Thomas Hessel

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• In-Sourcing in the Department of Defense

• Presentation to the ASMC PDI 2009
• May 29, 2009

• Thomas Hessel
• Senior Manpower Analyst
• Requirements and Program Budget Coordination
• OUSD (PR) Program Integration

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Outline

• DoD In-sourcing Background
• RMD 802 In-sourcing Initiative
• DepSecDef Guidance Overview
• Developing an In-sourcing Plan
• Steps to In-sourcing Contracted Services
• Reporting In-Sourcing Actions

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DoD In-Sourcing Background

• Prior to the FY06 National Defense Authorization
  Act (NDAA), OMB Circular A-76 rules applied when
  in-sourcing
• Required a public-private competition to convert
  work to in-house performance from the
  private-sector
• Mandated development of a government Most
  Efficient Organization (MEO) compared to private
  sector prior to converting to in-house
  performance
• FY06 NDAA Section 343
• Required guidelines/procedures for ensuring that
  consideration was given to using Federal
  Government employees for work being performed, or
  work that could be performed, under contract
• Sec. 343 guidelines issued by USD(ATL) on July
  27, 2007
• Allowed the conversion of contracted functions
  for up to 3 percent of the authorizations a
  Component coded commercial reviewable in the
  IG/CA Inventory
• Required prior notification to the DoD
  Competitive Sourcing Official (CSO) for actions
  in excess of the 3-percent limit
• Gave the DoD CSO authority to intervene or stop a
  Sec. 343 action at any time
• Required DoD Components to use the COMPARE
  costing software and report the results of
  in-sourcing actions in DCAMIS
• FY08 NDAA Section 324
• Incorporated new in-sourcing considerations into
  Title 10 of United States Code, Section 2463

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10 USC 2463 Requirements

• Requires USD (PR) to develop guidelines to
  ensure that consideration is given to using, on a
  regular basis, DoD civilian employees to perform
  new functions and functions that are performed by
  contractors and could be performed by DoD
  civilian employees
• Guidelines were issued by DepSecDef on 4 April
  2008
• Prohibits any specific limitations or
  restrictions on the number of functions or
  activities that may be converted to performance
  by DoD civilian employees
• Requires use of the inventory required by 10
  U.S.C. 2330a(c) to identify functions that
  should be considered for performance by DoD
  civilian employees
• Section 807 of FY08 NDAA
• Requires contracts for services be inventoried
  and reviewed
• Precludes DoD from conducting public-private
  competitions to implement in-sourcing
  requirements

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10 USC 2463 Special Considerations

• Provides for special consideration to be given to
  using DoD civilian employees to perform any
  function that
• (1) Is performed by a contractor and
• (A) Has been performed by Department of Defense
  civilian employees at any time during the
  previous 10 years
• (B) Is a function closely associated with the
  performance of an inherently governmental
  function
• (C) Has been performed pursuant to a contract
  awarded on a non- competitive basis or
• (D) Has been performed poorly, as determined by
  a contracting officer during the 5-year
  period preceding the date of such determination,
  because of excessive costs or inferior
  quality or
• (2) Is a new requirement, with particular
  emphasis given to a new requirement
• that is similar to a function previously
  performed by DoD civilian employees or
• is a function closely associated with
  the performance of an inherently
• governmental function

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DoD 10 USC 2463 Implementation Objectives

• Implement 10 USC 2463 requirements consistent
  with 10 USC 129 129a
• DoD Components shall
• Ensure workforce mix decisions are fiscally
  informed, analytically based, and consider total
  force requirements
• Use the least costly category of personnel
  (military, DoD civilian, or contractor)
  consistent with military requirements and other
  needs of the Department
• Consider the advantages of converting from one
  category of support (military, DoD civilian, or
  contractor) to another
• Functions not IG or exempted from private sector
  performance should be identified for DoD civilian
  performance unless
• It is not an enduring mission requirement
• Cost analysis shows that DoD civilians are not
  the low cost provider
• There is a legal, regulatory, or procedural
  impediment to using DoD civilians to perform the
  work, e.g.
• HRO certifies that civilians cannot be
  hired/reassigned (or done so in the timeframe
  required) or retained to perform the work
• Base closure underway makes it impractical
• Congressional limits on personnel

FOR NON-IG OR EXEMPTED WORK A cost analysis MUST
be conducted to determine most cost effective
service provider IAW 10 USC 129a
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DoD Total Force Implementation Objectives

• In-sourcing is just one tool to help achieve
  appropriate mix of manpower (mil/civ) and
  contractor support
• In-source in a systematic, well reasoned manner
• Minimize gaps in critical services when
  in-sourcing
• Finding the right Total Force manpower mix
• Realign inherently governmental and exempt
  functions for government performance
• Ensure support to deployed forces/commanders
• Balance savings with risk
• When determining/validating manpower for new or
  expanding missions or for in-sourcing contracted
  functions
• Verify mission requirements, required level of
  performance, and workload and (if under contract)
  eliminate functions that are no longer required,
  low priority, or of marginal value
• Activities must be organized to promote
  efficient, effective, and economical operations
  optimize personnel utilization and maintain a
  high level of productivity and morale
• Must comply with Congressional requirements and
  DoD priorities
• 10 USC 2463 should be used to
• Obtain the appropriate mix of manpower (mil/civ)
  and contractor support
• Reduce workforce costs while maintaining
  capability
• Execute workforce mix decisions more efficiently
  and effectively

NOT ALL IN-SOURCING IS GOOD, NOT ALL OUT-SOURCING
IS BAD
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The In-Sourcing Challenge

• April 6, 2009
• ...we will reduce the number of support
  service contractors from our current 39 percent
  of the Pentagon workforce to the pre-2001 level
  of 26 percent, and replace them with full-time
  government employees.
• Our goal is to hire as many as 13,000 new
  civil servants in FY10 to replace contractors and
  up to 30,000 new civil servants in place of
  contractors over the next five years.
• -- Secretary Gates

The White House Office of the
Press Secretary
For Immediate Release March 4,
2009 Memorandum for the Heads of Executive
Departments and Agencies Subject Government
Contracting The Federal Government has an
overriding obligation to American taxpayers. It
should perform its functions efficiently and
effectively while ensuring that its actions
result in the best value for the
taxpayers... Barak Obama
Questions
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Resource Management Decision (RMD) 802

• Reduces the proportion of contractor funding of
  the total funding for the DoD workforce
  (non-military) back to FY 2000 levels (pre-war)
  (26 percent in FY 2000 vice 39 percent in FY
  2009) for Contract Advisory and Assistance
  Services (CAAS) and Other Services through
  in-sourcing over the next 5 years (OPS-07)
• Assumes a 40 percent savings by replacing
  selected contractors with 33,600 Federal
  civilians by FY 2015 (includes 10,000 for the
  acquisition workforce)
• Provides for an additional 225 human resource
  personnel to support this in-sourcing initiative
• Reduces the funding for time and materials
  contracts for professional, administrative, and
  management support services on the basis that
  savings can be incurred by converting to more
  cost-effective contract structures

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In-Sourcing Defined

• In-sourcing is the conversion of any currently
  contracted service/function to DoD civilian or
  military performance (or a combination thereof)
  in which a new civilian or military
  authorization/position is established.
• DoD Components report manpower authorizations
  (both military and DoD civilian) once the
  manpower requirements are documented, the funds
  provided, and the manpower authorized.

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Schedule of Selected Key Events

• April 8, 2009 RMD 802 is issued by OSD
  Comptroller
• May 7, 2009 FY10 Budget is submitted to the
  Congress
• May 2009 DepSecDef memo on In-sourcing
  Contracted ServicesImplementation
  Guidance to DoD Components
• May 29, 2009 DoD Component inform OUSD(PR) of
  the senior official designated
  responsibility for development and
  execution of their In-sourcing Plan
• June 15 17, 2009 First meetings of DoD
  Component In-sourcing Program Officials and other
  responsible parties to review
  the in-sourcing process, share best practices,
  report on lessons learned, and answer
  questions
• Beginning June 2009 Component In-sourcing
  Program Officials alert OUSD(PR) of any
  problems with executing their plans
• Summer 2009 OUSD(PR) to establish a web-based
  site to share lessons learned, best
  practices, and answers to
  frequently asked questions
• July 31, 2009 Component In-sourcing Program
  Officials provide OUSD(PR) their
• In-sourcing Plans
• Beginning January 2010 Provide OUSD(PR)
  quarterly progress reports

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In-sourcing Decision Tree
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In-sourcing A Collaborative EffortStakeholders
include, but are not limited to
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Developing an In-sourcing Plan

• Collaboration among key stakeholders essential
• DoD Components should
• Use a total force approach when identifying
  contracted functions for in-sourcing
• Often risks to operations cannot be identified
  without clear accounting of the total force
• Use inventory of contracts for services required
  by Sec. 807 of FY 2008 NDAA
• Use IG/CA Inventory of military and DoD civilian
  manpower
• Best candidates for in-sourcing may not be evenly
  distributed across the Component
• Contracts typically have variable combinations of
  labor, other direct/indirect costs and
  profitability
• Consider steps/length of time it will take to
  complete an in-sourcing action so sufficient time
  is provided for transitioning to government
  performance
• Minimize risks and gaps in services
• Decide which contracted services would be good
  candidates to in-source in FY2010, which should
  be scheduled for later, and which should not be
  in-sourced
• Some in-sourcing actions may not be executable
• Some in-sourcing actions may have to be postponed
  to the following fiscal year (or later) because
  actions cannot be completed in required timeframe
  
• Review may show that there is a reason for not
  in-sourcing contracted services
• Include a margin of error

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Developing an In-sourcing PlanPrioritizing
Contracted Services for In-sourcing

• Determine if there is a valid requirement for the
  services
• No longer a mission requirement
• Marginal benefit to mission accomplishment
• Redundant of existing in-house or other
  contracted capabilities
• Not an enduring mission requirement
• Determine if contracted services are in one of
  the following groups
• Inherently governmental (IG) IAW DoD Instruction
  1100.22
• Exempted from private sector performance IAW DoD
  Instruction 1100.22
• Unauthorized personal services IAW Federal
  Acquisition Regulation (FAR)
• Contract administration problems IAW FAR
• Not in any of above groups but requires special
  consideration IAW 10 U.S.C. 2463
• Functions performed by DoD civilians during
  previous ten years
• Activities closely associated with IG functions
• Contracts awarded on a non-competitive basis
• Contracts that have been performed poorly

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Developing an In-sourcing PlanPrioritizing
Contracted Services for In-sourcing (continued)

• Generally, contracted services in groups 1-3
  should be in-sourced as expeditiously as possible
  since these services should not have been or
  should no longer be contracted.
• Contracted services in groups 4 5 that require
  re-competition during FY 2010 should be given
  priority over contracted services that have
  option years remaining
• This will save the time, effort, and costs of
  re-competing the contract
• Contracted services in groups 4 5 requiring the
  exercising of option-years should be considered
  for in-sourcing
• Contracted services with option years remaining
  should NOT be in-sourced solely to accomplish
  in-sourcing goals
• Generally, contracted services that were recently
  awarded as a result of public-private competition
  may not be good candidates for in-sourcing
• Costs of government performance were considered
  when the decision was made to contract

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Steps to In-Sourcing Contracted
ServicesInherently Governmental, Exempted,
Personal Services, or Contract Administration
Problems

• Manpower official determines/validates the
  manpower required to perform the services
  following standard manpower procedures
• Once the funding is approved
• Manpower requirements are authorized
• Requiring official notifies
• Director of the local HR Office (HRO) to proceed
  with hiring or reassigning DoD civilian employees
  to fill the civilian position(s)
• Military personnel officials to fill the military
  position(s)
• Contracting officer notifies the contractor of
  the Departments decision
• If requested by an employee of the contractor,
  information on the Federal hiring process should
  be provided

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Steps to In-Sourcing Contracted ServicesIAW 10
USC 2463

• Requiring official (with advice from others)
  determines if there is a legal, regulatory, or
  procedural impediment to using DoD civilians to
  perform the work
• Manpower official determines/validates the
  manpower required to perform the services
  following standard manpower procedures
• If there is an impediment, requiring official
  provides the contracting officer written
  confirmation that consideration has been given to
  using DoD civilians, but there is a
  permanent/temporary legal, regulatory, or
  procedural impediment
• For permanent impediments contracting officer
  re-competes the contract or exercises option
  years, as appropriate
• For temporary impediments if DoD civilians are
  determined to be the most cost effective source
  of support, requiring official obtains contract
  support on a temporary basis and formulates a
  plan for transitioning to DoD civilian employee
  performance as quickly as practical

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Steps to In-Sourcing Contracted ServicesIAW 10
USC 2463 (continued)

• If there is not an impediment (or impediment is
  temporary)requiring official requests that a
  cost analysis be conducted to determine the most
  cost effective provider
• Cost analysis shall be completed using business
  rules for fully burdened costing
• If cost analysis shows that DoD civilians would
  be most cost effective provider, once the funding
  is approved
• Manpower requirements are authorized
• Requiring official notifies the HRO Director to
  proceed with hiring or reassigning DoD civilians
  to fill the civilian position(s) and/or military
  personnel officials to fill the military
  position(s)
• Contracting officer notifies contractor of the
  Departments decision
• If requested by an employee of the contractor,
  information on the Federal hiring process should
  be provided.
• If cost analysis shows that private sector would
  be most cost effective provider
• Requiring official provides the contracting
  officer written confirmation that consideration
  has been given to using DoD civilian employees,
  but a cost analysis showed that the contractor is
  the most cost effective provider
• Contracting officer re-competes the contract or
  exercises option years, as appropriate

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And Lets Not Forget

• Contractual obligations and considerations
• Contracts requiring re-competition
• Exercising of option years
• Types of contracts (TM, FFP, Cost plus)
• Terminations for convenience
• Minimizing gaps in service
• Budget and resource considerations
• Appropriations and lines of accounting
• Human capital considerations
• Competency planning
• Position classifications
• Local labor market considerations
• Hiring flexibilities and expedited hiring
  authorities
• Recruitment, retention, accession, attrition
• Traditional overhead requirements
• Space/facilities considerations
• Security requirements
• IT solutions and availability

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Reporting In-sourcing Actions

• Metric in the Department's Performance Budget
  Submission/Balanced Scorecard
• Increases in manpower authorizations resulting
  from in-sourcing actions
• Reported quarterly
• Defense Manpower Requirements Report (DMRR)
• Summary of in-sourcing actions
• Reported annually to Congress
• Inherently Governmental/Commercial Activities
  (IG/CA) Inventory
• Billet-level detail of manpower authorizations by
  function
• Extracts reported annually to OMB

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Questions?