It’s tempting, if one listens to the political rhetoric, to think of the insourcing versus outsourcing debate as simply a matter of political or ideological preference of certain administrations, presidents, or interest groups.
In a political town, it’s definitely true that those positions matter. But to understand the real nature of the issue, and the immovable objects that shape it, one needs to follow much more than the politics. It is policy dynamics — not political preferences (or even the cost “answers,” if anybody can find them!) — that will dramatically shape the debate. In particular, four policy dynamics will have as great — or greater — impact on this topic than the political winds.
First, new mission needs will continue to drive outsourced government services, especially for those missions that fall between the seams of government agencies and their internal workforces. When I was a senior government national security official a few years ago, it became obvious to me that we had the best national security agency structure — that the minds of 1947 could devise. Our national security agencies, even 60 years after World War II, were still best positioned to deal with the stratified and somewhat predictable worlds of symmetric conflict. Moreover, agencies were encouraged to stay “in their lane.”
And yet, as 9/11 and the subsequent counterterrorism and counterinsurgency campaigns showed, our most dangerous adversaries had hit the United States in the “seams.” To close those seams, traditional law enforcement and intelligence agencies have combined efforts, as have the State Department, USAID, and the Pentagon. These are steps in the right direction, but government agencies move slowly — not because they’re not working hard but because their internal workforces are already doing other core missions that cannot easily be dropped.
Let me give an example. In 2006 when Gen. David Petraeus and I stood up an interagency effort to create a doctrine and center of excellence for the role that civilian agencies play in counterinsurgency operations, I had no choice but to use expert contractors for much of the work. It would have taken too long to both reassign and retrain my government employees for this new mission area and moving them would have left hard-to-fill-gaps in inherently governmental functions that were mission essential. Contractors turned out to have the expertise, responsiveness, and wherewithal to quickly fill the gaps between the core mission areas of national security agencies — the gaps where changing threats often manifest themselves.
The second big policy dynamic that augurs well for a healthy growth environment for government service providers is the issue of technology ownership. In a world in which yet another technology product or update appears weekly, technology ownership is something that the federal government is unprepared to own. The government does not have legions of engineers, software developers, systems integration professionals, or enterprise IT architects on staff to develop custom solutions for each agency. Instead, government agencies run hard just to have enough of their own IT professionals to assess the technology and operational requirements of their agency and then to oversee the procurement and implementation of the necessary products and services.
Over the past 15 years, as we’ve seen, government agencies have even outsourced the functions of in-house assessment, procurement, and program management. Those functions are likely to be migrated back to government employees — and rightfully so. But for the actual development and implementation of technology services and solutions, which increase in volume, pace, and complexity every year, the government will always turn to service providers.
The third dynamic that ensures a robust market for government service providers is driven by the demographics of the federal workforce. Much has been made of the bow wave of retirees within the federal workforce over the next 10 years, but the less publicized challenge is hiring replacements. The federal government would need a very large ramp up in its hiring just to stay constant in its headcount. With some 40,000 more federal employees leaving the government over the past five years than in the previous five year period — and even more scheduled to retire or leave in the next five — the government would need to increase its hiring pace by 35 percent over the next five years just to stay flat, and by more than 45 percent to grow the total headcount by 1 percent.
Even if the federal government were to accomplish that unprecedented feat (which would be the fastest hiring since World War II, by some measures), it would hardly change the overall workforce mix between employees and contractors. And there is a lot of work to go around. In 2008 only 2.6 million federal civilian employees were working in and around programs totaling some $1.2 trillion in discretionary spending — compared to 1992, when 3 million federal civilian employees oversaw $600 billion. Contractors will continue to competently and efficiently help with that challenge.
Finally, there is the issue of workforce management. When I was the Assistant Secretary of State for Political Military Affairs, I loved the dedication and sheer talent of my government employee workforce. But, like other colleagues across agencies, I also bemoaned how inflexible this workforce could be because of the rules surrounding their use. When I did need flexibility, it was a blessing to have both an internal and external workforce from which to pull the expertise and capabilities needed to get a mission done. Sister bureaus, such as the Bureau of International Narcotics and Law Enforcement, which oversaw police training in Iraq, Afghanistan, and South America among other places, issued large contracts to service providers because it was simply impossible to fill the mission need with an internal workforce. Government managers, particularly in fast-moving agencies, need the flexibility of external workforces to get the job done. Simply look at how the Department of Transportation was quickly able to get expert support from the Arlington, Va.-based firm, Vangent, to help process the “Cash for Clunkers” vouchers.
It is important that anyone who is party to the insourcing versus outsourcing debate understands all four of these dynamics that have shaped the issue to date — and will continue to shape it in the future. To just pretend that it is a matter of political choice, ideology, interest group influence, or trumped up “cost savings” statistics from either side is to miss the larger point: The U.S. federal government’s needs are complex and getting more so by the day. The government will continue to succeed in its many missions for the American people both at home and abroad by using outsourced expertise and capability from dedicated contracting firms, which view themselves as mission partners to the government.
John Hillen is the President and CEO of Global Defense Technology & Systems, Inc. (NASDAQ: GTEC). An industry veteran who has led several government service companies, he served as Assistant Secretary of State for Political-Military Affairs in the Bush administration and is the author of several books and numerous journal articles on military and security affairs.