Outsourcing pits mission vs. money

Stark differences exist between the role of the private sector and a government that must "provide for the common defense," as management consultant Paul Kuzniar wrote in Government Executive (Viewpoint, April 2000).

"Business has many goals, but one is foremost: Make money," Kuzniar wrote. "Government likewise has many goals, but one is paramount: Spend money to ensure the well-being of its citizens." The interests of business and government are at significant odds.

Outsourcing is not a new phenomenon in America. Contractors provided support on battlefields as far back as the Revolutionary War. In fact, the Eisenhower administration fashioned U.S. policy so it would not impede business. President Eisenhower restricted the federal government from providing any product or service that could be procured from private enterprise through ordinary business channels. The work of government, he said, must be confined to tasks that it alone must perform.

In 1966, Office of Management and Budget Circular A-76 spelled out the processes needed to divest government of all but its "core competencies." Since then, the Pentagon has engaged in a robust contracting-out program. Nearly every support function in the Defense Department has been outsourced in some way or another, according to a 1999 report by Business Executives for National Security. More than 45 percent of data processing has been outsourced, the report said.

Win Some, Lose Some

Sometimes the public good wins out over money in A-76 studies. White Sands Missile Range in New Mexico, for example, has survived 22 such outsourcing reviews. The facility's mission posture, streamlined workforce and improved resources led arbitrators to conclude that the government could perform missile tests more effectively than the private sector ever could. Once the necessary tools (faster computers, a flattened organizational structure and capital equipment) were provided, employees at White Sands demonstrated they were up to the task. In fact, the A-76 studies benefited the existing workforce by forcing the organization to modernize its operation.

The Army hasn't been so fortunate with other competitions. In Hawaii, Army telephone services were outsourced several years ago to the Hawaii Island Telephone System. But the cost of this system keeps going up by as much as 30 percent a year, says John Thorpe, deputy chief of information management for the U.S. Army-Pacific. According to Thorpe, these results are due largely to the contractor's lack of understanding of what it actually takes to keep this telephone system operational. That's why it's critical

to keep functions in-house, rather than outsourcing them to interests that lack long-term cost and performance data. Similar problems can be found throughout the 516th Signal Brigade's Pacific area. Across-the-board outsourcing has promised to cut costs, improve service and help organizations quickly move to new technology by tapping skilled contractor staffs. But those benefits often haven't materialized.

But problems with identifying, recruiting and retaining skilled information technology workers with potential for security clearances to fill these critical contractor positions have plagued government managers. The mission has been accomplished, but at what ultimate cost?

An Inside Job

With so many available IT firms, why not conduct A-76 studies with an eye toward outsourcing information technology operations? This effort to cut costs would, on the surface, appear to be a good idea. But according to the 1998 Federal Activities Inventory Reform Act, a federal function must be considered nongovernmental before it can be outsourced. This proviso should exclude the Defense Department from such wholesale contracting efforts.

"Inherently governmental functions are those tasks that are so intimately related to public interest that they need to be performed by government employees," according to a 1998 General Services Administration white paper on outsourcing.

Communication might not be considered inherently governmental, but it certainly is in combat. The changing nature of warfare erases any separation between day-to-day IT and operational IT. An information-based 21st century Army must have the core competencies needed to operate and maintain computer networks. These skills cannot be developed and maintained by outsourcing IT operations.

The Army's Directorate of Information Management in Huntsville, Ala., contracted out its entire information management function several years ago. Now, officials are trying to reverse their earlier decision by conducting more A-76 studies. They say outsourcing has resulted in higher costs and loss of control over their operations.

Such reversals are a concern. Once IT functions have been turned over to a contractor, they are often too costly to revert to government employees and control. And the advent of hostilities is no time to put these end-to-end systems back in-house. The transition period could create management weaknesses that compromise national security.

As the Defense Department modernizes its information operations, interoperability between soldiers on the battlefield and their sustaining bases will become paramount. Simply put, information management is a core military function, now more than ever.

Unfortunately, these concerns about outsourcing have not slowed down the A-76 process. The Pentagon expects to deliver $11 billion in savings by 2005 and to achieve recurring annual savings of $3 billion thereafter with the help of outsourcing studies. The reviews involve 229,000 positions-three times the number of positions Defense looked at from 1979 through 1996.

Shortsighted Savings

Information technology will provide the strategic and technical backbone of the Army in the years to come. In fact, IT will be as much a part of the Army as the warrior it supports and must not be contracted out because of any shortsighted need to reduce costs. According to the GSA white paper, "The decision process for outsourcing must be directly interrelated with the long-range, strategic planning process. . . . Overemphasis on short-term benefits is a clear sign of an outsourcing project that will prove unsuccessful."

Further, retaining an in-house workforce is the only way the Army can define the evolving information infrastructure needed to support the revolution in business and military affairs. Contracting out specific, short-term projects as a part of a step-by-step process will be critical, but only an in-house workforce is congressionally mandated to operate in the best interests of the nation.

As Kuzniar noted, the business of government revolves around politics, or doing the peoples' work. This is antithetical to the approach of business. Nowhere is this more true than in modernizing IT.

The structure of program managers, cross-functional commands, evolving guidance from higher-ups and the nature of providing national defense make wholesale outsourcing undesirable. As the Army works toward the Defense Department's Joint Vision 2020 plan and the knowledge-centric Global Information Grid, an interlocking system of networks, designed to connect battlefield systems to their sustaining bases in the continental United States, it must make the right outsourcing decisions.The Army cannot base its modernization decisions solely on cost savings, because to do so would undermine its ability to provide end-to-end connectivity.