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Thomas Hessel Senior Manpower Analyst Requirements and Program & Budget Coordination OUSD (P&R) – Program Integr

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 (P&R) – Program Integration Outline DoD In-sourcing Background RMD 802 In-sourcing Initiative

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Thomas Hessel Senior Manpower Analyst Requirements and Program & Budget Coordination OUSD (P&R) – Program Integr

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  1. 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 (P&R) – Program Integration

  2. 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

  3. 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(AT&L) 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

  4. 10 USC §2463 Requirements • Requires USD (P&R) 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

  5. 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

  6. DoD 10 USC §2463Implementation 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

  7. 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

  8. 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

  9. 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

  10. 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.

  11. 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 Services—Implementation Guidance” to DoD Components • May 29, 2009 — DoD Component inform OUSD(P&R) 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(P&R) of any problems with executing their plans • Summer 2009 — OUSD(P&R) 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(P&R) their In-sourcing Plans • Beginning January 2010 — Provide OUSD(P&R) quarterly progress reports

  12. In-sourcing “Decision Tree”

  13. In-sourcing: A Collaborative EffortStakeholders include, but are not limited to…

  14. 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

  15. 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

  16. 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 NOTbe 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

  17. 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 Department’s decision • If requested by an employee of the contractor, information on the Federal hiring process should be provided

  18. 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

  19. 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 Department’s 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

  20. And Let’s Not Forget… • Contractual obligations and considerations • Contracts requiring re-competition • Exercising of option years • Types of contracts (T&M, 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

  21. 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

  22. Questions?

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