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The loss of in-house smarts leaves agencies too weak to effectively oversee contractors.

Since World War II, the nature of the private sector and its relationship to government has been changing. During the Cold War, the United States developed a permanent military industrial base with the federal government as the predominant customer. With the end of the Cold War and the demise of the Soviet Union, U.S. military spending declined. As a result, private-sector defense companies combined and consolidated to gain and hold a significant share of the market. This consolidation reduced competition.

The decline in spending also resulted in a drawdown of the Defense Department's technical infrastructure. With the goal of saving even more money, Defense began to contract out more work and do less internally. As a result, the private sector began to provide capability, not just capacity, and to perform what were inherently governmental functions.

The implications of this shift are twofold. First, the government loses capability to perform its basic functions of deciding what the problem is, selecting the approach to solve the problem and validating the solution. The second effect is that certain critical industries, such as shipbuilding, become indispensable, and the government begins to budget on the basis of keeping those businesses alive rather than meeting mission needs.

The reduction of in-house technical functions has eroded government's "decision competence." Thus, government's historical role of "deciding" and industry's of "providing" what's needed have become distorted. This trend is most pronounced in the engineering arena. Engineering competence must be developed through "doing," not "watching." Agencies such as Defense and NASA, which depend on engineering products, lose their ability to effectively oversee contractors' technical performance and take on the functions of prime contractor and systems engineer. The government has paid a heavy price in oversight disasters such as the Challenger accident and the collapse of the Navy's multibillion-dollar A-12 aircraft contract.

Over the past 50 years, this pervasive trend has left critical government agencies ill-prepared to use the capacity of industry effectively. To reverse this trend, agencies must focus on performing sufficient technical work in-house to prepare the decision-makers who interact with industry to make the right choices.

Defense and NASA have been going in the opposite direction, focusing on the administrative side of contracting rather than technical decisions. No system has ever failed because of an administrative breakdown, but many have failed because of bad decisions and incompetent technical oversight. A properly administered contract that results in a technically deficient product is still a disaster.

COMMENTS

• The author, James Colvard, makes some excellent observations on the dangers of government outsourcing. Most of us agree that the government needs to become more competitive. Outsourcing, privatization, and changes in civil service hiring will certainly help. However, the wholesale sell off government functions happening under the Bush Administration will have disastrous consequences for America in the future. I'm already starting to see this scenario unfold. Technical functions are completely outsourced, but a GS manager is left to oversee the contract work. This works fine for awhile. Yet, with time the manager becomes ever more isolated from the technology. They become completely dependent on the contract company for making sound technical decisions. While it is normal for managers to rely on others for sound input, in this situation we have a conflict of interest. Contractors will always present information and propose decisions to maximize their profit. This is simple economics. I fully agree with Colvard that "agencies must focus on performing sufficient technical work in-house to prepare the decision-makers who interact with industry to make the right choices." Perhaps then we wouldn't have expensive brain farts like NMCI, etc. Another reader disagreed with the premise of this article and pointed to the former CEO of General Electric, Jack Welch, as an example. However, Jack Welch has a PhD in engineering. He started with GE in 1960 and worked his way up through the company. Only after 20 years with the company did he become CEO. If anything Dr. Welch is an good example of why it is good to bring people up through the ranks in both industry and government. IT Specialist Navy overseas GovExec.com reader Posted September 16, 2004 5:26 AM
• I am trying to think of a more bone-headed article on Competitive Sourcing. In effect, the author argues that Jack Walch, former CEO of General Electric, should have had the proven skills to fix a dishwasher - to say nothing of a space shuttel or an F-15 fighter - in order to manage the innovation, resources, skills and investment requirements to competently design, build, manage or operate a piece of equipment. I doubt that Mr. Walch had any concerns regarding GE's ability to oversea their support contractors or suppliers. No, this idea that the Federal government has to retain and protect commercial work in-house in order to be able to evaluate options and get things built, is really, really dangerous to the government's ability to be innovative and perform. Its one thing to argue for contract management competence and quite another to protect and require training, depot maintenance, accounting, A&E, forrestry, design or shipbuilding work as being inherently governmental. Bringing techncial work in-house does not assure protections against techncial failures, it simply asssures that oversight will not keep up with the technology. GovExec.com reader Posted September 13, 2004 1:12 PM