How to Reverse the Tide of Costly Outsourcing

You hear a lot in the news about employers outsourcing their operations overseas to drive down labor costs, resulting in job losses at home and diminished quality and customer service.

The same thing happens in the federal government, only the outsourcing replaces federal employees with for-profit contractors who actually charge taxpayers more for the same services.

Why is this happening, you might ask? A big reason is arbitrary caps on the size of the civilian workforce at many agencies, most notably at the Department of Defense. At the Pentagon, this cap prevents managers from hiring more civilian employees than the department had in 2010.

As a result, new work is almost automatically given to contractors – even though contractors charge the government two or three times as much as what it would cost for federal employees to do the work.

In fact, DoD spending on service contracts has spiraled out of control – more than doubling during the past decade – while the size of the civilian workforce has remained essentially unchanged.

The only way to reverse this wasteful and costly trend is by bringing back in house much of the work that has been contracted out. This is called insourcing.

Insourcing is common in the private sector and at lower levels of government – especially when work is too important or sensitive to have been outsourced, when performance can be improved and when costs can be reduced.

Unfortunately, Defense managers’ hands are tied as long as the cap on the size of the civilian workforce remains in place.

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