Obama Seeks to Cut Down on Contractors
Policy + Politics

Obama Seeks to Cut Down on Contractors

Several government departments have seen notable increases in contractors in recent years, raising concerns about accountability and efficiency

Federal outsourcing more than doubled during the Bush Administration, from $207 billion in 2000 to $532 billion by the time President Bush left office.

But as the number of contractors shot up in the departments of Defense, Homeland Security and Veterans Affairs, so too did questions of accountability and efficiency, most notably because of the security company once known as Blackwater.  Blackwater contractors  were accused of killing civilians, smuggling  weapons in Iraq and billing fraud.

Now the Obama administration is seeking to reverse that trend and wants to substantially increase its oversight of the billions of dollars being spent on private contractors. Peter Orszag, director of the White House Office of Management and Budget, said recently that despite the contracting explosion of the last nine years, the number of contract auditors and managers overseeing that spending — about 30,000 people in the civilian agencies — has barely budged.

"It's not too hard to figure out that oversight of those contracts has not kept pace with what it should be," Orszag said at a Feb. 1 press conference to unveil the president's 2011 budget.

Obama took office highly critical of the Bush outsourcing policies — spurred on by unions representing federal workers who complained that more and more federal jobs were being turned over to the private sector. The unions hailed the portion of the Omnibus Appropriations Act of 2009 he signed that included a temporary moratorium on private contracting of government jobs.  The law also required that federal agencies establish guidelines for bringing back government work currently being performed by private contractors.

The unions also praised a proposal for more overseers, which they argued would save money as well as grow their ranks.

"The boost in the acquisition workforce in the 2011 budget points to a desire for more government efficiency, which would allow agencies to rein in their budgets while still hiring more federal employees," said John Gage, president of the American Federation of Government Workers.

The "acquisition workforce"  is made up of federal contract overseers — civil servants who determine whether or not contractors have delivered what they promised.  They supervise the initial contract signing, monitor progress to see that key benchmarks are being met, and — ideally — raise a red flag when contractors do not perform.

Administration officials said that the basic problem with the acquisition workforce is that too few people are watching over too many contracts, resulting in a bad deal for the taxpayer.

"Because of the strain being placed on federal acquisition officers, some departments have even been contracting out contract management," OMB spokesman Thomas Gavin said. "We don’t think the government should do that."

Under the budget proposal, most civilian agencies would be able to increase the size of their acquisition workforce by 5 percent, according to OMB. It would provide up to $158 million across the civilian agencies for staffing, training and technology.

The changes are aimed at the civilian workforce as well as the Pentagon, which accounts for the lion’s share of federal contracting. The Defense Department’s Acquisition Workforce Development Fund, a pot of money for training and hiring overseers, would see its appropriation more than double, from $100 million today to $217 million in 2015.

"To operate effectively, the acquisition system must be supported by an appropriately sized cadre of acquisition professionals with the right skills and training to perform their jobs," Defense Secretary Robert Gates told the House Armed Service Committee on Feb. 3. "We will be making significant increases in training and retention programs in order to bolster the capability and size of the acquisition workforce."

Gates said the ranks of overseers would swell from 127,000 to 147,000. The Pentagon also is seeking to tip the balance between federal and contract workers back toward the government. A plan announced in the 2010 budget would restore the ratio of contractors to federal workers to pre-Bush administration levels. By 2015, the Pentagon wants to replace "selected contractors" with 33,600 federal civilian workers, for a savings of $900 million.

For example, some agencies use contractors in their human resources departments for the sake of moving quickly, according to John Palguta, vice president at Partnership for Public Service, a nonprofit dedicated to boosting the quality of the federal workforce. As it becomes clear their services are needed for the long term, it makes sense to hire them and avoid paying the contractor's profit margin.

"When you look at the work they are doing, it is the same," Palguta said. "You can only tell the difference if you look at their ID badges."

One key to determining the balance will be the administration's work to define what constitutes an "inherently governmental" function. This seemingly innocuous phrase guides what federal agencies can and will outsource, and will be the subject of a new OMB proposal, to be issued "within the next few weeks," according to OMB's Gavin.

Overall, the administration’s plan would expand the federal workforce as a whole, pushing the total of defense and civilian workers to about 2.1 million, according to OMB. That’s about the high under the Reagan administration, before the number declined to about 1.8 million under Bill Clinton, the next two-term president. The number rose to close to 2 million as President George W. Bush oversaw an expansion of federal security forces and the civilian force that backstops the military.

Counting contractors, however, is more difficult because the government does not keep a tally across all departments and agencies. Paul Light, a professor at New York University’s Wagner School of Public Service, recently estimated that the number of contractors grew from 4.4 million in 1999 to 7.5 million by the end of 2005.

In some cases, however, contractors have become a necessary evil, as the State Department discovered with security companies such as Blackwater in Iraq. And experts say the pendulum should not swing too far in the direction of fewer contractors and more employees. Waste and fraud will always lurk around government contracting, so these new hires, if approved, still must prove they can do a better job.

"It’s quite possible to go too far – in either direction," said Palguta. "From a good human resources management perspective, what you want in government is to identify what government really has to do."