Practitioner’s Perspective-Improving Sourcing Decisions

Practitioner’s Perspective-Improving Sourcing Decisions

Breul, Jonathan D. Public Administration Review, suppl. Special Issue on the Future of Public Administration in 202070.S1 (Dec 2010): S193-S200.


Federal departments and agencies increasingly rely on services to accomplish their missions. “Sourcing” refers to how government departments and agencies obtain the services they need to solve their mission delivery requirements and how those decisions are reached. Determining whether to obtain required services using federal employees or contracts with the private sector is an important legal, policy, economic, and strategic decision. The impact of decisions on the total federal workforce, both in house and those under contract, is profound. This article describes the issue of “sourcing,” provides definitions and distinctions regarding some often confusing (and confused) terms, and suggests the possibility of new forms of sourcing. The author concludes that sourcing should not be subject to a rigid pursuit of sterile, ideological orthodoxy. Instead, sourcing requires a reasoned and thoughtful approach, tempered with pragmatism. The proper balance of these characteristics will vary across agencies because each has a different mission, structure, funding mix, and workforce.

Civilian contractors working for the U.S. Department of Defense (DOD) in Afghanistan and Iraq not only outnumber the uniformed troops there, but also represent the highest ratio of contractors to military personnel recorded in any war in the history of the United States (Glanz 2009). Contractors have incurred significant casualties as a part of these conflicts, the costs of which are not considered or recognized by either the DOD or the Department of Veterans Affairs. Nevertheless, the DOD increasingly relies on contractors to support operations in Iraq and Afghanistan, resulting in a workforce in those that is composed of approximately an equal number of contractors (200,000) as uniformed personnel (194,000).

There has been long-standing recognition that the federal government does not have enough employees with the right skills to meet every agency need. Nor should they. Agencies obtain real advantage by employing contractors – they can be brought on line quickly, fully trained, and fully supported. Contracted personnel offer agencies flexibility. Contractors can take on both mundane and specialized skills to handle short-term mission requirements, allowing in-house personnel to concentrate on longer-term mission requirements. Moreover, competitive selection processes can help bring higher quality, efficiency, and innovation to address emerging government needs.

Yet there has been a growing disparity between the very low rate of growth in the number of civil servants over the last 15 years and the enormous growth in funding for all types of contracted support. Contractors today are engaged in virtually all aspects of federal agency operations. In fiscal year 2008, federal contract spending totaled $515.3 billion, up from $436.4 billion in 2007 – an almost unprecedented increase of 18 percent in one year.

Contract spending increases are not restricted to the Department of Defense. Civilian departments and agencies spent more than $137 billion in contracts in fiscal year 2008, up from $121 billion in 2007. The Department of Energy led the pack, followed by the National Aeronautics and Space Administration, Department of Homeland Security, and General Services Administration. Civilian spending rose even higher with the Department of the Treasury’s Troubled Asset Relief Program and the American Recovery and Reinvestment Act or “stimulus” program.

“Sourcing” refers to how government departments and agencies obtain the services they need to solve their mission delivery requirements and how those decisions are reached. Unfortunately, sourcing is too often drawn as an ideological battle between doing work “in-house” with civil servants or “out-house” with private contractors. However, in practice, the issue is much more complicated and nuanced. Whether government organizations should contract for services is not at issue. They must. The issue is how to balance the short- and long-term needs of their in-house and contract workforce to secure the skills and flexibilities necessary to direct and oversee their missions.

The Growing Reliance on Contractors

One of the major changes taking place today in government is that the public sector (whether federal, state, or local) is shifting from being the “provider” of public services to becoming the “manager of the providers” of services. The rationale is that, when properly implemented, contracting can result in significant benefits to both the government and the public being served, in terms of improved performance and lower costs (Gansler 2003).

Much like the British, who acquired their far-flung, global empire in what has been described as “a fit of absence of mindedness” (Seeley 1883), the federal government’s widespread use of contractor-provided services resulted from thousands of individual decisions – not from strategic, comprehensive planning across federal departments and agencies. The current level of reliance on contractors for special skills and technological support has occurred because government itself – like the global economy – is in transition. This transition is driven by technology, by the need to change the skills mix of the public sector workforce, by the increasingly limited availability of resources, and by citizen expectations.

Sometimes governments rely on their own “in-house” workforce to deliver services or do the job. Sometimes they “rent” workers by contracting with “out-house” professional services. In other circumstances, they may “purchase” technology to automate the work or even find that technology or the economy generally no longer requires government support. In the alternative, they might choose to “build” that capability themselves. No single approach or tool can work in all circumstances. There are, and should be, some standards for making these make-or-buy decisions, such as whether to build up additional in-house contract administration capabilities, or whether to build up additional in-house security guard or IT help desk capabilities.

Sourcing Policy

It has long been the stated federal policy in the United States that government will not produce products or provide services that are available in the private sector (Gansler 2004). Budget Bulletin no. 55-4, issued in January 1955 during the Dwight D. Eisenhower administration, states, “It is the general policy of the Federal Government that it will not start or carry on any commercial activity to provide a product or service for its own use if such a product or service can be procured from private enterprise through ordinary business channels.”

In 1992, U.S. Office of Management and Budget (OMB) provided additional help in distinguishing between inherently government functions and commercial activity in order to avoid making “an unacceptable transfer of official responsibility to government contractors” (OFPP 1992). The policy letter characterized inherently governmental activities as those requiring “governmental decision making because they are so intimately related to the public interest as to mandate performance by government employees.” The policy distinguishes between inherently governmental decision making and ministerial implementation supporting activities that contactors may undertake. For example, “Inherently governmental actions do not normally include gathering information for or providing advice, opinions, recommendations, or ideas to government officials.” That distinction allows the government to take advantage of private sector analysis and expertise while remaining fully in charge and in command of the decision making.

In practice, defining inherently governmental work requires a critical look at the tasks that federal and contract employees perform. There is no bright-line test for what is inherently governmental beyond the requirement that the necessary decisional authority be substantial and relate to a course of federal direction rather than the implementation of that decision within, for example, proscribed policy, rules, or procedures.

Beyond the circle of inherently governmental functions are concentric rings of “core” functions, such as cost analysis and supervision of contracts. The definitions of these functions are subject to interpretation, too. Frequently, they provide a minimum, residual in-house capability of otherwise commercial activities that serve as a ready resource of skills for responding to emergencies. These functions are critical to the success of an agency’s mission, too, because they ensure that mission control and oversight are maintained.

The basic provisions of current policy are found as Part 7.5 of the Federal Acquisition Regulation (FAR) and continue to form the basis for the determinations of what should and should not be contracted out. The FAR lists the types of activities that would be precluded from being carried out by a contractor, such as

* Binding the United States to take some action by contract, policy, or regulation

* Determining the United States’ interests by military or diplomatic action

* Significantly affecting the life, liberty, or property of private persons

* Appointing or directing officers or employees of the United States

* Exerting ultimate control over the acquisition or use of property of the United States, including collection of federal funds

The FAR cautions, however, that these prohibitions do not ordinarily affect gathering information or providing advice to government officials, nor do they affect functions that are primarily ministerial in nature. The difficulty in application comes from trying to apply a relatively general formula to specific cases – for example, whether contractors should provide security services to federal employees or diplomats in war zones.

Some contend that this concern about contractors usurping federal roles may be outmoded and irrelevant to how government works today given the prevalence of a multisector workforce. Steven Schooner and Daniel Greenspahn (2008) note that “throughout the government, the private sector is intimately involved in functions that might be perceived by some as inherently governmental, including those where the risk level is deemed highest, such as pre-award acquisition support, post-war inspection services, engineering or technical design services, intelligence services, policy development and reorganization and planning.” As a result, a new and emerging multisector civil servant/contractor workforce has both evolved and become a necessary fact of life as federal agencies carry out their responsibilities. Contactors often find themselves side by side with federal employees, addressing many of the same problems and often under the direct supervision of federal officials.

Sourcing is seldom a rational, purely objective, or technical exercise. Those in favor rely on the policy principle that the government should not compete with its citizens in the performance of commercial conrractible work needed by the government. Meanwhile, the main opponents of outsourcing argue that taxpayers deserve the opportunity to have work done by civil servants and believe that there is little that the civil service cannot do, and do better, when given the proper resources. It is the responsibility of government policy officials and managers to weigh the different sources available to achieve their policy and program objectives – and to weigh the costs and benefits of each.

The first and most important requirement in deciding whether to source in-house or out-house is to have a clear specification of the policy or program goals and objectives. Making a sensible decision is impossible without a clear goal or objective. Unambiguous policy and program goals will also assist the measurement of outcomes and the ability to examine comparisons of effectiveness and performance. A second requirement is the measurement of relevant direct and indirect costs. Fair cost-benefit analysis must be able to measure the differences in the fully allocated costs to the taxpayer – both short term and life cycle – among the sourcing alternatives. And therein lies the rub.

Contractors can provide significant operational benefits. The Department of Defense, for example, uses contractors to perform noncombat activities to augment the total force and free up uniformed personnel to perform combat missions. Because contractors can be hired faster than the DOD can develop its own internal capability, contractors can be deployed quickly to provide critical support capabilities when necessary. Contractors also provide expertise in specialized fields that the DOD may not possess, such as linguistics. Using contractors can also save the DOD money. Contractors can be hired when a particular need arises and let go when their services are no longer needed. Hiring contractors only as needed can be cheaper in the long run than maintaining a permanent in-house capability. Indeed, there is evidence that competitive sourcing can save significant amounts of money (Gansler 2003). However, the lack of activity-based cost accounting systems limits the ability of federal agencies to readily make cost comparisons because they cannot determine baseline costs, let alone marginal costs or savings attributable to particular sourcing initiatives.

Recent Changes

In recent years, thete has been a great deal of debate over the proper role and size of the federal government. President Bill Clinton declared that “the eta of big government is over” in his 1995 State of the Union address. President George W. Bush came into office promising a smaller government, yet he oversaw the biggest federal budget expansion since Franklin D. Roosevelt. In his inaugural address, President Barack Obama took a different tack: “The question we ask today is not whether our government is too big or too small, but whether it works.”

The Obama administration has made it clear that departments and agencies should reevaluate when it is appropriate to use contractors. The president’s March 4, 2009, memorandum on contracting reform (Obama 2009) directed the OMB to issue guidance on the appropriateness of outsourcing. It noted that the governments overriding obligation to the American taxpayer is to “perform its functions efficiently and effectively,” and stated that “the Government must also have the capacity to carry out robust and thorough management and oversight of its contracts in order to achieve programmatic goals and, further, must ensure that those functions that are inherently governmental in nature are performed by executive agencies and are not outsourced.” It also noted that “[t]he line between inherently governmental activities that should be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined . . . As a result, contractors may be performing inherently governmental functions.”

On March 11, 2009, the president signed the Omnibus Appropriations Act. Section 736 of that act provides that the heads of executive agencies subject to the Federal Activities Inventory Reform (FAIR) Act of 1998 (Public Law 105-270; 31 U.S.C. 501 note) shall “devise and implement guidelines and procedures to ensure that consideration is given to using, on a regular basis, federal employees to perform new functions and functions that are performed by contractors and could be performed by federal employees.” The OMB subsequently issued three memoranda on acquisition and contracting, with the aim of achieving $40 billion in annual savings. “Too much money is spent on too many wasteful contracts, and too many contracts are awarded with too little competition,” said OMB director Peter Orszag. “We are taking steps that are effective immediately to change the culture of government contracting, putting the focus on providing the best services for the taxpayers.”

The first memo directed agencies to reduce their baseline of contracts in fiscal year 2010 by 3.5 percent and another 3.5 percent in 2011 (OMB 2009a). Agencies were asked to achieve these savings by eliminating contracts that were no longer needed, leveraging buying authority, using technology, developing strategic approaches, reengineering business practices, or other means, according to the memo. In addition, agencies were expected to reduce high-risk contracts, defined as noncompetitive cost-reimbursement contacts and others, by 10 percent.

A second memo dated July 29, 2009, provided guidance on improving the workforce to achieve the best balance of public and contract employees (OMB 2009b). According to the OMB, the objective was to reduce an overreliance on contractors and to restore balance in the federal workforce. A third memo required agencies to electronically report on contractor performance (OFPP 2009).

Some federal departments and agencies were quick to respond. The Internal Revenue Service ended its controversial private debt collection program. The DOD dropped a major contract with the private security contractor Blackwater Worldwide. The General Services Administration began to phase out some of its governmentwide acquisition contracts. The Department of Homeland Security (DHS) issued related calls to collect contractor and total workforce data, including a listing of functions that departmental components believed should be considered in the near term for possible insourcing. And the OMB formed a multisector workforce working group of federal agency representatives to review insourcing policy options.


We hear lots of terms, but what is really meant by “outsourcing”? Outsourcing is contracting with a third party to take on a function for an organization. Outsourcing goes far beyond contracting discrete “yellow pages” functions such as trash pickup, building maintenance, or food service. It also involves ongoing business partnerships between government and the private sector to perform major functions for government agencies. Well before 9/11, outsourcing was embraced by governments at all levels. Indeed, Paul Light (1999) estimates that for every federal civilian employee, there are more than times as many contract personnel performing functions in support of government.

The politics surrounding the issue of outsourcing have clouded the distinctions between (1) the government’s reliance on contractors to provide products and manufactured items including everything from pencils to jet fighters, (2) the purchase of flexible service support to meet mission requirements, and, importantly, (3) the debate surrounding the requirement for federal employees who are currently providing commercially available services to compete with their private sector counterparts for the right to continue to provide those services.

Outsourcing for recurring purchases of products and services is increasingly a core requirement that has attracted more and more attention to the professionalism of federal managers within the program and contracting community. What has not been accepted, however, is the idea of competition between federal employees and private sector employees for that work on a fully allocated cost basis. Such analyses are not yet viewed as a core competency that senior executives and managers have embraced. There are several reasons for this, including (1) failure of the government to budget on the basis of the full life-cycle cost to the taxpayer, thereby making federal performance appear cheaper; (2) morale and employee support issues; (3) the perception that federal employees are a sunk cost and can be directed from one assignment to another without the formality of contract modifications; and (4) the fact that the savings generated from outsourcing competitions are seldom made available to the agency or program responsible for the savings. Indeed, when mandated from outside the agency, outsourcing competitions are viewed as just another administrative burden that can get in the way of accomplishing the mission and limit a manager’s discretion.

Contractors, too, see many disincentives. There often is (1) a lack of data to analyze how any agency performs work (including the number of employees) and what the activities actually cost; (2) fear that the animosity generated if a contractor competes for commercial work performed by federal employees will adversely affect the customer relationship; and (3) fear that the government, so committed to protecting its employees as a good manager and employer, is unlikely to conduct a fair and unbiased competition. Moreover, requirements change, which is particularly problematic for fixedprice contracts or those that are hastily drawn.


On the other hand, “insourcing” involves the conversion of contracted work from competitively awarded contract performance to in-house performance by federal employees. Insourcing actions include the conversion of contracted functions that are now considered to be inherently governmental, the conversion of work that is now considered a critical core requirement to in-house performance, or the conversion of work that may have been inappropriately contracted that now appears to have taken on an appearance of a personal services support contract (Lynn 2009).

Insourcing may also result through the conduct of standardized or streamlined A-76 commercial (public- private) competitions when contract cost or quality is in question and in-house performance is a reasonable option. It may also be done to standardize processes, streamline projects and reporting, or gain efficiency. Insourcing is not a new idea. However, some agencies, such as the DOD, are finding it an alternative to outsourcing. On April 6, 2009, Secretary Robert Gates announced that the DOD would scale back the role of contractors in support services. The DOD comptroller issued guidance to realign resources for fiscal years 2010-2014 to decrease funding for contract support and increase funding for 33,400 new civilian manpower authorizations, 10,000 of which would be for the defense acquisition workforce (Lynn 2009, 2).

Federal departments and agencies are now required to consider insourcing for a wide swath of commercially available services. The National Defense Authorization Act for fiscal year 2009 (10 U.S.C, section 2463, and section 736 of the 2009 Omnibus Appropriations Act for civilian agencies) requires the DOD to ensure that consideration is given to using civilian employees to perform functions that are performed by any new, expanded, or existing contract, but could be performed by DOD civilian employees (Lynn 2009, 5). Consistent with this policy, when teviewing existing contracted services, officials are expected to first determine and verify whether the function being performed is still a valid mission requirement, has marginal benefit to mission accomplishment, is redundant with existing in-house or other contacted capabilities, or is not an “enduring” mission requirement. For example, work is not considered “enduring” if the requirement for the services will not extend beyond the terms of the current contract. If die work is not required, has marginal benefit to mission accomplishment, is redundant with existing in-house or other contracted capabilities, or is not an “enduring” mission requirement, the requiring official should notify the contracting officer and resource manager that the services are, or will, no longer be required (Lynn 2005, 6).

Competitive Sourcing

“Competitive sourcing” is a diird approach to the review of commercially available service support work. Historically, competitive sourcing has been applied to both the conversion of work to contract and to in-house performance. This approach was employed in President Bush’s 2001 President’s Management Agenda (OMB 2002) to improve government efficiency and to reduce the costs of government programs by promoting competition between federal employees and private sector organizations. The competitions determined who should perform commercial activities. They focused on activities performed by the government that are also regularly performed in the commercial marketplace, such as information technology, maintenance and property management, and logistics. These competitions compared the public and private sector costs of performing an activity and resulted in outsourcing many federal jobs to the private sector (OMB 2002, 17).

According to the data submitted by the agencies in accordance with the FAIR Act, “Nearly half of all federal employees perform tasks that are readily available in the commercial marketplace – tasks like data collection, administrative support, and payroll services. Historically, the government has realized costs savings in range of 20 to 50 percent when federal and private sector service providers compete to perform these functions. Unfortunately, competition between public and private sources remains an unfulfilled management promise. By rarely subjecting commercial tasks performed by government to competition, agencies have insulated themselves from the pressures that produced quality service at reasonable cost” (OMB 2002, 17).

The term “A-76” comes from the OMB circular of the same designation, “Performance of Commercial Activities” (OMB 2003). This document has guided the conduct of public- private competitions since 1966. The OMB revised this circular in 1967, 1979, and 1983 in various attempts to level the playing field between the federal and private sectots, in order to make the process less burdensome and time-consuming and to create the right incentives to encourage agencies to conduct competitions. A furdier revision in 1 996 caused people to teally take notice. Prior to then, and with the exception of the DOD, federal departments and agencies conducted very few competitions. There had been a number of legislative restrictions imposed on agencies preventing them from conducting competitions – including a three-year moratorium at the DOD – and there was little enforcement to comply. However, Vice President Al Gore’s efforts to “reinvent government” reactivated A-76 and gave it new life. In 1998, Congress responded with the FAIR Act, requiring agencies to catalog their commercial activities. These activities were then subject to competitive sourcing with private industry.

Gore’s National Performance Review put pressure on agencies to use competition to increase efficiencies within dieir organizations. According to A-76 guidance, an activity could be converted to or from in-house or contract perfot mance if the alternative offered either 1 0 percent lower costs than the direct personnel of the in-house cost estimate, or $10 million less (over the performance period) than the in-house cost estimate. The OMB established this minimum cost differential to ensure that the government would not convert performance for marginal savings.

Regardless of these changes, the use of cost comparison studies under A-76 came under fire from all sides. All parties concerned – federal managers, employees, and industry representatives – expressed frustration with the process, and many believed that it needed significant reform. Agency managers resented the time and cost required to conduct a competition. They disliked having to develop new industry equivalent performance standards and to prove their agency to be a competitive in-house organization. They were also pressured to be supportive of their employees and would delay the competitive process to protect them. The employees themselves resisted the process. A completed A-76 competition could result in significant changes to the workforce, including reductions in pay as a result of the application of industry performance standards and even job loss.

Employee unions fought the conduct of competitions involving federal employees as a membership issue and sought to protect their hard-won gains in pay grades and work rules that often became the subject of competitive concerns. The unions also consistently argued that the cost of conducting these competitions should be added to the contractor’s offer when comparing costs with federal performance. Finally, private sector interests resented the A-76 process, too, as unnecessarily burdensome. The idea that a federal agency could compete with a new, untested (theotetical) organization was never accepted by the private sector. The private sector generally argued that quality and past performance, not just cost, should be the driving force in determining whether work should be done by federal or contract employees.

The U.S. Government Accountability Office (GAO) has shown that although the DOD’s A-76 program achieved savings, it was difficult to determine precisely die magnitude of the net savings (GAO 2001, 7). The GAO also documented some lessons from the DOD studies. It found that, first, studies have generally taken longer than expected. Second, studies have required higher costs and resources than projected. Thitd, finding and selecting functions to compete can be difficult. Foutth, making premature budget cuts on the assumption of projected savings can be risky.

Commercial Activities Panel

The Fiscal Year 2001 Defense Authorization Act called upon the GAOs comptroller general to convene a panel of experts to study and make recommendations for improving the policies and procedures governing the transfer of commercial activities for the federal government from government to contractor personnel. The congressionally mandated Commercial Activities Panel developed a set of 10 principles to guide sourcing decisions, which became a reference point for the panel’s work (Walker 2002, 7).

The panel’s principles (see table 1) supplied a strong conceptual framework and special criteria for measuring any proposal for change in the government’s competitive sourcing policies. The panel concluded that there were some advantages to the then-current system. First, A-76 cost comparisons were conducted under an established set of rules, die purpose of which was to ensure that source decisions were based on uniform, transparent, and consistently applied criteria. Second, the A-76 process enabled federal managers to make cost comparisons to cost accounting. Third, the A-76 process had been used to achieve significant savings and efficiencies for the government. The government achieved savings regardless of whether the public or private sector won the cost comparison. Competition served to promote efficiency and improve the performance of the activity studied.

Despite these advantages, the panel heard frequent criticism of the A-76 procedures. The panel noted that both federal employees and private firms complained that the A-76 did not meet the principles’ standard of a clear, transparent, and consistent applied process. In the panel’s view, the most serious shortcoming of the A-76 process was that it had been stretched beyond its original purpose. The A-76 process was designed to identify a low-cost provider of a defined set of services. It was not the right tool for identifying the best provider in terms of quality, innovation, flexibility, and reliability. This is particularly true in today’s environment, in which contracted services increasingly are driven by technology and may focus on more critical, complex, and interrelated services than previously studied under A-76.

In the federal procurement system today, there is a common recognition that a costonly focus does not necessarily deliver the best quality or performance for the government or the taxpayers. Thus, although cost is always a factor, and often the most important one, it is not the only factor to consider. The GAO was unable to come to a consensus as to how the A-76 cost comparison process could be changed to address these concerns. The lack of federal historical performance and quality tracking, the lack of independence in assessing the differences in quality between in-house and contract offers, and the lack of methods for translating these concerns into a nonsubjective (politicized) in-house or contract determination all proved challenging. Understanding these issues at the performance, costing, transparency, and legislative levels is key to the development of alternative approaches. Insourcing and outsourcing for commercial service work that can be performed by federal or contract employees must rely on a level, transparent, and auditable playing field.

Crowd Sourcing

In-house and out-house are traditional ways of framing the “sourcing” debate. If A-76 has outgrown its usefulness because of the political debate, perhaps we ought to examine other approaches. “Crowd sourcing” is a relatively new and popular approach that generally refers to aggregating the responses of individuals across a network. Crowd sourcing involves taking a job traditionally performed by a designated employee and outsourcing it to an unidentified and generally larger group of people in the form of an open call. It generally involves aggregating the responses of those individuals across the network.

The Department of State and the U.S. Agency for International Development, for example, have explored the application of crowd sourcing to enhance the capacity of decision makers to use a “knowledge community” to solve problems and deliver best practices, lessons learned, and innovative approaches in country development and security issues. A critical concern for government decision makers working on foreign assistance and development issues is not new knowledge, but accessing, acculturating, and applying knowledge that already exists globally. Too often, lessons are learned but never applied. Instead, knowledge that is critical to development programs or the success of reconstruction operations is unintentionally compartmentalized by geographic distance or institutional barriers.

The problem is how to compile and process this knowledge, and then make it readily accessible and applicable to key decision makers and operators. More important is how crowd sourcing is applied within the context of a possible FAR-based contract award or either an inhouse decision or a contract decision. Transparency of the decision is a key ingrethent in the insourcing and outsourcing decision. Properly functioning crowd sourcing efforts and collaborative portals can surmount these obstacles by flattening government agencies, bridging bureaucratic stovepipes, and uniting policy makers with field operators or subject-matter experts.


Collaboration emphasizes shared work between government institutions and a network of individual participants. Collaborative or group sourcing is a peer production effort – such as Wikipedia, in which volunteers sign up to write encyclopedia entries as a group. The Wikipedia model rethinks sourcing in the digital age.

New networking technologies such as those embodied in “Peer-toPatent,” highlighted by Beth Simone Noveck in Wiki-Government (2009), provide an opportunity to rethink the closed practices by which agencies gather information and make decisions. The effort focused on the U.S. Patent and Trademark Office (PTO). Patent applications in the United States alone have doubled in the past 1 0 years, putting a huge strain on the system and creating a growing backlog. PTO examiners have roughly 20 hours per patent application to determine whether the application should be granted a 20-year exclusive monopoly. Several years ago, the New York Law School began a pilot project in collaboration with the PTO. The idea was to leverage the PTO examiners by mobilizing a broader group of interested parties to research and identify potential examples of “prior art.” In the context of patents, prior art refers to all information that has been made publicly available about an invention that could be relevant to assessing a patent applicant’s claim of originality.

The program instituted a number of innovative approaches to support a public review process. Volunteers were invited to contribute prior art individually and encouraged to do so as a team of volunteers. These teams were provided with a shared online workspace where they deliberated among themselves regarding a specific patent application’s quality, decided on a research approach, suggested potential places to look for prior art, and allocated research tasks. Team participants identified the 10 most compelling examples of prior art before submitting them to the examiner. As a result, the patent examiner received synthesized views of prior art. The research done by the online team was not a replacement for the work that the patent examiner must do, but it significantly augmented die scope of the work, providing even more information to consider as part of the review process. The early success of this pilot program led to efforts to engage patent agencies around the implementation of similar initiatives in Canada, Japan, and Western Europe.

Smarter Sourcing

There are functions so intimately related to an agency’s mission and the public interest that government employees should perform them rather than manage those functions contractually. Other functions, however, can be managed effectively if the agency keeps its employees in key positions and ensures that they have the training, experience, and support needed to manage and control the work. The current framework does not focus agencies sufficiently on these management and control issues. As difficult as agencies have found it to settle on a practical definition of “inherently governmental,” identifying and retaining core competences presents an even greater challenge. The proper balance differs for each agency and will only be resolved by dioughtful management. Time is needed to work toward a transition to a more optimum balance in the work that government employees and contactors do to serve our county.

Sourcing requires a reasoned and thoughtful approach, tempered with pragmatism. Sourcing should not be subjected to rigid pursuir of sterile, ideological orthodoxy. Each agency has different missions, different structures, different funding mixes, and a different makeup to their workforce. Rather than sourcing on a simplistic, doctrinaire, or ideological basis, smart sourcing should become more sophisticated, consistent with six principles:

1. Cost. The first and most obvious criterion should be the fully allocated cost to the taxpayer over the long term. Yet this is often deceptively difficult to calculate. Sourcing is considerably more complex than the campaign and political nostrums of “do more with less” or “budget-based decision making.”

2. Performance. An important and necessary consideration is performance. Departments and agencies have important mission and program requirements. These should not be skewed by arbitrary targets or ideological objectives to insource or outsource. Performance here means the ability to set performance standards against any supplier of the service.

3. Appropriateness. Sourcing must consider whether the functions and activities involved are inherently government, or so “core” to the organization’s mission that they must be maintained within the organization to maintain critical functions and positions.

4. Accountability and transparency. There also is the need for accountability and control. Organizations must avoid the misapplication of lessons from the more traditional purchase of simple goods and services to their increasingly complex missions. Large, complex acquisition programs such as the Coast Guard’s Deepwater program or the Department of Homeland Security’s Secure Border Initiative require far more thoughtful analysis of the cost, performance, and workforce considerations. The complexities of these issues preclude quick, overly simplistic, or one-size-fits-all approaches that inhibit a balanced and reasoned approach.

5. Workforce balance. The organization must avoid arbitrary mandates and quotas in order to have the flexibility to strategically manage its workforce to effectively achieve its mission.

6. Innovation. Finally, and when practicable, the organization should consider new or innovative approaches such as collaboration and crowd sourcing in addition to the traditional ways of framing their sourcing options.

Going Forward

The federal government currently depends more on contractors than at any time in its history. This stems from political limits on the number of government employees, a broken hiring process, and the need to quickly ramp up to solve immediate problems. An effective government needs a strong cadre of government workers supported by a strong cadre of contractors. Government must align its roles and capabilities so that its programs are more effective. In doing this, it will save billions of taxpayers’ dollars and avoid the problems that come when it asks a contractor to take on a governmental role.

Sourcing matters. It has consequences. Third-party government requires an entitely different set of skills than managing something internally. The rules are different; incentives are different, and, not surprisingly, so, too, are the costs and performance. All of this requires processes and skills that are different from traditional public administration. Managers need specialized knowledge about the programmatic and operational consequences of sourcing decisions. Unfortunately, our knowledge and appreciation of programmatic and policy consequences of sourcing choices are still inadequate. It is time to dispel outdated or ideological notions and to gain a fuller and more balanced view of the consequences of these different sources.

The environment in which sourcing decisions must be made is a challenging one. It consists of new and changing security threats, the public’s growing expectations for demonstrable results, demographic changes, rapidly evolving science and technology, and serious fiscal constraints. The government needs to take a strategic look at contracting, decide how to manage it, and determine the appropriate roles for all parties and the right contracting methods. Most important, the government needs to invest the necessary resources to attract and retain managers equipped to perform the roles of “provider” of public services and “managers of the providers.”


. . . the federal government does not have enough employees with the right skills to meet every agency need. Nor should they. Agencies obtain real advantage employing contractors. . . .


Some contend that . . . concern about contractors usurping federal roles may be outmoded and irrelevant to how government works today given the prevalence of a multisector workforce.


. . . “insourcing” involves the conversion of contracted work from competitively awarded contract performance to in-house performance by federal employees.


The politics surrounding the issue of outsourcing have clouded the distinctions between (1) the government’s reliance on contractors to provide products and manufactured items . . . (2) the purchase of flexible service support to meet mission requirements, and, importantly, (3) the debate surrounding the requirement for federal employees who are currently providing commercially available services to compete with their private sector counterparts for the right to continue to provide those services.


In the federal procurement system today, there is common recognition that a cost-only focus does not necessarily deliver the best quality or performance for the government or the taxpayers.



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Jonathan D. Breul

Georgetown University


Jonathan D. Breul is executive director of the IBM Center for The Business of Government, a partner in IBM Global Business Services, and an adjunct professor in Georgetown University’s graduate Public Policy Institute.


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