Expert questions savings in Pentagon contractor cuts

Defense Secretary Robert Gates' plan to cut funding for service support contractors by 10 percent annually during the next three years isn't likely to save much money and could disproportionately hurt small businesses, said a former top federal procurement executive.

The Defense Department hasn't provided any data to support the argument that government employees are a cheaper alternative to contractors, said Robert Burton, a procurement attorney and partner at the law firm Venable LLP in Washington.

Unless the department intends to eliminate functions those contractors now are performing, any savings associated with the cuts is unlikely, he said.

"I've been in this business for over 30 years, and I don't recall any government initiative that has so negatively impacted small businesses," he said. Burton was the top career federal procurement official in the White House Office of Federal Procurement Policy from 2000 to 2008. Before that, he spent more than 20 years as an acquisition attorney at Defense.

While Gates has said the department no longer will automatically replace contractors with civilian employees, thus ending its controversial insourcing program, Burton said he doesn't believe insourcing is dead.

"I don't see any indication that will be discontinued. I think these functions will be transferred to the federal government," Burton said. "We know for sure they're trying to get around it with temporary hires -- they're hiring the small business contractor employees."

Burton cited one firm that had nine employees assigned to a service support contract with the Pentagon, and Defense hired seven of the employees away and ended the contract. Burton declined to name the contractor saying the firm fears retaliation if it files a protest.

"Here we have small businesses in effect doing the recruiting for the federal government, putting in the time and resources into recruitment and training only to lose these employees to the government. This is devastating to small businesses," he said.

He cited recent data, including an analysis by James Sherk, a labor policy analyst at the conservative Heritage Foundation think tank, that shows some federal employees earn significantly more in salary and benefits than people in comparable private sector positions.

"If I was the Defense Department, I'd be very concerned about those statistics," Burton said.

Defense officials did not provide a savings estimate associated with the cuts Gates announced on Monday. "I don't think it's ready for prime time," said Gen. James Cartwright, vice chairman of the Joint Chiefs of Staff.

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."