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Insourcing vs. outsourcing: The never-ending story

Insourcing vs. outsourcing is the debate that never ends. It just goes on and on, my friends.

That’s how it feels every time Federal Computer Week publishes an article on insourcing or outsourcing — or just about anything else related to the federal workforce. Inevitably, our readers begin weighing in on the subject, first by responding to the article itself and then by responding to one another’s comments.

It’s understandable, of course. The insourcing or outsourcing of federal work affects the livelihood of people, whether they are government or contractor employees. The intensity of the debate often reflects those high stakes, as readers argue that their side is better qualified for the work and a better deal for the government and that, unlike the others, their group is willing to go the extra mile to get the job done. Sometimes people even resort to name-calling.

Nevertheless, readers often offer sensible suggestions that move the debate along or provide valuable perspectives on broader issues.

For example, “sd” from Washington, D.C., wrote that agencies should have more options. It doesn’t help to limit them to choosing between insourcing everything or outsourcing it all.

“One policy would not work, and insourcing or outsourcing decisions should be made on a case-by-case situation,” the reader wrote.

Some members of Congress are attempting to do that by lifting a temporary ban on public/private competitions for federal work. However, other lawmakers and employee unions say it’s a bad idea.

Another reader, Bob, gave a diplomatic response. He wrote that many organizations need a mixture of military personnel, civilian employees and contractors to achieve their missions.

“Each group brings different talents to the workplace, and each must be considered when trying to ‘rightsize’ the government,” he wrote, adding that officials need to remember that policies aimed toward just one group don’t help.

The decision to insource or outsource should not be made on principle but in light of the work that needs to be done, Bob wrote. First, officials need to determine the functions, then they should ensure that the workforce is made up of the right mix of people to perform those functions, he said.

“The average American understands that if their costs are too much, they must determine what they no longer need and then stop paying for it,” he added.

RT recommended that officials making decisions on bringing work in-house should consider how long contractors have been doing a job. They should seriously review the work for insourcing if a company has done the work for more than five years and half of its employees have been there that long or more.

That might be something the government should be doing, although not always. However, contractors still might be the best option, wrote a reader going by “rfd kcmo.” As a current federal employee and a former contractor in an IT position, this reader said the contractor company did an excellent job. And at times, the reader has found companies to be more flexible when it comes to sick leave, grievances and long vacations.

Unfunded mandates and unhappy customers

Other readers entered the debate with different issues. It’s not about insourcing or outsourcing, one reader wrote, instead it’s “all the bureaucratic nonsense.” Agencies deal with unfunded mandates all the time and must allocate money for them. It eats up a large chunk of money, “and the operating budget is gone and no work has yet to be accomplished.”
“Until that’s fixed, none of the rest of it matters,” the reader said.

Despite the surfeit of ideas, one reader found conversation less than satisfying. Gordonzola described the insourcing and outsourcing debate as a repetitive fluctuation: “It goes up and down like a sine wave.”

In the end, it could be that no one will win this debate.

“As time goes on, the coddled, overpaid workers from both sides will become indistinguishable,” Gordonzola wrote. “The real customers are the American people, and they are not satisfied with either employees of the U.S. government or contractors.”

Reader comments

Thu, Jul 7, 2011 dp dc

I just read a number of POGO letters on contracting rules. First, I fully agree w/ POGO that the FedGovt currently has insufficient information to compare the costs of insourcing vs. outsourcing. The touch upon several problems w/i the Govt for improving that information, for example the difference in job categories between GSA and OPM. They make the point that the Govt has no way of knowing whether and how to compare Fed salaries and benefits and the labor rates of a contractor. I did not see much discussion on a very important issue that effects this comparison - general administrative, overhead, and capital costs. Although POGO is aware of this problem, it does not seem to me that they view this is critical, as I do. I will be interested in seeing such a report as Dr. Chassy indicates will be released, partly because I am curious as to how POGO would resolve the very problems on lack of information and standards for comparison about which they complain.

Thu, Jul 7, 2011

I don't know if any of the big wigs in DC ever take this into consideration when deciding between insource v/s outsource, but there is one little thing that certainly affects the value received for the dollar spent. This is that tiny little phrase included in all job descriptions, "other duties as assigned".

Contracts normally spell out quite specifically what is expected. If you want to assign the contractor some work that is outside of the scope of the contract you need to renegotiate, and most likely spend more money.

With the career employee the other duties clause makes them more flexible in what they can do. This can be good or bad, depending on how this is managed.

If some new function or task is identified, it is much easier to assign the new work to an existing employee. It is also easy to assign an existing employee so many "other duties" that they have little time to actually perform the defined work of their job description. It is also easy to assign a task to a $100K+ GS14 that you could hire a Kelly Girl to do for $10 an hour.

In my career as a government IT specialist, I've been pulled from important software development so I could spend 2 weeks answering phones during the Christmas rush. I've been assigned inventory tasks that a GS5 would be considered overpaid for. I've numerous other such experiences, and have seen many others assigned tasks far below their pay grade.

This often makes it appear that the contractors are more efficient as someone contracted to write software is allowed to do so, while her civil service counterpart has to take time away from the project to manage the office's environmental program. This situation of $100K employees spending enormous amounts of time doing $40K work is not the fault of the employee, it is entirely due to mismanagement. But it is the employee who loses their job when the agency decides to contract out the $100K work.

Thu, Jul 7, 2011 Paul Chassy, Ph.D., J.D. Washington, D.C.

Dennis McDonald is spot on. The Project on Government Oversight is soon to issue a report documenting that the outsourcing of many critical functions imposes nearly a 100 percent cost premium on the American taxpayer. There are currently no empirical studies assessing the justification for such cost premiums in terms of enhanced performance. Until such studies are conducted, the outsourcing/insourcing debate will continue to be driven by ideology instead of economic rationality.

Wed, Jul 6, 2011 Dennis McDonald http://www.ddmcd.com

It would help this debate if any proposal to insource or outsource were accompanied by an open discussion of what the impacts on costs for the target operation will actually be over time. By costs I mean total costs not just the contract amount or payroll of the affected operation. Also the admin overhead and procurement costs should be considered as well.

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