Wednesday, August 11, 2010

Insourcing Realities

Over the last twelve months the Department of Defense has been "insourcing" its contractor employees where they believe it is appropriate. This means converting a previously contractor slot to a civil service one. It is not supposed to guarantee that the contractor becomes the civil servant but that often happens. The savings by this are hard to quantify and there has been little justification presented by the government.

Insourcing has the potential to be hard on small companies as they lose employees and revenue. Bigger companies should be able to absorb the losses of the slots but if they lose their best employees to the government it will affect them long term. They also have lost all of the money put into recruiting, training and preparing that employee for more important work.

SecDef Gates announced a further round of budget reforms this week including a plan to cut 30% of the contractor funding over the next three years. In a sign that insourcing may not be saving money it was also announced that these lost positions may not be insourced.

In an article at Robert Burton, a former defense official, was quoted as saying "The 2011 National Defense Authorization bill passed by the House in May, (H.R. 5136), actually would prohibit data on employee health and retirement benefits from being used in cost analyses produced in determining whether to convert contractor jobs to Defense civilian employee positions. Burton says this is "an admission that the government knows the private sector is cheaper than the federal government in most cases.""

Without comparing the total cost of a person which includes salary, benefits and other costs it is impossible to figure out if insourcing is cheaper. I guess Congress doesn't want that found out and insourcing is more about creating civil service jobs then saving money.