insourcing | The Contracting Education Academy

April 16, 2012 By AMK

Insourcing savings difficult to predict

Insourcing saved the Homeland Security Department $2.3 million since mid-2010, a DHS official said, even while counterparts at the Defense Department said their initial estimates of cost savings to be had from converting contractor positions into full-time civil service jobs were overestimated.

During a March 29 hearing of the Senate Homeland Security and Governmental Affairs subcommittee on contracting oversight, Debra Tomchek, executive director of the DHS balanced workforce program management office, said efforts underway at DHS since mid-2010 to rely less on contractors and to hire more civil servants have produced about $2.3 million in savings as of January 2012.

According to Tomchek’s written testimony, DHS calculates the cost of a contractor to a civil servant using a “DHS Modular Cost Model” that includes “one-time and recurring costs associated with establishing new positions.”

During the hearing, Chuck Grimes, Office of Personnel Management chief operating officer, emphasized that savings shouldn’t be calculated by just comparing labor costs.

When the Defense Department began an insourcing initiative in 2009, then-Defense Secretary Robert Gates estimated the Army could produce $400 million worth of savings and that conversion of contractor positions would save 40 percent on employment costs.

“We had two instances over different periods of time where we achieved anywhere from about 16 to 30 percent savings. And really the percentage savings are really dependent upon the function that’s being in-sourced and the location where that’s occurring,” said Jay Aronowitz, Army deputy assistant secretary for force management, manpower and resources.

Lack of a good cost model to compare the true costs of retaining civil servants versus hiring contractors has long been an obstacle to cost transparency and decision-making. The Center for Strategic and International Studies proposed in May 2011 a cost estimation taxonomy that would permit a comparison based not on labor costs, but the costs that federal agency would incur if it tried to meet its needs by internally running the equivalent of a private sector consulting firm.

— by David Perera, Fierce Government IT, Apr. 3, 2012 at http://www.fiercegovernment.com/story/insourcing-savings-difficult-predict/2012-04-03.

March 27, 2012 By AMK

Former OFPP chief cites progress in federal acquisition and workforce

Daniel I. Gordon, who served as the Administrator for Federal Procurement Policy from 2009 through 2011, has authored a paper on his tenure in at the Office of Federal Procurement Policy (OFPP).

The paper, published in the Government Contractor, presents reflections on his three goals while Administrator: strengthening the federal acquisition workforce, driving fiscal responsibility in federal acquisition, and rebalancing the relationship with contractors.

Gordon points to reversal of several negative trends, in particular, decline in the size of the federal acquisition workforce during the years 1992-2009, unsustainable annual increases in procurement spending during those years, and an unhealthy overreliance on contractors in performance of key government functions. In each of those key areas, Gordon reports on the progress made — increasing the size of the federal acquisition workforce, buying less and buying smarter (particularly through the strategic sourcing initiative), and a better balance in relations with contractors, with more clarity about the proper role of contractors and improved oversight, as well as efforts to increase communication with vendors.

A full copy of the article can be downloaded here: Reflections on the Federal Procurement Landscape – February 2012.

March 16, 2012 By AMK

Pentagon seeks to strengthen acquisition workforce

In an era of shrinking defense budgets, President Obama’s fiscal 2013 budget forges ahead with existing plans to strengthen the acquisitions workforce through improved management and modest increases in hiring. Still, many in the contracting community appear resigned to seeing fewer opportunities as the government seeks a proper balance between in-house and contracted management.

In its broad themes, the Defense Department budget stresses “better buying power” and creating new efficiencies and improving productivity through such tactics as reducing high-risk contracts and cutting spending on contracts for management support services.

The Pentagon’s request for $274.2 million for the Defense Acquisition Workforce Development Fund reflects its “continuing efforts to strengthen the acquisition workforce, which includes efforts to right-size and right-shape the workforce,” a department spokeswoman said in an email to Government Executive.

“We have increased the number of people in the acquisition workforce over the last few years,” the spokeswoman said. The president’s budget proposes resources that will help sustain recent new hires, “and some additional hiring under the initiative is provided for,” he said. “As we finish the capacity-building initiative, we are increasingly turning our attention to initiatives to improve the capability of the workforce that we have.”

Since 2008, the Pentagon has used the acquisition fund to fill 6,400 new positions in such areas as engineering, contracting, acquisition management and audit. Training capacity has risen by 19,000 resident and 100,000 online seats annually. Such additions are strategic, the spokeswoman said, because of demographics and recent budget tightening: 17 percent of the workforce is eligible for full retirement today and 19 percent is eligible within five years. Workforce gains decreased 32 percent between fiscal 2010 and fiscal 2011, and losses spiked up 32 percent between 2010 and 2011, she said.

And while the size of the acquisition staff is important, “ultimately, it is the quality of the workforce that determines the quality of our acquisition outcomes,” she said.

The Obama administration’s early efforts to reverse its predecessor’s tendency to increase the use of outside contractors in acquisitions slowed toward the end of the tenure of Defense Secretary Robert Gates.

But the Office of Federal Procurement Policy is quick to stress that the goal has been less to simply boost hiring than to “make sure we have the right balance of federal employees and contractors,” said a spokeswoman for the Office of Management and Budget. “Insourcing is a tool to help rebalance where work needs to be brought in-house, such as where the work is inherently governmental or the work involves a critical function and the government is at risk of losing control of its operations.”

The acquisition reforms and guidance of the past three years were intended to hold contractors more accountable for providing value, she added. “We have not seen, nor do we expect to see, a substantial shift to in-house.”

Dan Gordon, who left his post as Obama’s administrator for procurement policy in late 2011 to become associate dean for government procurement law at The George Washington University Law School, said in an email that he commends the Defense Department and the administration for continuing to rebuild its acquisition workforce.

“Almost every contracting challenge we face — in particular, poor acquisition planning, unjustified sole-source contracts and inadequate oversight of contractors — can be traced back to our failure during the 16 years before this administration to invest in the federal acquisition workforce,” he said.

“While I understand the reluctance to hire thousands of new federal employees, rebuilding our federal acquisition capability represents a sensible investment where money spent on hiring and training should pay off in terms of improved contracting, meaning a reduction in waste and fraud.”

Many in the contracting community have mixed feelings about the budget’s implications. Stan Soloway, president and chief executive officer of the Professional Services Council, says, “$274 million sounds like a ton of money, but it doesn’t go far when you’re talking 100,000 to 200,000 people.” He called it “a sustainability question,” noting that 75 percent of the Pentagon’s new hires are interns, of whom less than a third will stay.

Soloway said Frank Kendall III, acting undersecretary of Defense for acquisition, technology and logistics, is on top of the task of boosting capabilities of the acquisition workforce. “We on the private side would like to see it successful because bad procurements are not good and a smart customer is a better customer,” he says. He warned against a repeat of the 1990s “hollowing out” of key elements in the workforce, which he says left the government unable to handle the most technologically advanced contracts.

Trey Hodgkins, senior vice president for national security and procurement policy at TechAmerica, agreed the White House is committed to maintaining the acquisition workforce, but he still sees leaner times ahead.

“The reality of the budget is that one of the first things cut will be full-time equivalent positions, and we’re hearing they’re doing it through attrition,” he cautioned. “We will see a reduction in the number of contractors, but it won’t be at the hands of insourcing.”

Some critics argue that the strengthening, or insourcing, of the acquisition workforce hasn’t gone far enough. Winslow T. Wheeler, director of the Straus Military Reform Project at the Center for Defense Information, said, “outsourcing has gotten massively out of control, [and] our oversightless Congress has been ignoring the matter other than occasional rhetoric.”

He says an essential step is to audit the “money being spent on outsourcing and to start reducing it. Simultaneously, the resources spent on finding and hiring insourced government auditors and improving their skills is . . . the key to saving real money.”

— by Charles S. Clark, Government Executive, March 2, 2012, http://www.govexec.com/contracting/2012/03/pentagon-seeks-strengthen-acquisition-workforce/41369.

February 23, 2012 By AMK

OFPP and the dangers of politicizing procurement

Keep political rhetoric out of procurement policy.

That’s the advice some acquisition experts would like to share with Joe Jordan, President Barack Obama’s nominee to lead the Office of Federal Procurement Policy.

They say it is tempting for a new OFPP administrator to inject some campaign-style thinking into his job, but it generally ends up distracting him from the task at hand: creating sound procurement policy.

“His highest priority should be improving the procurement process instead of getting sucked into campaign rhetoric and high-profile — but ultimately empty — gestures,” said Steven Schooner, a professor of government procurement law and co-director of the Government Procurement Law Program at George Washington University.

At a time of heightened concern about government spending, procurement policy could be a legitimate issue in campaign politics. Unfortunately, what sounds good in a stump speech doesn’t always work well as policy, said Larry Allen, president of Allen Federal Business Partners.

“You need to be able to tell your superiors ‘no’ to some of their ideas that might end up causing disruptions to the procurement program,” he said.

Experts say that for the most part, former OFPP Administrator Dan Gordon managed to keep politics out of procurement. He focused on three primary tenets: ensuring fiscal responsibility, reducing high-risk contracts and strengthening the acquisition workforce. In an interview with Federal Computer Week in December 2011, Gordon reiterated those points, adding that his successor should keep them as the highest priorities.

Gordon left the post at the end of 2011 to become associate dean for government procurement law studies at George Washington University.

Nevertheless, the Obama administrator has had a tendency to view the procurement process as fodder for the campaign trail by focusing on issues such as insourcing and contractors’ political contributions, Schooner said.

He added that Jordan should steer clear of such tactics and instead focus on improving the skills of the acquisition workforce and defining clear regulations that empower employees to make wise decisions on the government’s behalf.

Gordon earned respect from the acquisition community by reinstituting the Frontline Forum, which gives acquisition employees the opportunity to discuss key challenges and concerns in face-to-face meetings with the administrator. Gordon also initiated the Mythbusters campaign to clarify misconceptions among government and industry employees that hinder the procurement process.

“Personally, I think the most successful administrators have reached out to, engaged with, and won the confidence and support of the acquisition community,” Schooner said.

Before joining the Office of Management and Budget in early December as a special assistant to Acting Director Jeffery Zients, Jordan was associate administrator of government contracting and business development at the Small Business Administration.

He also spent a number of years in the private sector. He worked at global consulting firm McKinsey and Co., where he specialized in developing purchasing and supply management strategies for a number of industries, and he managed operations at Backwire, a Web-based publishing and marketing firm.

“His experience gives him a unique perspective on the effects government acquisition policies can have on businesses of all sizes, and we believe that sensitivity will help drive sound polices,” said Stan Soloway, president and CEO of the Professional Services Council.

Jordan might also be well-prepared to tackle some key small-business issues, such as how small companies have suffered as a result of the government’s insourcing efforts, said Robert Burton, former deputy OFPP administrator and now a partner at Venable law firm.

In recent months, several members of Congress have introduced legislation that seeks to reform small-business procurement, including bills that would increase the government’s 23 percent goal for small-business contracting and add consequences for missing the mark.

However, Allen cautioned against narrowing the OFPP administrator’s broad responsibilities. In other words, “don’t try to be the head of the SBA or some other government organization from this position,” Allen said.

Jordan will have his hands full. Allan Burman, who served as OFPP administrator in the early 1990s, said the administrator needs to communicate with disparate groups in the procurement community, including federal employees, contractors and members of Congress, who play a major role in acquisition.

“It helped me get in good standing by doing that,” said Burman, who is now president of Jefferson Solutions, the government consulting practice of Jefferson Consulting Group.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week. This article was published on Feb. 10, 2012 at http://fcw.com/articles/2012/02/10/advice-ofpp-administrator-joe-jordan.aspx.

January 26, 2012 By AMK

Contractors will remain in limbo during debates over automatic Defense cuts

“Fasten your seat belts,” a panelist told Defense Department contractors ahead of likely sparring between lawmakers and the White House over the details of automatic budget cuts slated to hit the Pentagon in January 2013.

“Defense contractors are hostages in the showdown between the president and Congress over funding decisions on taxing and spending.” John Cooney, a partner at Venable LLP law form and a former Office of Management and Budget general counsel, told a panel convened Tuesday by the Professional Services Council, a contractors trade group.

Despite the failure last fall of a group of lawmakers dubbed the super committee to agree on $1.2 trillion in savings, the Congressional Budget Office and the Office of Management and Budget have determined that no automatic cuts — called sequestration under the 2011 Budget Control Act — are necessary immediately.

But barring legislative intervention, spending related to national security, which in addition to the Pentagon includes the Homeland Security and Veterans Affairs departments and intelligence agencies, could face across-the-board cuts on Jan. 3, 2013.

Robert Keith, former senior specialist at the Congressional Research Service, said in a review of the budget procedures that Defense would be hit with a cut of 9.3 percent in 2013 if the president exercises his discretion to exempt military personnel, or 7.5 percent if he does not exempt them. From 2014-2014, that would translate to cuts of about $55 billion a year, Keith said.

“There have been such cuts in the past, but not of this magnitude,” he said.

In reviewing the legal procedures used in a sequestration, Cooney noted the practice has been invoked only once, following passage of the 1985 Balanced Budget and Emergency Deficit Control Act, known as the Gramm-Rudman-Hollings budget act. Back then, contractors “got a free ride,” he said, whereas this year the Obama administration negotiated to put many more contractors’ interest on the table. “The only silver lining from Gramm-Rudman,” he said, “was that both Congress and the executive branch figured out that the cuts and revenues generated the intellectual capital for the 1986 reform of the tax code.”

If the sequestration kicks in next January, the details will not be known until there is an analysis from CBO, then a report from OMB and then an order to agencies from the president, the panelists noted. The cuts, technically called “impoundments” and “apportionments,” would be legally binding for every agency, with violators subject to criminal penalties.

“But the president can put his thumb on the scale,” Cooney said, meaning he has some discretion in favoring some programs within line items, though he may chose not to exercise it for fear of alienating Congress. “It’s highly controversial within agencies. The contracting officers will be told of the cuts’ impact relatively late in the process.”

Agencies also will have some discretion, Cooney said, in weighing personnel cuts against contract expenditures, for example. Their least attractive option would be to terminate contracts; their most feasible options would be to lower the cap on existing cost reimbursement contracts by telling contractors, in effect, “Use your best efforts but don’t exceed $Y dollars,” he said. Though prior-year contracts would be exempt, there would likely be few new contracts, and agencies would rely more on indefinite delivery-indefinite quantity contracts.

Contractors were encouraged to be proactive and “engage their customers” by staying in touch with contracting officers despite the limits on what they will know about future cuts.

Alan Chvotkin, PSC’s executive vice president and counsel, said agencies likely will reduce mandatory contracting commitments, maximize discretionary commitments and defer contract award decisions. That means adjusting acquisition strategies for new awards based on available funds, he said, and looking at “long-term agency mission flexibility.”

He predicted greater use of General Services Administration schedules for products and services, and he counseled contractors to review their past performance records in federal databases.

— by Charles S. Clark – Government Executive – January 18, 2012 – http://www.govexec.com/story_page.cfm?articleid=49790&dcn=e_gvet

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