Agencies Claim Big Cost Savings From Insourcing The Army believes it saves more than $45,000 for every contractor that is replaced by a federal employee. Army Secretary John McHugh cited savings of $41 million by insourcing 900 positions last year. He testified Feb. 23 before the Senate Armed Services Committee. Industry officials have warned that federal agencies are making arbitrary, inflated estimates of the savings they can achieve by insourcing. McHugh said the Army will insource more than 7,000 jobs during the current fiscal year and an additional 11,000 over the next five years. His first priority is rebuilding the acquisition workforce; after that, he said he will focus on service contracts. “Workforce improvements are not enough to fix the procurement system,” McHugh testified. “…The entire process must be retooled.” The market research firm Input forecasts that most agencies will follow the same path: first, insourcing acquisition-related jobs, then turning to services such as IT, program management and systems integration. The Office of Management and Budget has directed agencies to ensure that they have enough federal employees to perform their core mission. The Obama administration plans to increase the number of federal workers by about 600,000 by fiscal 2014. But Input analyst Lauren Jones cautions, “Retirement, recruitment and retention issues, as well as increasing discretionary spending, makes accomplishing this plan highly unlikely.”