In-sourcing in the Department of Defense

1. Presentation for ASMC PDI 2010June 4, 2010Thomas HesselOffice of the Under Secretary of Defense for Personnel and Readiness Requirements and Program & Budget Coordination Directorate In-sourcing in the Department of Defense

2. The In-Sourcing Challenge 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 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 Questions 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.

3. Key Themes & MessagesOUSD(P&R) is lead for In-sourcing InitiativeTeamed with OUSD(AT&L), OUSD(C), CAPE, Military Departments, and Other DoD Components Reduces operational risk by ensuring functions that are inherently governmental and/or critical to DoD‘s readiness/management needs are performed in-house In-sourcing is strategic rebalancing of the Total Force and restoring critical “organic” capabilities Although in-sourcing may, in some instances, reduce costs – it is NOTa budget drill “The Department is not in-sourcing for the sake of in-sourcing” In-sourcing focuses on contracted services – NOT on contractor employees Contractors will remain a vital source of expertise and support services In-sourcing is NOT a “war on contractors” In-sourcing is NOT arbitrary – decisions result from well-reasoned policies and objective analysis “Not all in-sourcing is good, not all outsourcing is bad” In-sourcing is “not new” to current Administration Congress mandated in-sourcing and codified it in Title 10 In-sourcing is an enduring tool (one of many) to ensure appropriate mix of personnel

4. Sequence of Events • January 6, 2006:FY06 NDAA directed in-sourcing • AT&L implemented – did not meet intent of Congress • Required “reverse” A-76, plus there were other limiting constraints • January 8, 2008: FY08 NDAA direction to DoD: • Give “special consideration” to using DoD civilians instead of contractors (reiterated FY06 NDAA) • P&R directed to develop/implement in-sourcing policy (DepSecDef memo 4 Apr 08) • Mandated “inventory of contracted services”/subsequent review to provide basis for well-reasoned in-sourcing (AT&L lead) • March 4, 2009: President Obama’s memo on “Government Contracting” directed: • Only government personnel perform “inherently governmental” functions • Agencies ensure functions are performed well, and at “best value” • Reduced reliance on contractors and strengthened organic technical capabilities • April 6, 2009: Secretary Gates’ FY10 budget announcement (RMD 802) • DoD to reduce support service contractors from current 39% of workforce to 26% (pre-2001) • Rebalance the workforce, ensure appropriate mix, and rebuild organic technical capabilities • May 28, 2009: DepSecDef issued additional in-sourcing guidance incorporating lessons learned/best practices • Use a “total force” approach to obtain the appropriate mix of manpower (military/DoD civilian) and contractor support • Verify mission requirements, required level of performance, and workload; Eliminate functions that are no longer required, low priority, or of marginal value; Organize activities to promote efficient, effective, & economical operation and optimize personnel utilization; Consider the entire workforce and how the work is performed • July 29, 2009: OMB Director memo on “Managing the Multi-Sector Workforce” • Policies must improve to achieve the best mix of public/private labor • Currently excessive reliance on contractors – “internal capacity is lacking” • Agencies don’t understand how they use/integrate contracted services

5. Total Defense Acquisition Workforce (DAW) Growth ~ 19,887 Total in-sourcing ~ 33,400 (FY10~13,400; FY11~6,200) Additional DAW Growth (non in-sourcing) 9,887 Non-acquisition in-sourcing 23,400 10,000 DAW in-sourcing DoD In-sourcing Initiative: FY10-14 Component FYDP In-sourcing Goals • Army: 8.8K authorizations • Air Force: 13.8K authorizations • DoN: 9.8K authorizations • “4th Estate”: 0.8K authorizations In-sourcing initiative focused on contracted services/functions NOT on contractor employees or positions

6. In-sourcing “Decision Tree” From DepSecDef 28 May 09 Guidance Memo

7. Process and Considerations • Use a “total force” approach to obtain the appropriate mix of manpower (military/DoD civilian) and contractor support • In-source services entailing inherently governmental functions • In-source services needed to support the readiness and workforce management needs, consistent with DoD manpower mix policy (including, in some instances, functions closely associated with inherently governmental) • For all “other services”—conduct a cost analysis (full costs and “like comparisons”) to determine the most cost effective source of performance • Determining/validating manpower for in-sourcing actions: • Verify mission requirements, required level of performance, and workload • Eliminate functions that are no longer required; tailor those of low priority or marginal value • Organize activities to promote efficient, effective, & economical operation • Optimize personnel utilization • Consider the entire workforce and how the work is performed • Not all risks can be identified without a clear accounting of total force: • Inventory of Contracts for Services required by section 807 of FY08 NDAA • Inherently Governmental/Commercial Activities Inventory of military/civilian manpower • Consider steps/length of time it will take to complete an in-sourcing action so there is sufficient time to transition to government performance and there are no gaps (or overlaps) in critical services • Develop transition plans to address temporary impediments so the work can be in-sourced

8. Requiring Activity COR/COTR Requiring Official Support Activities Faculties/Space Mgmt. Information Technology Security Financial Mgmt Org. Budget/Program Officials Appropriators IN-SOURCING Acquisition Org. Contracting Officer Manpower Org. Civilian Requirements Military Requirements Human Capital Org. HR Service Reps. Functional Community Managers In-sourcing: A Collaborative EffortStakeholders within DoD Components include, but are not limited to…

9. Questions? Thomas Hessel thomas.hessel@osd.mil 703-697-3402 DoD In-sourcing Initiative Clearinghouse: http://prhome.defense.gov/pdusd/requirements/insource/