Industry: Insourcing Threatens Small Contractors Industry groups say the Obama administration’s insourcing push is threatening the livelihoods of thousands of small contractors. In a letter to Defense Secretary Robert Gates, the Professional Services Council, a leading contractor group, said the initiative “is rapidly devolving into a quota-driven exercise based on highly questionable cost assumptions.” A new organization, the Small Business Coalition for Fair Contracting, is gearing up to question the initiative. Both groups said agencies are insourcing routine commercial activities, jobs that go far beyond inherently governmental or critical functions. Stan Soloway, president of the Professional Services Council, said internal Defense Department documents assume that insourcing jobs will reduce costs by 40%, without explaining how such savings would be achieved. “As a result of this lack of process discipline, we are witnessing thousands of contractor employees, many of them members of a union and/or employees of small businesses (some of which face the potential literally of going out of business) having their jobs terminated,” he wrote to Secretary Gates. The president of the International Association of Machinists, R. Thomas Buffenbarger, expressed the same concerns in a separate letter to Gates. The union represents many contractor employees. The new group, the Small Business Coalition for Fair Contracting, is being organized by Robert Burton, former acting administrator of the Office of Federal Procurement Policy and now a partner in the Washington office of the Venable law firm. Burton said more than 100 companies joined a May 11 conference call to kick off the effort. “People need to understand that this is not a proposed or planned policy for the future,” he said in an interview. “The federal government’s insourcing initiative is well underway.” He said contracts are already being terminated for the convenience of the government. In one case, he said a Venable client’s contract was canceled and his employees were given 48 hours to decide whether to accept government jobs. Administration officials have repeatedly spoken of a need to “rebalance” the mix of federal employees and contractors. But the president’s proposed 2011 defense budget explicitly refers to an “Insourcing Initiative” and describes it as a high priority for DOD. Secretary Gates has said the department plans to hire an additional 39,000 employees over the next five years to replace contractors. Gates and other administration officials have said their priorities are to remove contractors from “inherently governmental” positions and other jobs that are critical to an agency’s mission. But Burton says the Office of Federal Procurement Policy’s March 30 policy letter invites agencies to adopt a broad definition of “critical” jobs. In addition, the letter does not require cost analyses to determine whether insourcing would save money. “This sends a message to agencies that they should aggressively insource,” he said. The new coalition plans to submit comments on the policy letter by the June 1 deadline. “Taking away private-sector jobs is not good public policy in this economy,” he added.