Defense Finance Agency Begins Insourcing Push In a first step toward thinning the ranks of Defense Department contractors, the Defense Finance and Accounting Service plans to bring 600 jobs in-house early next year. DFAS will hire civilian employees to process retiree payments. Lockheed Martin currently handles that work, but its contract expires in February. DFAS Director Terri McKay said the agency conducted a business case analysis before making its decision. “The study showed bringing this work back in-house would result in savings of more than $20 million over the next 10 years, provide improved flexibility and reduce risks to operations, and finally would allow us to sustain and potentially improve service delivery and customer satisfaction,” she said in a statement. The 2008 Defense Authorization Act directed the department to determine whether outsourced functions could be performed better in-house. That requirement was extended governmentwide this spring. Defense Secretary Robert Gates announced last month that the department will replace 30,0000 support services contractors with government employees over the next five years. He said contractors currently make up 39% of the DOD workforce; he wants to cut that to 26%, approximately the level before the 2001 terrorist attacks. Gates said his first target is contractor jobs in such areas as acquisition, work that he considers “inherently governmental.” His plan reverses more than a decade of policies aimed at reducing the size of the federal workforce.