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TOO MANY CONTRACTORS; TOO MUCH COST?

Monday, September 08, 2008
Joe Mazzafro

The recently concluded Democratic and Republican Party Conventions provided excellent made for TV political drama, but not surprisingly offered no insight about how either of the Presidential candidates feels about changes in the Intelligence Community (IC). We do know, however, that both Senator Obama and Senator McCain view change as good and that government contractors need to be reined in. We also know from the FY 09 Intelligence Authorization Bill that was not enacted because of partisan differences over language on interrogation techniques that at least the IC Congressional oversight committees want to reduce the number of contractors used by the IC and that they believe contractors should not be allowed to execute “inherently government functions.” I am sure the Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI) have substantive reason for why IC contracting needs to be improved qualitatively and reduced quantitatively, but it’s also good politics (in an election year) to rail against government contracting abuses. The message from Congress seems to be the IC is spending too much and getting too little from the people it contracts with and that these IC contractors lack the accountability of government employees.Drowned out by the Olympics, events in Georgia, and the political conventions was the 31 July release of a Defense Science Board (DSB) Report on “Creating an Effective National Security Industrial Base for the 21st Century: An Action Plan to Address the Coming Crisis.( http://www.acq.osd.mil/dsb/reports/2008-07-DIST.pdf).” This was followed by a 27 August conference call with the press hosted by ODNI Chief Human Capital Officer (CHCO) Ron Sanders reporting on the “Results of the Fiscal Year 2007 U.S. Intelligence Community Inventory of Core Contractor Personnel (http://www.dni.gov/interviews/20080827_interview.pdf).” An over simplified summary of the DSB report is that the existing national security acquisition infra-structure and associated processes are tuned to the industrial era of the 20th Century and not the information age of the 21st Century. Dr. Sanders wants us all to know that while 70% of the National Intelligence Program (NIP) is outsourced there are only 37,000 “core” intelligence contactors working for the IC that make up 27% of the IC total work force. Moreover, the ODNI CHCO insists no IC contractors are performing any "inherently government functions." The first important reality here is that the IC spends more of its contracting dollars to procure "stuff" than it does for personnel augmentees. When it comes to people the IC has a choice --- it can compete for them in the market place or it can contract for them, but when it comes to fielding a satellite system there is no choice but to request bids from industry since the government’s capabilities to build complex systems was shuttered decades ago to save money.Given the troubled histories IOSA (Integrated Operational Space Architecture), FIA (Future Imagery Architecture), Trailblazer at NSA, GEOSCOUT at NGA, and Railhead at NCTC it is hard to see how IC acquisition is functioning anywhere near reasonable expectations. A recent INSA survey of industry agrees with the DSB that DoD in general and the IC in particular lack both the experienced acquisition professional and program managers for effectively executing complex large scale procurements. Since awarding and managing contracts is an "inherently government function" the IC cannot and does not outsource this directly, but it can and does contract for program management services. I say awarding and managing contracts is indirectly outsourced because the limited experience of IC acquisition professionals makes them risk adverse and prone to default to incumbents that have not gotten them in trouble when it is time for a recompete. This lack of experience also makes IC acquisition officials reluctant to communicate with industries about requirements and trade space for solutions. The answer here is simple, obvious, and not immediate: the IC must invest in growing its acquisition ranks as well as insuring they have the training, education, and experience to deal with delivering what the IC needs from the private sector at good value for both the government and the contractor(s). The IC would also be wise to protect such an investment in its acquisition work force with draconian non-compete rules that would make it economically impossible for the private sector to hire these acquisition professionals away from the government before retirement. With regard to improving communications between IC Acquisition Executives, end user agencies, and the private sector much better advantage can and should be taken of professional associations such as AFCEA to act as open forums and honest brokers between the IC and industry. Finally both the IC and its industrial base need to be patient while this intelligence specific acquisition cadre grows in capability. Alternatively, the government could streamline and simplify the Federal Acquisition Regulations (FAR), the requirements generation/validation process, and IC how the IC is funded. I am reasonably sure Social Security will be privatized before any of those things happen!In his conference call with the media, Dr Sanders implied the IC's real issue with personal services contractors was neither their numbers, costs, nor contributions; but, rather that the IC lacks the data to effectively manage this component of its total work force. The ODNI CHCO said this is being corrected by data calls from 2006 and 2007 on the IC that are now a permanent requirement. Most interesting to me was the ODNI pegging the average cost of a government employee at $125,000 compared to $207,000 for a contractor. Dr Sanders did not provide any data or references for how these numbers where arrived at, but I would be willing to bet a good dinner that the government number is understated. First, the government gets to amortize retirement costs over a career while industry has to account for its 401K contributions on a yearly basis. Second I doubt the government number includes costs for training, education, travel, administrative overhead or security processing that private sector cost accountants pay close attention to for setting rates. Of course, the private sector does have the need for profit; however even at an $82,000 premium over government IC employee costs, it does not seem like a viable get rich scheme when there are lots companies competing for 37,000 opportunities.While the idea of reducing the number of IC personal services contractors sounds attractive, the next administration and the Congress should first know if the IC could actually fill contractor converted to government positions with people possessing the skills sets/experience needed – particularly after realizing there is no incentive for retirement eligible IC professionals to remain in or return to government. Before arbitrarily cutting IC contractor numbers, it would also be prudent to insure that the cost of a government employee is accurate. Otherwise shifting from contractors could prove to be a false savings in both actual and opportunity dollars. Conversely, there is one immediate and relatively straight forward thing the IC could do to reduce the cost of a contractor: rationalize the security process! IC wide accepted investigation and adjudication processes automated as much as possible with clearance reciprocity would lower contractor costs significantly.That's what I think --- what do you think?

Comments

My plans are to become a contractor in the IC. Why? The government low-balls us when we get out of the military. I'll have 10 years experience with any government position barely would allow me to live in the DC area. This is a common theme. You can't expect to hire the best and brightest and not pay us appropriately. Raise the standards for pay for competent, experienced IC analysts and you won't have this problem. I know people who tried to work at the FBI and who quite, the pay and promotion scale were a joke compared to a normal FBI agent.

By John

Would you be interested in a story about about APL employees performing Inherently Governmental positions and functions within the Department of Defense?

If so I can provide amplifying information. I am a navy officer and have insight to various acquisition programs.

By dan_buckler

Interesting and accurate article. Having studies the root causes of many of these failures, I would hope that both congress and the DNI leadership would take some action to improve accountability on both sides of the equation. Alan Wade made similar observations in 2003 in his IC IT industry day brief in which he claimed 80% failure rates of IC IT programs. Little changed. When looking at the acquisition methods employed by GEOSCOUT, SENTINAL, GROUNDBREAKER, RAILHEAD and DEEPWATER, you find the same MilSpec methods employed by DOD; DODAF, DOD5000, NESI, LISI.

If Einstein were alive today, he would say "insanity is continuing the same process over and over again and expecting different results", maybe its criminal to over see these failures and do nothing to change the outcomes. Albert would continue "you can't solve today's problems with the same kind of thinking that got you there in the first place".

Hopefully, both congress and the DNI leadership recognize these traps and bring in some new thinking free of rice bowls.

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