Industry Group Sounds Alarm on Insourcing Some agencies are moving to insource work with “no rhyme or reason” in order to meet budget targets, said Stan Soloway, president of the Professional Services Council. He said recent actions by agencies, especially in the Defense Department, go beyond any mandate from the Obama administration or Congress and are based on what he called “the mythology…that contractors are a lot more expensive than government employees.” The Office of Management and Budget has told agencies to cut contract spending by 7% over the next two years. In a July 29 memorandum OMB Director Peter Orszag said agencies should strive for “a strong internal core of federal employees supported by the expertise of contractors.” (SAA, 8/7) Soloway said OMB’s guidance was “balanced” and did not promote an insourcing agenda. “It’s not an insourcing agenda; it’s a management agenda,” he said at a Sept. 22 briefing for reporters. Despite that, “The field [offices] remain under the perception that there is an insourcing mandate.” The Obama administration has made it a priority to insource work that is inherently governmental or mission critical. But Soloway said some agencies appear to be “managing by quota” rather than taking a strategic approach to deciding which jobs should be done in-house. He cited one of his organization’s members, a small business that has contracts for routine base operating services at two military bases. He said both contracts are being canceled, the work is being insourced, and the company will be driven out of business. Most of his members are seeing some of their customers move to terminate contracts and bring work in-house, he added. Budgetary pressures appear to be driving the decision-making. In planning 2011 budgets, Soloway said, the military services are assuming savings of 30% to 40% by hiring federal employees to replace contractors. He said such huge savings may be “wishful thinking.” Soloway urged agencies to perform cost and performance analyses before making such assumptions and to put work up for competition between contractors and in-house teams to get best value for the taxpayer. OMB plans to issue guidance by the end of September to clearly define “inherently governmental” tasks that should be brought in-house. In addition OMB has told agencies to submit plans by Nov. 2 on how they will achieve the 7% reduction in contract spending over the next two years.