Lawmakers challenge the Pentagon’s reliance on service contractors

Cost-cutting moves by the Defense Department that include capping the number of civilian employees at 2010 levels have prompted protests from House and Senate lawmakers who say the Pentagon is spending too much on contractors to provide services.

On Wednesday, 26 Democratic senators led by Sherrod Brown of Ohio and Kirsten Gillibrand of New York sent Defense Secretary Leon Panetta a letter saying they are “concerned that while the size of the civilian workforce is proposed to be cut back to fiscal 2010 levels, no comparable constraints were imposed on workforce hired through contractors. We are concerned that this would incentivize managers to use contracting firms rather than civilian employees, even when the latter costs less. We also believe that there are a number of sensitive roles that should be performed by direct employees.”

The letter, which renews an ongoing debate over the Obama administration’s insourcing initiative, follows a similar one sent to Panetta in March by 130 House members led by Rep. Maurice Hinchey, D-N.Y. The House letter called the caps on civilian employees "gimmicks” that are “causing mass layoffs” of civilians but aren’t generating savings. “Because of the arbitrary standards set by the Pentagon, civilian employees are being fired, and private contractors that charge more for the exact same service and are less accountable to the public are being hired,” the letter said. “This shift away from a civilian workforce isn't just inefficient -- it's also a violation of long-standing workforce management rules."

The senators’ letter calls on the Pentagon to eliminate the cap on the civilian workforce or provide a waiver; “embrace” the total force management approach, which looks at the military, civilian and contractor workforces holistically; cap spending on service contracts; conduct cost comparisons when making outsourcing decisions; implement an inventory of contract services; and prohibit outsourcing of inherently governmental work.

A Pentagon spokeswoman said Panetta is on travel in South America and will respond appropriately to the letter later.

The letters were welcomed by the nonprofit Project on Government Oversight, which has long argued the government wastes money relying on too many private contractors. Scott Amey, POGO’s general counsel, told a March 29 hearing of the Senate Homeland Security and Governmental Affairs Contracting Oversight Subcommittee that “except in very limited circumstances, the federal government does not have accurate data about service contracts and the contractors performing those services. Moreover, the government does not have a governmentwide cost modeling system that compares the life-cycle cost of in-house and contractor personnel. As a result, the government often turns to service contractors under the misguided assumption that market economies enable contractors to be more cost-efficient than the government.”

The contracting community appears less enthusiastic. “The senators’ letter demonstrates an unfortunate lack of awareness of what is actually taking place in the Defense Department,” Stan Soloway, president and chief executive officer of the Professional Services Counsel, said in an email to Government Executive. “Unlike federal jobs, contractor positions disappear when the work is done or no longer needed or funded. In fact, over just the last couple of years, defense spending on contract services has been reduced nearly $20 billion, which translates into tens of thousands of jobs already lost.”

Soloway said his group has “long opposed arbitrary personnel or funding cuts for either contractors or federal employees and supported allowing agencies the flexibility they need to appropriately manage their combined workforces based on their mission needs and resources. But to suggest that contractors have in any way been ‘spared’ by the current fiscal environment is simply wrong and misleading.”

Trey Hodgkins, senior vice president for national security and procurement policy at TechAmerica, said the letter “seems to throw out the lessons” of former Defense Secretary Robert Gates, who “abruptly and publicly terminated the insourcing program because it did not produce the intended savings.”

He said his trade association agrees with the Office of Management and Budget principle of seeking “an appropriate balance between what can and should be performed by civilian employees, but that the remaining activities,” ranging from trash removal to lawn care to information technology, “can be handled, as agencies look at their missions, in ways that maximize value for the taxpayers.”