The Cost of Critical Functions

The Office of Federal Procurement Policy (OFPP) finally issued its long-awaited, and fairly lengthy, policy memo governing the use of contractors to perform critical functions and functions closely associated with inherently governmental functions. But the policy memo is not fully functional because it tells agencies to determine the costs associated with in-house performance of non-inherently governmental work but lacks guidance on how they are to estimate and compare the costs with the private sector.

While the true cost to the government of contractor performance is fairly clear, the true costs of in-house performance has never been adequately determined using any of the existing methodologies.

Earlier this year, the Center for Strategic and International Studies (CSIS) recommended the most comprehensive public-private cost comparison methodology to date and PSC endorsed it. It is troubling that OFPP did not mention this or any other methodology, let alone adopt the sound, evidence-based CSIS analysis.

Additionally, there is strong evidence to suggest that the private sector is more efficient and cost effective for performing these functions. Even the Commission on Wartime Contracting reached this conclusion in the appendix to its Aug. 31 final report.

We look forward to seeing further guidance from OFPP on the cost comparison methodology. Until such guidance is issued, OFPP’s final policy memo on “Performance of Inherently Governmental and Critical Functions” cannot be considered truly final.

OFPP Proposed Workforce Policy Too Complex, Lacks Clarity

The Professional Services Council, through the Council of Defense and Space Industry Associations (CODSIA), made recommendations to the Office of Federal Procurement Policy on how it can improve its proposed policy letter “Work Reserved for Performance by Federal Employees” to avoid creating an environment that would promote arbitrary insourcing at federal agencies.

The proposed policy letter sought to clarify the definition of what constitutes “inherently governmental” work that must be performed by federal government employees and to provide guidance to agencies to help them identify functions “closely associated with inherently governmental” and “critical” functions that should also be reserved for federal employee performance.

But we felt that agencies could misinterpret the proposal as a mandate to insource work that is neither inherently governmental nor critical to government’s mission performance, such as base maintenance, information technology support or other tasks found in the yellow pages.

To avoid a final policy that results in wide-scale, non-strategic, quota-driven insourcing, we recommended OFPP:

• Provide a clear definition and examples of what constitutes inherently governmental work;
• Combine the categories of “closely associated with inherently governmental functions” and “critical functions” into one narrowly defined category to eliminate duplication and confusion;
• Require that agencies to submit and publicize a list of their inherently governmental and critical functions and define which critical functions must be reserved for performance by federal employees;
• Require agencies establish a comprehensive human capital plan and conduct in-depth cost comparisons before making insourcing determinations for work that could be performed by either the public or private sectors.

PSC to Gates: DoD’s Strategic Human Capital Initiative is Devolving into a Quota-Driven Process

Professional Services Council President and CEO Stan Soloway sent a letter to Defense Secretary Robert Gates today expressing concern that the Defense Department’s plan to insource critical functions is going off track. The president of the International Association of Machinists, R. Thomas Buffenbarger, sent a separate letter to the secretary with identical concerns. Read our press release and both letters here.

Gordon hears PSC, ABA concerns on multi-sector workforce policy memo

Office of Federal Procurement Policy Administrator Daniel Gordon took part in a question and answer session the Professional Services Council and the American Bar Association hosted on April 26. Gordon discussed his March 31 draft policy letter, “Work Reserved for Performance by Federal Government Employees.” Among the top concerns raised by attendees about the letter: a failure to offer clear guidance on conducting a cost comparison and a failure to address what to do when a job could be considered “government only” but the need is immediate or the job isn’t a long-term requirement. Gordon said he is in “listening mode” and welcomed written comments on these and other concerns raised during the town-hall style meeting. PSC is preparing comments to send to Gordon by the June 1 deadline.