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In-Sourcing: Are GovCon's Fears Justified?

While in-sourcing might make some in the government contracting community nervous, the great tribulation expected by the private sector hasn’t hit as hard as some noted industry watchers had anticipated.  But recent review of OMB activity shows there is definite cause for concern.

Many large contractors were worried recently over a pair of OMB memos circulated October 27th.  The first memo mandates that agencies save $40 billion over two years by reviewing work they’ve contracted out.  Then, selected agencies must decide if money can be saved and work quality can be improved by bringing work in-house or holding a re-compete for the contracts.  It also mandates a 5% expansion in the federal acquisition workforce,

The second memo articulates the OMB’s firm shift away from cost reimbursement contracts and toward fixed price contracts. The OMB wants agencies to reduce cost reimbursement contracts by 10 percent by the end of 2010.

Recently confirmed by the Senate as the OMB’s Chief Performance Officer Jeff Zients, told Federal News Radio, “Right now agencies are picking pilot [programs] where they believe they are overly reliant on contractors…hopefully there aren’t any areas where we actually have inherently governmental [work] being done by contractors. If that is the case, [inherently governmental work] needs to be insourced immediately.”

Whatever mandated changes are coming, predictions by noted industry watchers are that these attempts to save money won’t come very quickly.  And, with the definition of “inherently governmental” forthcoming (ed. hopefully) by the end of the year, contractors should be able to evaluate their positions more intelligently for 2010.

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Written by Neel Mehta

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