Insourcing Debate Is About Strategy, Not Numbers

As the federal government continues to find ways to move contracted work back in-house, it must overcome some major obstacles. One area that has been significantly neglected is effective human capital planning. As a result, the government’s lack of in-house resources has increased its reliance on contractors to help it perform vital functions. This issue became acute with the federal acquisition workforce, but only recently garnered substantial attention. Although human capital plans are being implemented as part of the Office of Management and Budget’s (OMB) guidance on contract savings initiatives, the real challenge remains understanding the roles and responsibilities of current contract activities and how a blended workforce will be managed in order to continue performing the acquisition mission.

Strategic human capital plans can only be effective and executed properly by identifying an organization’s skills and capabilities, and recognizing how that current skill set performs the mission. Contractor visibility and transparency remain areas of concern for the government because of poor information management, lack of oversight and accountability, and most importantly, poor leadership. A renewed focus by the government on contract management is critical to alleviating these continuing problems. In short, the government must have a better grasp of who the agency contractors are and what activities they are performing.

On the other side, industry must also engage by providing information crucial to human capital planning so they too can be more effective. Contractors have more accurate and current data on their workers because of their necessity to maximize profitability and utilization. Obtaining this data from industry will help the government make informed decisions and strike a much needed balance. Only through this partnership and trust can workforce plans be created that are of any value.

Furthermore, vast information to help make these decisions already exists, but because of the lack of contract oversight and administration, in addition to poor overall program management skills by government, this data is either incorrect or incomplete. This creates a vicious cycle because inadequate staffing contributes to contract management issues, which in turn fuels reliance on contractors. Additionally, lack of staffing and bad practices have led to poor quality assurance principles, making it difficult to determine whether contractors are meeting their contract requirements. The end result is that skills, capabilities, and outcomes are obfuscated because of shortcomings in following guidelines for contract execution.

These quandaries must be solved to help shape the balanced workforce and human capital management plans, as contractors will continue to perform vital functions such as the acquisition mission. The government simply does not have the manpower to perform all necessary tasks, and thus contractors help fill a critical gap. However, it is this gap that needs to be the central focus of any debate on insourcing and managing a blended workforce.

A comprehensive review must also be conducted of current contracted services, what services and skills are being purchased, the size and complexity of the contracts, and the efficiency and costs associated with these contracts. This will be an exercise in information management, and the power of collaboration tools, or Gov 2.0, can undoubtedly play an important and essential role.

Solving these problems requires strong leadership, and a demand for accountability and transparency, from both the government and the private sector. Only by working together can both succeed, and provide the tools necessary to create the foundation for effective government management.

Execution is the Key to Improving the Federal Acquisition Process

As 2009 is now in the books, the year ended with plans submitted to the Office of Management and Budget (OMB) by the 24 federal agencies that account for 98% of contract actions. As reported by NextGov, these agencies have identified $19 billion in acquisition-related savings, also announced by OMB in their report on the plans.

These plans will not be made public until spring 2010, when an online dashboard focusing on the savings is launched, in addition to “a combination of strategies,” according to Jeff Zients, federal chief performance officer and OMB's deputy director for management. These plans will apparently focus on program terminations and reductions, spending caps, and more competition with procurement actions.

I for one look forward to the plans, because the lack of information and the “identified savings” seem to be cherry-picked actions with no real long-term impact, focus on real process improvements and business case analyses, contract restructuring, or ways to improve human capital strategic planning. One good area of the plans are a renewed commitment to strategic sourcing and leveraging the buying power of the government. However, details are non-existent, in addition to a strategy that relies on increased use of agency-wide and government-wide contract vehicles, which also need a further look as abundant waste is indicative in the use of these contract vehicles as standardization is needed. However, the inherent culture of “uniqueness” across government will deter this needed analysis on these contract vehicles, and create further waste with any strategic-sourcing initiatives since buying power will not be leveraged to the maximum extent possible.

Encouraging examples were given in the report, such as the Department of Homeland Security (DHS) standardizing desktop operating systems across the department, allowing DHS to award a single contract for all necessary IT products and projecting cost savings of $87.5 million. Also included are examples of savings through in-house engineering expertise for a manufacturing or design flaw, and a new online reverse auction service implemented by Energy. Although these are steps in the right direction, I hope the plans move forward in a more strategic way, or these initiatives will be the equivalent of placing band-aids on wounds that require a tourniquet.

The report continues by discussing how agencies are also seeking to find the right balance of contractors and federal employees. The reporting agencies have apparently developed pilot programs to determine the appropriate number of contractors and federal workers and will report on progress under these programs by May 2010.  According to OMB, these pilots will be assessed to find ways to  “insource” or add resources for contract management. A better use of resources would to create strategic human capital plans now that include a balanced workforce based on skills and capability needs. I would like to think that adding resources for contract management would be a known fact, so it makes better sense to forgo pilots and execute. The time for further pilots and studies has passed, we need action now. Although each reporting agency is required to submit a human capital plan for acquisition by March 31, 2010, I hope the balanced workforce is part of the plan. We shall see.

Finally, the third area of the report is to address one of the vital administration priorities; a reduction of high-risk and noncompetitively awarded contracts. In discussing these contracts, Zients said:

…"carry the greatest potential risk of overspending taxpayer resources." He said the "explosion" of these contracts -- the use of which increased by 129 percent between 2002 and 2008 -- is a concern. Agencies are working to meet the president's goal of reducing money spent through such contracts by 10 percent, and will report twice a year on their progress…

This is an area of concern, as the administration and OMB want to restrict the tools available to the workforce, and add insult to injury by focusing on symptoms and not the disease. The acquisition workforce is understaffed and undertrained, and do not have skills, capabilities, or tools to perform. One of the resulting factors is an explosion in sole source procurement actions, as contracting personnel forgo competition in an effort to increase contract velocity in a desperate and increasingly futile attempt to keep up with the workload. Creating an environment where only fixed-priced contracts should be used, regardless of the requirement or appropriateness of another contract type, has already been attempted and will only lead to more waste, fraud, and abuse. The reality is that more needs to be done with less, and increased communications and collaboration through Gov 2.0 tools is a promising endeavor that should bear fruit (See Better Buy Project). These tools will not solve everything certainly, but will go a long way to improving the acquisition process, and help standardize and improve methods to increase competition, lower costs, and change outcomes for the better.   

This year-end report from OMB continued a disturbing trend on their part in 2009 through a lack of specificity, guidance, and leadership instead of creating an environment of risk-taking, accountability, and a renewed focus on oversight. I hope that 2010 is a year for execution, but apparently we’ll have to wait until March 2010 before we get a roadmap on how we can move the process forward.