Insourcing: Who is Watching the Watchers?

watchingWith federal deficits rapidly spiraling out of control, it’s no surprise that policy makers in Washington are floating a range of ideas to rein in budgets and bring more accountability.

To date, DoD’s policy has centered around the creation of public-private partnerships (PPPs) and a performance-based approach to logistics (PBL).  These arrangements focus on bringing private industry into closer collaboration with government, capitalizing on the advantages of competitive sourcing.

According to a recent report from the Lexington Institute, PPPs in general (PBL, in particular) have a solid track record of cost savings and improved availability. “Government, industry and academic studies all have reached the same conclusion: contracts have led to improvements in availability in the neighborhood of 20-40 percent while typically reducing costs by 15-20 percent.”

Also, the improvement to availability realized through public-private partnerships “creates an additional cost savings by reducing the total number of systems required in order to meet the warfighter’s needs. In addition, by streamlining supply chains and improving inventory control, PPPs have achieved hundreds of millions of dollars in cost avoidance.”

Finally, by working more closely with government counterparts, the private sector has invested millions in the defense industrial base, through training for government workers and critical intellectual property.

Just about everyone in the defense industry seeks a closer working relationship with the federal government to improve the delivery of products and services, but I suspect most would take issue with the alleged value proposition of insourcing.

First of all, there’s no evidence that insourcing saves the government money, especially in the long-term.  Insourcing could potentially be very costly, especially in terms of force flexibility and increased maintenance and sustainment costs. Also, since PPPs have such a clear track record of success for increased availability of goods and services, insourcing carries the implicit danger of making vital weapons systems less available to warfighters.

Despite the clear hazards of increased long-term spending and diminished warfighter support, proponents of insourcing continue to vilify the government contracting industry and make dubious claims about cost-savings.  The question is: who’s checking out these insourcing claims?

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