Outsourced DoD

Obama DoD insourcing failure

by nkronos on March 7, 2011

Yesterday I posted about how recent government outsourcing–as one way of cutting long-term liabilities associated with pensions and benefits–ties into the desire for states like Wisconsin to reduce the power of collective bargaining. Out of self-interest unions will block such efforts when they can. I also asked whether outsourcing makes fiscal sense for government, especially if the resulting jobs (and thus tax base) wind up outside the government’s jurisdiction.

Unsurprisingly, the Obama administration has reversed many of the Bush administration’s efforts to outsource work at the federal level. Particularly in the two most recent wars (Afghanistan and Iraq), the US military relied extensively on private contractors. According to Forbes:

On the day that George W. Bush left office, there were 30 percent more contractors on the ground in Afghanistan than U.S. military personnel — 68,000 versus 52,000 — and the number of contractors in Iraq nearly matched the troop count of 141,000. Although many of these private-sector workers were locals hired to assist in tasks such as base support and translating, the heavy use of contractors played into a political narrative among Democrats at home who alleged that the Bush Administration was trying to “privatize” functions that should only be performed by federal personnel.

Since taking office, Obama and his Department of Defense–even while headed by Robert Gates, who likewise oversaw Defense in the previous administration after Donald Rumsfeld’s departure–have set a goal of reducing outside contractors from 39 percent of the workforce to 26 percent. Although the effort has not saved any money as was hoped, it nevertheless faces pressure to continue because its motivation is as much political as fiscal.

Last month, the Army, which had been aggressive in its implementation of Gates’s goal, established new criteria and paperwork before additional insourcing would take place. In particular, Army Secretary John McHugh must personally approve each such action.

Democrats like Senate Armed Services chairman Carl Levin are pushing back. With Democrats in charge, government is one place where organized labor still has powerful levers to influence management, even if that management answers ultimately to taxpayers.

The dynamics and characteristics of government work, however, are not vastly different than those in private industry when it comes to the susceptibility of a job being out-sourced. In fact, government work may score worse on three out of the four variables used to evaluate the likelihood that a job can be outsourced (ease of transmitting inputs/outputs electronically, level of employee interaction with other types of employees, and routine nature of work). Consequently, according to the BLS, Washington, DC ranks the third highest of cities surveyed for percentage of jobs at risk of being outsourced.

Ironically, the part of the American economy going against the outsourcing grain has proved to be the part least welcome at Obama’s table: small businesses. Because Obama woos labor for its votes and corporate giants for their bucks, he has little time for the small entrepreneur (cf. Joe the Plumber, 2008). The economies of scale dilute some of the costs of outsourcing overseas for large companies, whereas they are prohibitive for small firms.

And small companies are unlikely to have union workers.

Comments on this entry are closed.

Previous post:

Next post: