officials at the Department of the Interior, which managed the contract for the Army, said proper procedures were followed in the contract award. But they said in a statement that they have asked the department’s inspector general to investigate.

It’s not the first time Cape Fox has come under scrutiny this year. Alaska Dispatch reported in May that Cape Fox and two companies it owns — APM LLC and 1CI Inc. — were suing two of APM’s former CEOs and four of those men’s companies for $27 million in damages. Last fall, the Air Force expelled 20 contractors from its procurement list, citing an extensive scheme to exploit and deceive an award process designed to assist small and disadvantaged businesses — businesses which, if Native-owned, are given preferential treatment. Six of the companies named had direct ties to Cape Fox. The rest had ties to former APM chief executive Townsend Jackson, his brother Craig Jackson, and other family members.

Cape Fox and other Alaska Native corporations have been under fire for benefiting from a special federal contracting program. Many Native corporations have created subsidiaries that are involved in what are called 8(a) contracts with the federal government. For years, critics have claimed Native corporations have received unfair advantages compared to other small businesses and that the Small Business Administrations 8(a) program lacks oversight.

The program creates preferences for economically disadvantaged small businesses. Alaska Native companies enjoy the lion’s share — 74 percent — of federal 8(a) awards, according to a 2009 report by the U.S. Senate Subcommittee on Contracting Oversight. Native corporations can go after federal contracts without facing competition. They can also subcontract to larger companies that aren’t Native-owned but have the expertise to fulfill the contracts.

– Alaska Dispatch – Nov. 27, 2010

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