11December 4-5, 2006Sheraton Premiere at Tysons CornerVienna, VA
Breakout Session # 707
Professor Steven L. Schooner Daniel S. GreenspahnThe George Washington University Law SchoolApril 15, 2008
4:30 Session
Too Dependent on Contractors?W. Gregor Macfarlan Excellence in Contract ManagementResearch and Writing Program:
Outsourcing: The Current Reality
DHS: A Portrait of Outsourcing
Tax Day: Competing Views
“I pay my tax bills
more readily than
others for… I get
civilized society for it.”-Oliver Wendell Holmes
vs.
Optimistic Pessimistic
Tax Day: Competing Critiques
vs.
Nations maximize wealth through free markets and limited taxes
-Adam Smith
The IRS has no legal
authority to collect taxes -Wesley Snipes
Tax Reality: Where Your Money Goes
• Adam Smith: a profit motive fosters innovation and efficiency better than a public service ethic
• U.S. Spending: nearly 50% of the federal discretionary budget goes to government contracts
Outsourcing and Privatization: Bipartisan Trend
“The era of big government is over.”
“Too much government crowds out…the private economy.”
$100
$150
$200
$250
$300
$350
$400
$450
2000 2001 2002 2003 2004 2005 2006 2007
Federal Procurement Spending Since 2000 (in Billions)
Cumulative Growth in Federal Procurement Dramatically Outpaces Inflation
0%
20%
40%
60%
80%
100%
2001 2002 2003 2004 2005 2006
Federal Procurement Consumer Price Index
Outsourcing and Privatization: Growth Areas
• Tax Collection
• Health Care
• Education
• Welfare
• Prisons
• Info Technology
• Disaster Relief
• Police
• Border Security
• Port Security
• Foreign Operations
• Military Operations
Debate on Privatizing Our MilitaryGoes Mainstream
Battlefield Contracting:An “Unprecedented” Industry?
• 180,000 contractors in Iraq
• 1:1 ratio - contractors to troops
• Multi-billion dollar industry
• 25% of allied fatalities in 2007
4,507 “Total” Fatalities:What About the 1,120 Contractors?
Big Picture:Procurement Pressure
• Statutory Cuts: 1989-2000 workforce reductions
• Post-9/11: huge procurement spending growth
Defense Acquisition Workforce and Procurement Trends
100
200
300
400
500
1990 1999 2004 2006Acquisition Workforce (in hundred thousands of employees)
DoD Procurement (in billions of dollars)
Hollow Procurement and Contract Management Shops• DHS has “no in-house ability to
evaluate the solutions its contractors propose”
• “In Iraq, contract management . . . was a ‘pick up game’ ”
30%
35%
40%
45%
50%
55%
60%
2000 2001 2002 2003 2004 2005 2006 2007
Federal Procurement Dollars Awarded Through Limited-Competition Since 2000
Tying It Together
• Taxes: tax evasion flourishes because of an under-funded enforcement agency
• Procurement: purchasing regime is more prone to error, fraud, waste, and abuse with hollowed-out and under-funded agencies
Is the Government “Too Dependent” Upon Contractors?
• That’s Irrelevant– Too many mandates, too few government employees– Pressure to suppress government headcount– Outsourced governance (and the blended workforce) is
the reality, and here to stay….
• The better question, therefore, is:
Can the Government responsibly manage its “outsourced workforce”?
Outsourcing Makes Sense• Maintain focus on mission - specialization
• Surge capacity
• Flexibility
• Innovation, access to technical expertise
• Continue to meet agency missions with inadequate personnel, abilities, and resources
Outsourcing is “Attractive”to Program Managers
• No troop/personnel caps
• Customer Service “ethic”
• Civil Service frustration
Penny-Wise, Pound Foolish?
• Marginal cost saving (in a vacuum) is not the only metric
• Best value – Paying more for:– Higher quality goods/services– Quicker delivery/response time– Unlimited surge capacity– Flexibility – changing personnel, products,
approaches
Outsourcing Has Limits• Inherently Government Functions
– Right idea– Poor decision-making rubric
• Blended Workforce evolved more quickly than:– Best management practices– Ethics rules (e.g., organizational conflicts)
• Contractors Need to Be Managed
Gansler Commission: A Plea For Responsible Outsourcing?
Contract management is the essential post-award contracting function to ensure mission accomplishment, and it is an important control over fraud, waste, and abuse;... With not enough ACOs, PCOs could do this - but they are too busy and therefore it is not being done
Investing in theAcquisition Workforce
• Total Headcount–New Hires–Pending Losses
• Training and Experience–New Hires–Existing Workforce
Acquisition WorkforceWorst-Case Scenario???
• Denial remains prevalent • Retirement bubble ready to burst (but, a
recession may help)• Insufficient:
– leadership for massive hiring/training initiative;– numbers of qualified individuals interested in working for
the government (but, a recession may help);– time/resources for the existing workforce to gain
sufficient training/experience
Restoring the Acquisition Workforce?
For the foreseeable future, Congress cannot spend “too much” on:
• Salary• performance
incentives• recruitment bonuses• retention bonuses
• intern programs,• workforce training• sabbaticals (for
higher education)
Gansler Commission: A Plea For Responsible Outsourcing?
• Increase– Army military and civilian contracting personnel
[1,400+, approximately] 25 percent of the total– DOD post-award contract management personnel (to
fill DCMA billets for Army support) [nearly 600]
• Extrapolate across Government [8,000-10,000?]– Army ~ 15-25 percent of federal procurement $– Army historically better staffed than other agencies
Scope of the Challenge: Recruiting the Future Acquisition Workforce:• Back-of-the-napkin assumption:
– 8,000-10,000 professional needed
• An Analogy: US Department of Justice< 8,200 Attorneys, including:
–General Legal Activities (all)–U.S. Attorneys (all 50 States)–Antitrust Division–Trustees
Current Acquisition Workforce
Wrong Skill Set?1984 (CICA-FAR Era)• Supply• Formal
Advertised/Sealed Bid• Firm Fixed Price• Government-specific
specification• Awarded by PCO• Managed by DCAS
(DCMC, DCMA)
Today• Services
– Employee augmentation– Personal Services
• ID/IQ, Inter-agency vehicle• Cost-Reimbursement, T&M• Limited Competition• Unclear responsibility for post-
award contract management
Current Acquisition WorkforceOpportunities, Attractions?
• Civil Service (for better or for worse)• Career ladder out of secretarial pool• Long-term, stable, safe career• Fixed retirement program• Inadequate incentive structure
– 1990’s – failed incentive initiative
Recruiting the FutureAcquisition Workforce
• Gen X, Gen Y….– “most praised generation”– Universities and Helicopter Parenting– Show me the money!
• Civil Service Bureaucracy– Impenetrable, Slow, not user friendly
• Job Mobility• 401(k), TSP (What, me worry?)
• What is, why work in “procurement”?
Compare to private sector….
…. Business Acquisition Contracts & Pricing Manager responsible to provide contracting expertise to develop and negotiate creative business solutions …[P]osition … requires leading and managing … Create a culture of continuous improvement by communicating/deploying enterprise best practices and employee engagement. … Coach, mentor, manage, motivate and provide developmental opportunities … Seek and expand on original ideas, enhance others' ideas, and contribute own ideas. Understand the business issues related to the operation…
Acquisition Reform Chorus?
“constant drumbeat claiming that federal agency [IG’s] are discouraging the acquisition workforce from performing their work in an optimum fashion.”
Nash, Dateline, 21 N&CR (May 2007)
Can NCMA Play a Leadership Role?
Good Luck!
• Questions?
• Comments?
• Suggestions?
• Ideas?
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