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Support an Insourcing Moratorium at the Department of Defense
An Open Letter to Senator Warner
October 25, 2010
Honorable Mark Warner
Dear Senator Warner:
The undersigned Virginia organizations request your sponsorship of an amendment to the Defense Authorization instituting a moratorium on insourcing – the conversion of work currently performed by private sector contractor firms to performance by Federal government employees.
In August, Defense Secretary Robert Gates said, “We weren’t seeing the savings we had hoped from insourcing.” (“Insourcing failed, DOD's Gates says. Now what?” Federal Computer Week, August 10, 2010.)
In June, Senator Robert Menéndez (D-NJ) was asked about the effect insourcing had on small and minority owned business. The Chairman of the Democratic Senatorial Campaign Committee said insourcing was “counter-intuitive to the President’s goal of creating opportunities in the federal contracting system for diversity.” Sen. Menendez concluded, “We already have a much more limited universe than we should, and if [insourcing] is being pursued, then it is only going to erode what exists, so it doesn’t make a lot of sense.” (“Procurement pinata out of hispanic reach” Hispanic Link News Service, June 21, 2010.)
Every Congressionally-chartered White House Conference on Small Business (1980, 1986, and 1995) has made unfair government competition with small business a top issue. The issue of government competing with the private sector has been a serious concern for small business for decades. According to inventories compiled under the Federal Activities Inventory Reform (FAIR) Act, beginning under the Clinton Administration in 1999, there are still more than 850,000 Federal employees engaged in activities which are commercial in nature. Subjecting these positions to established public-private comparisons can save more than $27 billion annually over the next 5 years. We are concerned that in-sourcing is occurring without such public-private comparisons or cost analysis. In fact, a recent Air Force insourcing effort was reversed when a court challenge was filed noting that no standards for cost analysis were utilized.
This shift to government performance of commercial activities not only hinders the private sector, including small and minority owned business, but places additional costs on taxpayers during a lengthened period of a steep decline in the nation's economy, a staggering national debt, and a high national rate of unemployment. The government intrusion and competition in the private market that insourcing brings is having a detrimental effect on capital investment and job creation. The insourcing agenda is particularly impacting Virginia. Many private firms, including small and minority owned firms, have lost jobs or have jobs threatened, by insourcing of Federal contracts. This increases private sector unemployment and shrinks state and local tax revenues.
Given Secretary Gates’ recent acknowledgement that insourcing does not save money, Senator Menendez’s concerns that insourcing is ‘counter-intuitive’ to the Obama Administration’s goal of creating Federal contracting opportunities, particularly for small and minority owned businesses, and the current state of the nation’s economy, we respectfully urge you to offer an amendment to the Defense Authorization that would place a moratorium on insourcing within the Department of Defense.
We suggest that the Obama Administration use the moratorium period to develop a policy, similar to that which was Federal policy, beginning in 1955, that recognizes that real economic growth and job creation is in the private sector, and emphasizes that government should not compete with its citizens, but should rely on the private sector to the maximum extent possible. Finally, a clear and objective metric for justifying and determining cost-effectiveness of government performance of commercial activities should be developed to protect the interest of taxpayers.