Congress pushes for more insourcing

The transfer of operations from contractor to government employees at the Puget Sound Fleet and Industrial Supply Center in Washington state earlier this year is part of a stepped-up effort to bring certain outsourced activities in-house, reports Federal Times.

As a result of the transfer at the Puget Sound Fleet and Industrial Supply Center, 65 Navy civilian employees at Puget Sound's Fleet and Industrial Supply Center in Washington state took over torpedo maintenance work that had previously been done by 85 contractor employees.

The Navy "insourced" the work ? as it is called when work is transferred from a contractor to in-house employees ? after it calculated it would save 10 percent of the cost, or $3 million over five years, of what it was costing to have BAE Systems do the work.

The Navy quickly cobbled together a work force using special hiring authorities for veterans and civil servants. It partnered with local colleges to bring aboard new hires as interns. Remarkably, the Navy had its maintenance crew in place within three month, said the center's commanding officer, Capt. Stephen Shapro.

The Army has also insourced work. So has IRS and the Homeland Security Department. Such cases are rare, but if Congress gets its way, there will be plenty more insourcing going on in coming years at the Defense Department and across government.

The 2008 Defense Authorization Act directed the Pentagon to consider insourcing any work done by contractors that had previously been done by federal employees, was awarded to contractors without a competition, or that was poorly performed by contractors.

The Pentagon issued new guidelines in April for how it will comply with the authorization act. "The new legislation should improve our ability to reduce costs and management the Defense work force," Gordon England, deputy Defense Secretary, wrote in an April 4 memo.

And a measure in the 2009 financial services appropriations pending before the Senate would expand the push for insourcing to all agencies.

Insourcing proponents admit the road to bringing work back in house is not an easy one.

The IRS announced this month it would take back 700 documents management jobs it outsourced last year to a contractor.

"I don't think they'll convince many to come back," said Colleen Kelley, president of the National Treasury Employees Union. But she noted that since the work was performed by feds as recently as 2007, all the documented procedures and institutional knowledge is within the agency to make restaffing the positions successful.

Filling the 700 vacancies at IRS is made easier by the fact that many of those jobs are seasonal or entry level, she said. The jobs can simply become part of IRS's seasonal recruitment campaigns again, she said.
But filling the new permanent positions could be troublesome. "I think employees will remember ? that this work was outsourced," Kelley said. Despite these challenges, insourcing this work is the right thing to do because it will save the taxpayers money and ensure documents central to the IRS mission will be handled properly, she said.

The IRS contract for the documents management jobs, which was awarded to IAP Worldwide in 2006, had been delayed by the contractor several times. The contractor didn't officially take over the work until 2007.

In a document obtained by Federal Times, the IRS declared it was canceling the contract and bringing the 700 jobs back in house "in the interest of putting a long-term solution in place and doing so in the most cost effective manner." The document didn't say how much the agency would save by reversing its outsourcing decision.

In many cases, it may not make sense to insource work just because it is being done poorly by a contractor because it is costly to build an in-house capability. An Office of Management and Budget official said if there are other contractors in the marketplace performing similar functions, it is easier and often cheaper to hold a traditional contract competition to replace the failing contractor.

Agencies may also have personnel ceilings that keep them from hiring, said Stan Soloway, president of the Professional Services Council. Another barrier to insourcing is that agencies often can't compete with private sector salaries for high-skilled employees, he said.

The Army also insourced work over the last two years ? personal services, strategic planning, intelligence services, logistics management and other functions ? affecting 475 jobs.

Similarly, the Homeland Security Department is reviewing its services contracts to see if there are any insourcing opportunities. So far, the department has identified 253 contractor jobs that it will convert to full-time federal jobs, said Larry Orluskie, a department spokesman.

Insourcing some contracted work could give the department more flexibility in how it uses its employees, by allowing its employees to multitask, performing both inherently governmental and commercial work, he said.

DHS plans at least two public-private jobs competitions for contracted work in the next two years, Orluskie said.

OMB took a step this year that could promote more insourcing. OMB will give credit to agencies that insource work as it grades agencies on a scorecard for how well they meet Bush administration management goals.

OMB does not keep figures on how much insourcing there is, an OMB official said.

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