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57–942 PDF 2010

S. Hrg. 111–626 

BALANCING ACT: EFFORTS TO RIGHT-SIZE THE 

FEDERAL EMPLOYER-TO-CONTRACTOR MIX 

HEARING 

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE, AND THE 

DISTRICT OF COLUMBIA SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MAY 20, 2010 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 


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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

DANIEL K. AKAKA, Hawaii, Chairman 

CARL LEVIN, Michigan 

MARY L. LANDRIEU, Louisiana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

GEORGE V. VOINOVICH, Ohio 

SCOTT P. BROWN, Massachusetts 

LINDSEY GRAHAM, South Carolina 

LISA M. POWELL, Staff Director 

ROGER YEE, Legislative Fellow 

EVAN W. CASH, Professional Staff Member 

JENNIFER A. HEMINGWAY, Minority Staff Director 

SEAN M. STIFF, Minority Professional Staff Member 

AARON H. WOOLF, Chief Clerk 


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C O N T E N T S 

Opening statements: Page 

Senator Akaka .................................................................................................. 1 

Senator Voinovich ............................................................................................. 2 

WITNESSES 

THURSDAY, MAY 20, 2010 

Hon. Daniel I. Gordon, Administrator, Office of Federal Procurement Policy, 

Office of Management and Budget ..................................................................... 5 

Jeffrey R. Neal, Chief Human Capital Officer, U.S. Department of Homeland 

Security ................................................................................................................. 6 

Charles D. Grimes III, Deputy Associate Director, Employee Services, U.S. 

Office of Personnel Management ........................................................................ 8 

John K. Needham, Director, Acquisition and Sourcing Management, U.S. 

Government Accountability Office ...................................................................... 10 

Mark Whetstone, President, National Citizenship and Immigration Services 

Council, American Federation of Governnment Employees, AFL-CIO ........... 24 

Alan Chvotkin, Executive Vice President and Counsel, Professional Services 

Council .................................................................................................................. 25 

Maureen Gilman, Legislative Director, National Treasury Employees Union ... 28 

ALPHABETICAL LIST OF WITNESSES

Chvotkin, Alan: 

Testimony .......................................................................................................... 25 

Prepared statement .......................................................................................... 103 

Gilman, Maureen: 

Testimony .......................................................................................................... 28 

Prepared statement of Colleen M. Kelley ....................................................... 112 

Gordon, Hon. Daniel I.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 37 

Grimes, Charles D. III: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 52 

Neal, Jeffrey R.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 47 

Needham, John K.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 56 

Whetstone, Mark: 

Testimony .......................................................................................................... 24 

Prepared statement with attachments ........................................................... 71 

APPENDIX 

Background .............................................................................................................. 120 

Questions and responses for the Record from: 

Mr. Gordon ........................................................................................................ 127 

Mr. Neal ............................................................................................................ 136 

Mr. Grimes ........................................................................................................ 147 


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BALANCING ACT: EFFORTS TO RIGHT-SIZE 

THE FEDERAL EMPLOYER-TO-CONTRACTOR 

MIX 

THURSDAY, MAY 20, 2010 

U.S. SENATE,

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT

MANAGEMENT, THE FEDERAL WORKFORCE,

AND THE DISTRICT OF COLUMBIA,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:53 p.m., in room 

342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, Chairman of the Subcommittee, presiding. 

Present: Senators Akaka and Voinovich. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Good afternoon. This hearing of the Subcommittee on Oversight of Government Management, the Federal 

Workforce and the District of the Columbia is called to order. 

Aloha and welcome to all of you, especially to our distinguished 

panelists and guests. I would like to thank you all for joining us 

for this hearing on the efforts to rebalance the work performed by 

Federal employees and contractors. 

The government’s workforce has long been made up of both Federal employees and service contractors, working side by side to provide services to the American people. Over the past decade, outsourcing increased significantly and management and oversight 

challenges have emerged. Federal agencies have begun to rely so 

heavily on contractors that agencies have lost the expertise needed 

to accomplish important parts of their missions. This is particularly 

troubling when agencies also lack the skilled staff needed to properly manage their contracts and oversee the contractor workforce. 

Without question, contractors do provide vital services and expertise to the government. After the attacks of September 11, contractors helped the Federal Government quickly ramp up homeland security operations and stand up the Department of Homeland Security (DHS). However, more than 7 years after DHS was created, 

the Department remains too heavily reliant on contractors to provide services that are critical to the Agency’s mission. 

I have long been concerned that contractors at DHS and elsewhere are performing inherently governmental functions, work 

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countability Office (GAO) has told us that the closer contractors 

come to supporting inherently governmental functions, the greater 

the risk of influencing the government’s decisionmaking process. 

However, the line between inherently governmental activities and 

commercial activities has been blurred. 

Recently, the Obama Administration directed the Office of Federal Procurement Policy (OFPP) to reexamine the definition of an 

inherently governmental function and what jobs or functions 

should be brought back in-house. I look forward to hearing from 

OFPP today on this matter. 

Rebalancing the Federal workforce will not simply be a job conversion process. This effort will take considerable workforce planning to determine what Federal positions should be created and 

what contracting functions eliminated. 

One issue that we must also address in this right-sizing effort is 

to reform the Federal hiring process. The long and complicated hiring process across the Federal Government may encourage agencies 

to use contractors rather than hiring permanent staff. 

Senator Voinovich and I have been pressing for Federal hiring 

reform with our Federal Hiring Process Improvement Act, and I 

am pleased that the Senate passed our bill Tuesday night. 

The American people expect strong leadership from the Federal 

Government. We must make sure the Federal Government has the 

people it needs to perform critical functions and to properly oversee 

the important work done by contractors. We need to hire the right 

people with the right skills to perform the right jobs; that is a 

statement that is often made by my friend, Senator Voinovich. 

I will work with the Administration to address any potential barriers that may hinder insourcing efforts. I commend DHS for its efforts to develop and implement workforce plans to right-size its 

contractor mix. This is a big challenge, but I think it will finally 

reduce the Department’s over-reliance on contractors. 

With that, I look forward to hearing from our witnesses today, 

and I would like to call on Senator Voinovich for his opening remarks. 

Senator Voinovich. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Thank you, Senator Akaka. 

I was remarking to Senator Akaka at noon today that I admire 

him so much for his continuing to have hearings just about every 

week dealing with the issue of human capital, which has been 

something that we have been talking about now, I think, for about 

10 years, and its impact on the delivery of services in the Federal 

Government, and also in regard to working harder and smarter 

and doing more with less. 

I would like to join today’s chorus in voicing my support for the 

congressionally mandated work currently underway at the Office of 

Management and Budget (OMB) that seeks to clarify the guidelines 

agencies may use when considering how best to accomplish the 

tasks assigned to them. We must ensure that Federal agencies remain in control of their missions, and I am hopeful that OMB’s 

work will move us closer to that goal. 


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I am also pleased to see the Administration embracing strategic 

human capital management for the multi-sector workforce. I have 

long sought to encourage greater use of this tool by Federal agencies. But as demonstrated by strategic human capital management’s appearance on each of GAO’s high-risk lists issued since 

2001, the Federal Government needs improvement in this area. I 

look forward to hearing from today’s witnesses on how this track 

record can be improved, especially within the context of the multisector workforce. 

As today’s hearing will demonstrate, bipartisan agreement appears to exist on the objectives of workforce balancing efforts, but 

the devil will be in the details, particularly in how general guidance issued by OMB is translated into action by front-line contracting officers and hiring managers. I am glad that today’s hearing will allow the Subcommittee to begin an examination of this 

issue. 

I just met with the new head of the Chief Human Capital Officer 

(CHCO) Council who said that if she can get the participation of 

all of the chief human capital officers of the various agencies, that 

will go a long way toward accomplishing what OMB wants to get 

done. 

As agencies progress in workforce balancing efforts, they will be 

confronted with a variety of challenges. Congress and the Executive 

Branch must assist agencies when necessary to overcome these 

challenges. 

First of all, we have got to recognize and address the hiring challenges posed by workforce balancing efforts, and I think most of us 

agree that the last Administration went too far the other direction. 

It was interesting though, when the A–76 procedure was used to 

decide whether something should be outsourced, in about 85 percent of A–76 cases the workers for the government won. 

And I said to myself on so many occasions that Federal employees were the most efficient organizations, but the fact was they 

were not given a chance to be the most efficient organization until 

they were challenged by the prospect of moving work outside of the 

agency. I thought it was too bad that they could not have been 

challenged and given the right to, as I call it, engage in quality 

management—for the group to get together on their own and say, 

we can do a better job in this agency. But in too many cases they 

had to wait for somebody on the outside to compete with them, and 

then you finally got to the Tiger team or whatever new work arrangement it was that came up. 

The current Federal hiring process we know will not be up to the 

task of workforce balancing, although, as Senator Akaka said, we 

are very pleased that by unanimous consent, S. 736, the Federal 

Hiring Process Improvement Act, passed the Senate Tuesday night. 

We are hoping we can get it through the House, and that the legislation will reinforce the President’s Executive Order. 

Indeed, the Department of Homeland Security has already requested direct hire authority from OPM as part of its workforce 

balancing efforts. We must ensure that the goals we are asking 

agencies to achieve with respect to insourcing can be achieved 

using current hiring tools. If not, the Administration or Congress 


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must supply agencies with sufficient flexibilities to get the job 

done. 

If we fail in this responsibility, we will see a past trend repeated. 

Agencies will turn to existing hiring authorities, like the Federal 

Career Intern Program (FCIP), to hire the personnel necessary to 

achieve the tasks assigned them by Congress and the Administration. By providing flexibilities specifically designed for the unique 

requirements of insourcing critical functions, we can avoid such 

practices and the concern they cause for some stakeholders. I am 

hopeful that the Federal Hiring Process Improvement Act will help 

in this matter. 

I also want to direct attention and discussion to the impact proposed OMB guidance on workforce balancing will have on the acquisition workforce. A host of new actions will likely be required 

of acquisition professionals as part of the workforce balancing efforts. These tasks will be necessary to prevent key functions from 

being improperly outsourced, but new actions will only increase the 

burdens placed on the Federal acquisition workforce. And we have 

had hearing after hearing on that issue. 

I would remind those present today that our acquisition workforce grew only 11 percent while contract spending increased almost 60 percent between fiscal year 2002 and 2008. Increased responsibilities for the acquisition workforce must be accompanied by 

increased funding and support for this critical group of Federal employees. 

Finally, we must ensure that workforce balancing efforts do not 

override longstanding government practices of securing noncritical, 

commercially-available services from the private sector unless the 

performance of such tasks by Federal employees is the most cost 

effective option. Such decisions must be based on full and complete 

cost comparisons between the Federal and private sectors, particularly under current budget restraints. 

Striking the right balance between Federal employees and contractors is going to be a difficult task, but a critical one. I look forward to today’s discussion and to working to ensure the success of 

this effort. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Senator Voinovich. 

On our first panel, it is my pleasure to welcome Daniel Gordon 

who is Administrator of the Office of Federal Procurement Policy 

at OMB; Jeff Neal who is the Chief Human Capital Officer for the 

Department of Homeland Security, Chuck Grimes, the Deputy Associate Director for Employee Services at the Office of Personnel 

Management; and John Needham, Director of Acquisition and 

Sourcing Management at the Government Accountability Office. 

It is the custom of the Subcommittee to swear in the witnesses, 

and I ask you to stand and raise your right hands. 

Do you swear that the testimony you are about to give this Subcommittee is the truth, the whole truth and nothing but the truth, 

so help you, God? 

Mr. GORDON. I do. 

Mr. NEAL. I do. 

Mr. GRIMES. I do. 

Mr. NEEDHAM. I do. 


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1The prepared statement of Mr. Gordon appears in the Appendix on page 37. 

Senator AKAKA. Thank you. Let the record show that the witnesses answered in the affirmative. 

I want our witnesses to know that although your remarks are 

limited to 5 minutes, your full statements will be included in the 

record. 

Mr. Gordon, please proceed with your statement. 

TESTIMONY OF HON. DANIEL I. GORDON,1 ADMINISTRATOR, 

OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF 

MANAGEMENT AND BUDGET 

Mr. GORDON. Good afternoon, Chairman Akaka and Ranking 

Member Voinovich. I welcome the opportunity to appear before you 

today to discuss the Administration’s efforts to rebalance the mix 

of work performed by Federal employees and contractors. 

As you noted, Chairman Akaka, I have submitted a written 

statement, and I appreciate your entering that into the record. I 

will speak very briefly in this oral statement. 

In my former position at GAO where I worked for 17 years, as 

well as in my 6 months at OMB, I have heard again and again 

about situations where the mix of work performed by our Federal 

employees and contractors has gotten out of balance, where agencies have contracted out functions that should be performed by 

Federal employees, where agencies have lost control of critical functions. I am, therefore, especially appreciative of the demonstrated 

commitment on the part of this Subcommittee’s leadership to addressing this important issue in general and, in particular, in holding this hearing today. 

As you know, the office that I head within OMB, the Office of 

Federal Procurement Policy, issued a draft policy letter in the Federal Register on March 31. We are now in the public comment period which closes at the end of this month. The draft provides guidance about three kinds of functions: 

First, with respect to inherently governmental functions, the 

draft policy letter would remind agencies to adhere to the statutory 

definition of that term in the Federal Activities Inventory Reform 

(FAIR) Act. If you will, it is the law, and it must be followed. That 

definition says that a function is inherently governmental if it is 

so intimately related to the public interest as to require performance by Federal Government employees. But beyond reminding 

agencies that they have to follow the statutory definition, the draft 

policy letter provides guidance. It provides tools to help agencies 

apply that definition to specific situations. 

Second, with respect to functions that are closely associated with 

inherently governmental ones, where we do use contractors to perform that work, the draft policy letter reminds agencies that they 

must give heightened management attention to guard against what 

is sometimes called mission creep—expansion of contractors’ work 

into what would be inherently governmental functions. 

Third, the draft policy letter would require that agencies have 

the internal capacity to maintain control of critical functions, a new 

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1The prepared statement of Mr. Neal appears in the Appendix on page 47. 

ently governmental, are needed for the agency to effectively perform its mission and operations. 

Those are the key points in the draft policy letter. We are getting 

comments. We are looking forward to the comments, and we are 

going to consider them, of course, carefully as we put the policy letter in final form. 

We recognize that the road ahead of us will be challenging. In 

many ways, implementation will be far more difficult than writing 

the policy letter. We are asking the agencies to take a hard and 

honest look, to see where they are overly reliant on contractors and 

to promptly take steps to correct imbalances that they identify. 

It is worth underscoring, and I know both the Chairman and the 

Ranking Member are very much appreciative of this. It is worth 

underscoring that this will be a joint effort of agency leadership 

and those handling human capital, finance, performance, and acquisition in the agencies. 

I believe that we are now on the path to better use of the talents 

of both our Federal employees and the contractors who support us. 

We are already working with the agencies, including with OPM 

and DHS who you will be hearing from shortly on this panel, and 

we are committed to continuing that collaboration. 

I also very much look forward to working with this Subcommittee 

and with other Members of Congress and our other stakeholders as 

we move forward together on this important initiative. I am happy 

to answer any questions that you have. Thank you for letting me 

appear here today. 

Senator AKAKA. Thank you very much, Mr. Gordon, for your 

statement. 

And now we will receive a statement from Mr. Neal. 

TESTIMONY OF JEFFREY R. NEAL,1 CHIEF HUMAN CAPITAL 

OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY 

Mr. NEAL. Chairman Akaka and Ranking Member Voinovich, 

thank you for the opportunity to speak to you today regarding the 

Department of Homeland Security’s efforts to appropriately balance 

our Federal and contractor workforce. 

My name is Jeff Neal. I am the Chief Human Capital Officer of 

DHS, and as a former career civil servant for more than 30 years 

I appreciate your leadership on Federal human capital issues. 

In its initial standup of operations, the Department of Homeland 

Security relied heavily on industry to provide critical services. 

While such reliance on contractors made sense in a startup environment, operating in that manner today may not be the most efficient and effective way to carry out our homeland security mission. 

Since 2007, the U.S. Government Accountability Office has raised 

concerns regarding the Department’s large number of contract 

services. The President’s March 4, 2009 Memorandum on Government Contracting raised concern that agencies across the Federal 

Government may be contracting for work that should be performed 

by Federal employees. The Office of Management and Budget has 

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tors, including through the draft policy letter issued on March 31, 

2010, by the Office of Federal Procurement Policy. 

With Secretary Napolitano’s leadership, we have been working to 

achieve the appropriate balance between Federal employees, military personnel and contract services in DHS. Our rationale for implementing the Balanced Workforce Strategy is clear-cut, and that 

is that we must ensure we have an appropriate balance between 

our personnel and contract services. We must also create a process 

that examines that balance immediately and ensures examination 

of it on a regular basis. 

We recognize that this is an ongoing workforce planning need 

that requires integration of our human capital, financial and procurement planning processes. None of us can do it on our own. 

We have begun the integration of these processes through our 

Balanced Workforce Strategy. Some of the elements of this are still 

in the final development and review stage, but we believe this 

strategy and the partnership between our financial management, 

procurement, and human capital offices will serve as a catalyst to 

achieve the more balanced multi-sector workforce that we are looking for. 

Our Balanced Workforce Strategy consists of three parts: The 

first part is communication and change management. This is a 

complex and challenging effort that has the personal interest of the 

Secretary and Deputy Secretary. We will soon be issuing guidance 

and direction to component heads and to their staff who make decisions about hiring and procurement. I have also established a dedicated Balanced Workforce Program Management Office within my 

organization and hired an experienced career senior executive to 

lead this important effort. 

The second part is developing and implementing a repeatable 

process to conduct risk analysis and make multi-sector workforce 

decisions. We are creating comprehensive, specific and clear guidance for components on how to make these decisions. We will also 

assist components in developing implementation road maps to aid 

in the transition as appropriate. 

And finally, we must have adequate measurement and reporting. 

We cannot change what we cannot measure. Sustainable change 

will require metrics that tell us how we are doing, where we have 

to make course corrections and when we have achieved the balance 

we are seeking. 

Our focus throughout this effort is going to be on our vital homeland security mission and having a Federal workforce that allows 

maximum flexibility to accomplish that mission. 

Again, I thank you for the opportunity to appear before you 

today, and I welcome any questions you might have. 

Senator AKAKA. Thank you very much, Mr. Neal, for your statement. 

Mr. Grimes, will you please proceed with your statement? 


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1The prepared statement of Mr. Grimes appears in the Appendix on page 52. 

TESTIMONY OF CHARLES D. GRIMES III,1 DEPUTY ASSOCIATE 

DIRECTOR FOR EMPLOYEE SERVICES, U.S. OFFICE OF PERSONNEL MANAGEMENT 

Mr. GRIMES. Chairman Akaka, Ranking Member Voinovich, and 

Members of the Subcommittee, I appreciate the opportunity to represent the Office of Personnel Management and Director John 

Berry at this important hearing to examine the Administration’s efforts to ensure that Federal agencies have the right mix of employees and contractors to carry out their missions. 

The title of the hearing says it all. Right-sizing the Federal-tocontractor mix is indeed a balancing act of competing issues: The 

nature of the work, agency mission, acquisition, human resources, 

finance and budget, performance management, recruiting and hiring, training and development, and retention. And the appropriate 

balance will differ by agency and sometimes even within the agencies. 

A common tool that agencies use to strike the right balance is 

workforce planning. Agencies will be in the best position to determine the appropriate Federal employee-to-contractor mix if they: 

Align workforce planning with strategic planning and budget formulation; involve managers, employees, and other stakeholders in 

planning; identify critical occupation skills and competencies, and 

analyze gaps; develop strategies to address those gaps; build capacity to support workforce strategies; and monitor and evaluate their 

progress. 

The Administration started this process to describe the nature of 

work with regard to whether it must be performed in-house or 

whether it may be contracted. Soon after taking office, President 

Obama issued a memorandum for heads of agencies expressing 

concern that the line between inherently governmental activities 

and commercial activities that may be outsourced had become 

blurred. 

After consulting with OPM and other agencies, OMB Director 

Peter Orszag issued a memorandum on July 29, 2009, which required agencies to begin developing and implementing policies, 

practices, and tools for managing the multi-sector workforce. Specifically, the OMB memorandum directed Federal agencies to adopt 

a framework for planning and managing the multi-sector workforce, conduct and report by April 30 of this year on a pilot analysis 

of at least one program or activity where the agency has a concern 

about an over-reliance on contractors, and use guidelines for 

insourcing that facilitate consistent and sound application of statutory requirements. 

More recently, on March 31, OMB’s Office of Federal Procurement Policy published a proposed policy letter for public comment 

on rules for when work must be reserved for performance by Federal employees. Of particular interest to OPM is a new category of 

‘‘critical function,’’ which focuses on functions that are core to an 

agency’s mission. The draft policy holds agencies responsible for ensuring that a sufficient number of positions performing critical 

functions are filled by Federal employees having the appropriate 


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training, experience, and expertise to understand the agency’s requirement, formulate alternatives, and manage work products. 

OPM has partnered with OMB to provide technical assistance 

and support specifically to the Federal human resources (HR) community in achieving the goals set forth in the President’s memorandum and OMB directives. OPM’s work with OMB has included 

facilitating discussions in which agencies can share their experiences and lessons learned; fostering collaboration across agencies’ 

acquisition, HR, finance, budget, and performance areas; identifying and developing tools to assist agencies in complying with the 

OMB directives; and streamlining the Federal recruiting and hiring 

process. 

One of the tools OPM has developed is an online community of 

practice at the OMB MAX Website to respond to agencies’ inquiries. OPM has also briefed key stakeholders, such as agencies’ Chief 

Human Capital Officers and Deputy CHCOs, in addition to hosting 

a CHCO academy session. To complement these efforts, OPM provided an in-person and webcast skill-based training class on the 

Federal Activities and Inventory Reform (FAIR) Act, for HR specialists. OPM continues to monitor the HR community’s training 

needs, so that it can respond appropriately to those needs. 

Another important tool for right-sizing is training. Any influx of 

new Federal employees, whether resulting from insourcing or other 

agency hiring initiatives, is likely to require planning for additional 

employee training. Most agency training departments are not able 

to offer increased training assistance without additional resources. 

Currently, OPM is working with the training community to look for 

ways to collaborate and offer training more efficiently. 

Mr. Chairman, I would like to close by emphasizing that the effective management of a multi-sector workforce is fundamentally a 

workforce planning issue that must be carried out at the agency 

level. Effective workforce planning requires a sound governance 

structure within each agency that provides accountability for workforce planning and analysis. Although data collection and analysis 

may be shared by numerous organizations within the agency, there 

should be one office that is responsible for integrating and disseminating workforce planning information. 

OPM can do, and has done, a great deal to assist and support 

agencies in developing the capacity to conduct the appropriate 

analyses on which ‘‘right-sizing’’ depends. OPM looks forward to 

continuing to work with agencies so they can implement appropriate recruiting and hiring strategies to achieve the optimal blend 

of Federal employees and contractors to carry out their missions. 

Thank you again for the opportunity to discuss this important 

issue with you. I would be happy to respond to any questions you 

may have. 

Senator AKAKA. Thank you very much, Mr. Grimes. 

Now, Mr. Needham, please proceed with your statement. 


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1The prepared statement of Mr. Needham appears in the Appendix on page 56. 

TESTIMONY OF JOHN K. NEEDHAM,1 DIRECTOR, ACQUISITION 

AND SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. NEEDHAM. Thank you, Chairman Akaka and Senator 

Voinovich. I am pleased to be here today to discuss civilian agencies’ development of insourcing guidelines, OMB’s proposed policy 

on work reserved for Federal employees, the challenges agencies 

face in managing the Federal workforce and the tools that will be 

available for managing the insourcing process. 

Federal agencies face a set of complicated decisions in finding the 

right mix of government and contractor personnel to conduct their 

missions. In choosing to use contractors, agencies must determine 

what activities ensure governmental control over policy and program decisions, and those that are critical for retaining long-term 

agency capacity. 

Importantly, Congress and others have expressed concerns as to 

whether Federal agencies have become over-reliant on contractors 

and whether they have appropriately outsourced services. In March 

2009, the President tasked the Office of Management and Budget 

to take several actions in response to these concerns. 

Last July, OMB issued guidance for agencies to begin the process 

of developing and implementing policies and methods for managing 

the multi-sector workforce. Included in this guidance was guidance 

on insourcing which called for agencies to develop planning pilots 

to address the overuse of contractors. 

Last summer, per congressional mandate, GAO reviewed the status of agency efforts to develop and implement insourcing guidance. 

In October 2009, we reported that none of the nine agencies, the 

civilian agencies, with whom we had met had met the statutory 

deadline for this guidance. This was due in part to the agencies 

awaiting OMB direction on the question of inherently governmental function, so as to ensure their agency guidance was consistent with OMB policy, and they wanted to use the results and 

lessons learned from the pilots to better inform their insourcing 

guidelines. 

OMB reported in December 2009, on 24 Chief Financial Officers 

(CFO) agencies that had pilots underway in one or more of their 

organizations. However, the results of these pilots have not yet 

been released. 

In addition to the insourcing guidance released last summer, 

OMB recently released a proposed policy which is now out for comment. The guidance for determining when work must be performed 

by Federal employees is notable in four ways: 

First, it adopts a single governmentwide definition of inherently 

governmental functions in accordance with the definition in the 

FAIR Act. 

Second, it retains the illustrative list of examples of closely associated with inherently governmental functions from the Federal Acquisition Regulations (FAR), such as preparing budgets and developing agency regulation, and it provides guidance to help agencies 

decide whether to use contractors to perform these functions. 


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Third, it introduces a category of critical functions as functions 

whose importance to the agency’s mission and operation requires 

that at least a portion of the function should be reserved for Federal employees to ensure that the agency has sufficient internal 

control. 

And last, it outlines a number of new management determinations and actions that Federal agencies should employ to avoid allowing contractor performance of inherently governmental functions. 

Turning to the implementation challenges, once the decision to 

insource is made, the success of implementation will, in large part, 

depend on the ability of the agencies to translate mission and 

human capital requirements into executable plans that will assure 

agency workforces possess the necessary knowledge and skills to 

accomplish their mission, and also to oversee contractors. 

This is not an easy task as they will need to align workforce 

planning with strategic planning and budget formulation, involve 

managers, employees and others such as financial and procurement 

offices in this planning process. They will need to identify the critical occupations, the skills, the competencies, determine what gaps 

they have in their current workforce as well as what contractors 

they have onboard. And last, they will need to develop strategies 

that can be able to be sustained over time, to address these gaps. 

Then most importantly, they will need to monitor and be able to 

adapt implementation as they learn. 

Furthermore, in our 2009 review, we identified several challenges that agencies face in replacing contractor functions with 

government positions. Key among them will be limited budgets and 

resources that may constrain insourcing efforts. 

Last, agency implementation of insourcing efforts can be facilitated by tools such as: 

Inventories of civilian employees and service contracts to identify 

inherently governmental functions and the universe of the total 

workforce; 

Business case analyses to facilitate agency decisions and determine which, when insourcing a particular function, has the potential to achieve mission requirements and effective control over contractors; and, 

Last, human capital flexibilities to ensure to efficiently fill the 

positions that should be brought in-house. 

In conclusion, Mr. Chairman, OMB’s insourcing criteria provides 

a sound basis for agencies to develop their insourcing plans and 

will facilitate decisions on the proper mix of Federal employees and 

contractors to better reform government control over functions. 

However, it is in the formation and execution of agency plans and 

the individual sourcing decisions that will ultimate determine the 

success of this effort. 

That concludes my statement, Mr. Chairman. I will be happy to 

answer any questions that the Subcommittee may have. 

Senator AKAKA. Thank you very much, Mr. Needham. 

Administrator Gordon, this Subcommittee has struggled to understand exactly how big the Federal contractor workforce is, especially those working side by side with Federal employees. DHS and 

the Department of Defense (DOD) have both taken the approach of 


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estimating contractor work year equivalents, which are similar to 

a full-time equivalent position (FTE). 

Do agencies need more reliable data on how many non-Federal 

employees they have, and is OMB helping them gather that data? 

Mr. GORDON. Thank you for the question, Chairman Akaka. 

The amount of money that agencies are spending on service contracts can be very helpful in giving a sense of where we are. That 

is to say, as was noted earlier, the increase in spending on service 

contracts has far outpaced the increase, for example, in our own acquisition workforce that handles those contracts. 

Nonetheless, both DOD and the civilian agencies are carrying out 

their statutory mandate to create inventories of service contracts 

and service contractors. DOD’s statutory mandate began earlier, so 

DOD is ahead of the civilian agencies down that path. But we will 

be having inventories for service contractors, which can be of further assistance in this effort. 

Senator AKAKA. Mr. Needham, GAO has emphasized the importance of adequate workforce planning to promote efficient and cost 

effective efforts to achieve the right mix of Federal employees and 

contractors. Moving forward, what key characteristics of this planning will be the most challenging? 

Mr. NEEDHAM. Mr. Chairman, GAO just completed a review of 

three agencies’ workforce planning and strategic planning work 

that has been done at the Environmental Protection Agency (EPA), 

the Department of Interior and also the Forest Service, and we specifically looked at their workforce planning. What we found was 

that while they had many of the elements that are desirable, they 

were not integrating the workforce planning with the strategic 

planning and the budget formulation, which is critical to this effort 

succeeding. So that is probably one of the key challenges. 

When they do this, they need to do a total workforce perspective. 

They need to look at all the players who are in the workforce, both 

contractors and civilian employees, and where you have uniform 

personnel, those as well. 

And also, good data. There has been the development of the contractor inventories at DOD. We have found that those inventories 

are not consistent across the services. They count service contracts 

differently. They categorize the services that are provided within 

those contracts differently, and they also collect data on FTEs differently. So trying to meld those data together is going to be difficult. 

So those are some of the challenges that they are likely to face, 

Mr. Chairman. 

Senator AKAKA. Thank you very much, Mr. Needham. 

Mr. Neal, earlier this month, some industry groups criticized the 

Department of Defense’s insourcing efforts. They claimed that the 

process at DOD has been quota driven. Do you expect similar concerns over DHS insourcing, and what can be done to avoid such a 

perception? 

Mr. NEAL. Chairman Akaka, I believe no matter what we do, 

there is going to be a lot of concern about it. This is a vital Department. Our mission is absolutely critical to this Nation’s security, 

and there is also a lot of money involved in what we are doing. So 

I believe no matter what we do we are likely to face some criticism. 


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When we do get our guidance out, what everyone will see is that 

we are going to be doing this in a deliberate way. We want to make 

certain that there is actually a process that we can use more than 

one time. As I said earlier, it needs to be a repeatable process. This 

is going to be an ongoing thing for this Department and really the 

entire Federal Government. 

So we are going to have to have a process that allows us to look 

at these contracts, to look at this work and make intelligent decisions based on what kind of work is being done, what is the risk 

to our mission by having contractors versus Federal employees 

doing a particular function, and then make an informed decision 

based on the risk, based on the type of work and in some cases 

based on the cost of doing that. 

Senator AKAKA. Yes. Mr. Gordon, many positions were contracted 

out over the past decade through a public-private competition 

under the A–76 process. Under clarified guidance, agencies may determine that some of these should not be contracted out. Are there 

additional hurdles to insource positions that were privatized 

through A–76? 

Mr. GORDON. Thank you, Mr. Chairman. 

I had the honor in years at GAO of spending a considerable 

amount of time working on issues related to Circular A–76. It was 

a very challenging process, one that was found to be difficult I 

think by all parties. 

I would point out that A–76 was used, I think, for only a very 

small part of the outsourcing that took place over the past 10 or 

15 years. As Senator Voinovich, I think, pointed out, the fact is 

that under A–76 in the competitions the Federal employees at the 

most efficient organization, as it was called, were usually winning. 

But in fact we all know that there was fairly massive outsourcing 

taking place. It was not running through the Circular A–76. 

I am not aware of particular problems in terms of insourcing 

work, or unique problems in terms of insourcing work, that was 

outsourced under A–76, but we would be happy to look into that 

question if it would be useful for the Subcommittee. 

Senator AKAKA. Thank you very much. 

Mr. Grimes, coming back to a similar question that I asked Mr. 

Neal, how can agencies make sure that workforce planning for 

insourcing considers specific human capital needs and does not become driven by quotas? 

Mr. GRIMES. I think the best way to do that is to employ good 

workforce planning processes. You look at the work, make a realistic determination of whether that work is inherently governmental, closely allied with inherently governmental work, or critical; and what portion of that critical work needs to be in-house in 

order to maintain control. Once you have made that kind of analysis, you can make a more rational decision on whether that work 

should be contracted out, based on costs or other things, but not 

driven by quotas. 

Senator AKAKA. Thank you very much. Senator Voinovich, your 

questions? 

Senator VOINOVICH. We are talking about a big picture here. It 

is interesting. We just had a discussion this afternoon at our 

Thursday lunch club about the EPA in regard to certifying contracVerDate Nov 24 2008 10:44 Oct 14, 2010 Jkt 057942 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 P:\DOCS\57942.TXT SAFFAIRS PsN: PAT

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tors that have to be certified to remove lead-based paint, and it is 

a fiasco throughout the Country. If they do not get certified and 

they do the work, they get fined $37,000 a day. 

I just wonder if from a big picture, Mr. Neal, have DHS component agencies really been candid with you, or Mr. Gordon at OMB, 

about whether or not they have the capacity to get the job done 

that needs to be done. Now I do not know what oversight you have 

over Minerals Management Service (MMS). We had this terrible 

spill that has happened in the Gulf. My conclusion from a hearing 

on this topic that I was at is they did not have the people necessary 

to do the job that they were asked to do. 

So you start out with that, about where are we. And we keep 

passing laws around here without any consideration to whether or 

not the agencies can get the job done. For example, when we did 

Part D of Medicare, I think that Administrator McClellan over at 

the Centers for Medicare and Medicaid Services (CMS) had to hire 

500 people, and we had to give him some new flexibilities in order 

for him to move forward with the job. So that is the big picture. 

You have the Government Performance Results Act (GPRA). 

Then you look at that, and you say what are the human capital 

challenges that we have, what is the succession plan that is in 

place, and then start to go from that. 

It seems to me that you have to prioritize. Senator Akaka and 

I sent a letter off to OMB about the fact that Mr. Zients said to 

us that he was going to target jobs in the Federal Government 

where we really needed people with qualifications, to take advantage of the fact that right now there are a lot of people out there 

that are not working, that we can get in the Federal Government 

now, that we might not be able to get in. 

So it seems to me—and the same way, Mr. Neal, in your shop— 

you have to figure out what are your priorities and how they fit 

with what you are going to ask your people to do on workforce balancing. There has got to be some planning of this. 

The next question that you have to ask is we had this hearing 

on internship programs in the Federal Government, and the unions 

are complaining bitterly that DHS was using the Federal Career 

Intern Program (FCIP) to hire all those people. The question was 

whether they were not meeting veterans preferences and all the 

other merit sustem requirements. 

I would like maybe Mr. Neal or Mr. Gordon to explain why it is 

that—Mr. Grimes, you might be involved too—why it is that you 

use the FCIP and not the normal process competitive hiring, to 

hire those people. So it really gets into the issue of if you are going 

to move people back in, how many of those people that are working 

for the contractor might come back? 

In Cleveland we have the Defense Finance and Accounting Service (DFAS). They went to the private contractor now, but they are 

coming back into Federal service. That is going to take a while because how do you figure out the pay that they had with the schedule, and so forth. 

Will you comment on that? Is the system that we have in place 

competent to do the job that is necessary on the workforce balancing front, or do we have to understand that you are going to 

have to have flexibilities to get the job done? 


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Also, do you have sufficiant capacity to make the determination, 

of whether a certain contract should be insourced? And are you 

going to determine if they have the determination? 

And Mr. Needham, how do you create metrics to make sure agencies strike the right balance between Federal employees and contractors? 

Now I have raised a bunch of questions, but I think this is the 

big issue that we have to look at here. 

Mr. GORDON. Senator Voinovich, I am happy to start, although 

my colleagues both from across the Executive Branch and my 

former colleague, John Needham from GAO, are welcome to chime 

in afterwards. 

Looking at the big picture is extremely helpful here, and making 

priorities has to be done. There is a huge amount of work to do, 

but if we do not set priorities we could end up doing nothing at all. 

Our priorities at OFPP are three, and they are related very much 

to the subject of this hearing today: 

Number one, we have to strengthen the acquisition workforce. 

We are spending more than twice as much as we were spending 8 

years ago, and yet, as was noted earlier, our acquisition workforce 

has barely grown 10 percent. We have got to increase the acquisition workforce. The President’s budget include $158 million to invest in the civilian agencies’ acquisition budget. That is a very high 

priority for us. 

We need to improve hiring. We need to improve training. We are 

working with OPM to improve the hiring process, as you know, 

Senator. We are focused on both entry level hires and mid-career 

hires. We do have a once-in-a-generation opportunity to renew the 

acquisition workforce because now the Federal Government is for 

many reasons the employer of choice. So we are working very hard 

with OPM and the agencies to strengthen the acquisition workforce. 

We need to show fiscal responsibility. We need to save money 

and reduce cost in acquisitions. 

And our third priority is we have to rebalance our relationship 

with contractors, and the hearing today is a central part of our rebalancing that relationship. 

When we asked agencies last summer in their pilots, where are 

you most concerned that you are out of balance between your contractors and your Federal workforce, the two top areas were IT 

and, very notably, acquisition. We have acquisition shops that are 

so short-staffed that they have contractors managing contractors, 

contractors writing statements of work. It is no wonder that we 

have had the challenge of organizational conflicts of interest showing up in our acquisition workforce. 

Senator VOINOVICH. Let me just say this, what you are saying 

that has to be done will not happen that way. 

Mr. GORDON. I will tell you, Senator, it took a long time for us 

to get into this hole. We will not get out of this hole overnight, but 

I do believe we are on the right path towards correcting these imbalances. 

Senator VOINOVICH. Mr. Neal. 

Mr. NEAL. The capacity issue is one that I am worried about 

when I look at what we have to do just in the Department of 


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Homeland Security—the number of contracts we have, the number 

of contractors doing work, just the sheer magnitude of the Department with 188,000 civilian employees and 42,000 military. I am 

concerned about our capacity to be able to actually do all of the 

planning that needs to be done, to be able to do the reviews. So 

to try to mitigate that concern, what we are going to be doing is 

trying to set some priorities based on risk, looking at types of contracts, types of work, finding out which ones might pose the greatest risk to us and addressing that first. That will be the No. 1 

issue. 

The capacity of procurement staff, much like the capacity of the 

human capital staff, was reduced years ago. Not long before the 

number of contracts started going up, the number of human resources professionals in the Federal Government and the number 

of contracting professionals sort of took a nosedive. So the staff 

that we have in these offices to carry this stuff out in some cases 

may be lacking. So that is a real concern. 

The other concern in looking at this tendency over the years to 

rely on outsourcing is that there is a form—I do not mean this 

term to be negative, but there is a form of bureaucratic inertia that 

keeps an organization, a large organization heading in the direction it is heading. Kickstarting it and getting it out of that pattern 

makes it a little bit more challenging. 

On top of that, we are talking about having to make decisions 

that in some cases will cause us to ramp down a contractor workforce at the same time we have to ramp up a Federal workforce. 

And we have to do it exactly right. We do not have a big window 

where we can start hiring Federal staff and keep Federal staff on 

board for a year while we are downsizing a contract. We are going 

to have to be able to time those just right, to be able to make it 

work. That, to me, is also a significant concern. 

So the execution of this will be difficult. I am not going to pretend that it would be easy. 

You did ask about the Federal Career Intern Program. We have 

used the Federal Career Intern Program extensively in the Department of Homeland Security, most extensively in Customs and Border Protection. It was the way we doubled the size of the Border 

Patrol and the way we have done a lot of hiring of our Customs 

and Border Protection Officers (CBPO). 

We have used the program extensively. There is some good news 

to report about that though. 

Senator VOINOVICH. The point of this, and I have taken too much 

time, but the issue is how come you used FCIP and you did not 

use the regular system in order to hire new people? 

Mr. NEAL. It was the most expeditious way to do the hiring. 

When they were trying to ramp up, this was before my tenure, but 

when they were trying to ramp up they decided that it was the 

easiest way to get it done. 

There was some good news about it. The good news is that more 

than 20 percent of the people who were hired were veterans. More 

than 30 percent of the people who were hired were minorities. A 

substantial number, well over 1,000 of them, were current Federal 

employees from the Transportation Security Administration (TSA). 

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curity Officers. So there was actually some good news out of that 

story, but it was the most expeditious way to get the hiring done. 

As you know, the Federal hiring process is quite a challenge. It 

seems to be designed to see how desperately someone really does 

want to be a Federal employee. 

Senator VOINOVICH. Any other comments? 

Mr. NEEDHAM. Senator, you asked about metrics. Some of the 

work we did over at the Defense Department with their acquisition 

workforce was the problem of data, how much data do they have 

and what do they know about their workforce. Efforts are underway now to address that, but there are a lot of gaps, and agencies 

just do not have the kind of insight they need. 

One of the issues that needs to be measured with the acquisition 

workforce is churn. We have repeatedly found when we are looking 

at contracts, when we go to talk to the contracting officer, they are 

gone. People come in; they go out. 

I know the Federal agencies are using the career intern program 

to bring in new personnel into acquisitions. But will they stay? And 

how long will they stay? That is something that does need to be 

measured. 

Senator VOINOVICH. I have taken too much time. Thank you. 

Senator AKAKA. That is all right. Well, we will do a second round 

here. 

Mr. Grimes, the difficult Federal hiring process can lead to overreliance on service contractors. As you know, Senator Voinovich 

and I have been working to streamline hiring through our Federal 

Hiring Process Improvement Act which passed the Senate on Tuesday night. OPM also recently issued guidance on implementing the 

President’s hiring reform memorandum. How do you expect these 

efforts will assist agencies to address the challenges in hiring and 

retaining employees, particularly for hard-to-staff positions such as 

the acquisition workforce? 

Mr. GRIMES. Thank you, Chairman Akaka. 

We expect these hiring reforms will dramatically improve agencies’ abilities to hire the right person into the right job at the right 

time. The goal is to reduce the length of the hiring process to an 

average of 80 days from the time the job is announced to when the 

person comes onboard. That is roughly the average in the private 

sector. It is about half of the time that it takes now, so it would 

be a dramatic improvement. 

I realize that this does not seem very fast, but it is a lot faster 

than before, and it is an average. 

Of course, we are very concerned about being respectful of merit 

system principles and veterans’ preference, but I think that these 

reforms do respect those principles and that agencies will be able 

to get the folks in that they need to get in. 

Senator AKAKA. Mr. Neal, to follow up, how will DHS make sure 

it does not slide back into contracting for services without first considering whether hiring is more appropriate and consulting with 

the human capital professionals? 

Mr. NEAL. Mr. Chairman, that is one of the reasons, the primary 

reason that what we want is a repeatable process, so we can make 

these decisions on an ongoing basis in a way that does not look like 

it is the first time we have ever made a decision like that. 


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So we want our managers to know that they do need to do the 

proper planning, that they do need to look at the type of work that 

is being done, they need to look at what kind of risk might be introduced by using a contractor to do the work, and that needs to be 

a routine part of any service contracting decision. 

So we believe as we implement this process and refine the process, it will become something that just becomes a normal part of 

the way we conduct business. And we will not be just blindly making a contracting decision. It will be an informed decision based on 

a variety of considerations. 

Senator AKAKA. Thank you. 

Mr. Grimes, as a veteran and as the Chairman of the Veterans 

Affairs Committee, I am a strong supporter of veterans preference 

in Federal hiring. Some agencies, such as DHS, may seek to convert some contractors that already are working for the Department 

directly into Federal employees. How can agencies preserve veterans preference particularly if they want to directly convert certain contractors into Federal employees? 

Mr. GRIMES. If we were to get such a suggestion, Chairman 

Akaka, we would like to work closely with the agency, and if any 

legislation were required, then work with you and the Subcommittee, to make it work. At this point in time, not having seen 

any particular proposal, I do not know how that would work, but 

we would need to make it work. 

Senator AKAKA. What about veterans preference, Mr. Neal? 

Mr. NEAL. Mr. Chairman, we are very strong supporters of veterans preference. As a matter of fact, at the American Legion Convention last year, Secretary Napolitano announced a goal of increasing the number of employees, of veterans employed in DHS to 

50,000. Right now, about 25 percent of our workforce are veterans. 

Those men and women are throughout the Department, in every 

type of occupation. We have the fourth largest percentage of veterans in our workforce of any Federal department or agency. So we 

are very proud of our accomplishments in that area and what we 

believe is the respect we have shown for the service of the men and 

women who have served in the Armed Forces. 

Senator AKAKA. Thank you for that. 

Mr. Gordon, generally, a service contract is an agreement for a 

private firm to provide particular services to the government, not 

a contract to bring on a certain number of people. In reality, service contractors often work side by side with Federal employees. In 

your experience, as contracting has proliferated, has the role and 

use of service contractors changed? 

Mr. GORDON. Mr. Chairman, I think that it has. You could see 

this in both the reports from GAO, which I highly value and not 

only because I used to work there, and I hear it all the time when 

I go out and listen to people. I go out and listen to our workforce 

every few days. 

In these 6 months that I have been at OMB, I have been at dozens of meetings with the agencies, with Federal employees and 

their unions, with contractor associations, and what I hear is that 

contractors are being used today in ways that are dramatically different from the way they were used 15 years ago. Contractors are 

being used in ways that are much closer to policy decisions than 


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1The chart referenced by Senator Voinovich appears on page 135 in the April 29, 2010 hearing titled ‘‘Developing Federal Employees and Supervisors: Mentoring, Internships, and Training in the Federal Government.’’ 

would have been thought permissible 15 years ago. Contractors are 

much closer to the decisionmaking process. 

I think it is noteworthy that the Acquisition Advisory Panel, the 

SARA panel, congressionally commissioned, in their final report, 

they talked about concern that contractors are getting closer and 

closer to the decisionmaking process in the agencies, so that you 

begin to have questions about whether the decisionmaking process 

is affected by the corporate interests of those contractors. We need 

to be sure that work that is inherently governmental is done by 

Federal employees 100 percent of the time and that closely associated work, which can be done by contractors, does not expand or 

preempt the ability of our Federal officials to carry out their public 

service. 

Senator AKAKA. Thank you very much for that. Senator 

Voinovich, now for your further questions. 

Senator VOINOVICH. Yes, I want to get back to the question that 

I asked of Mr. Neal. You just outlined how the intern program resulted in somethings that I think are very good. As a matter of 

fact, what you just said reflected a chart I had here at that hearing.1

The question though is if you are in the position where you are 

going to have to bring on people rather quickly, does the current 

system—we have the President’s Executive Order out there and 

then our legislation. It is going to take a while to implement these 

new reforms. I mean the living process is going to be a whole new 

ball game for a lot of these agencies. You are going to have to 

change the system around and so on. How are you going to meet 

workforce balancing hiring targets amid these changes? 

It might be interesting that you are talking about getting on 

some more procurement people, Mr. Gordon. But though your office 

is tasked with leading insourcing efforts, OFPP is relatively small. 

Is it 17 people? The question is how many people have you brought 

on to help you with your job? 

You say that you do have enough, but I would be interested to 

know, have you brought any on? If you have, how did you get 

them? 

I am trying to get at this issue of how do you make the change. 

Like the Department of Homeland Security, let’s say to balance the 

Department’s workforce you have to hire another 3,000 to conduct 

border security. 

I think, Mr. Grimes, one of the things I am looking for from the 

Director is the answer to what people want to do there. 

But let’s imagine that you have to do that, Mr. Neal. How are 

you going to bring on those people in a short time? Or if you decide 

that you are going to go and say this is inherently governmental, 

and you are going to bring people from outside to do the job, how 

are you going to bring them on? 

And then, Mr. Gordon, you tell me, how are you getting these 

people? Have you hired any? If you have, how did you hire them? 

Mr. NEAL. In looking how to do this, it is clear that the Federal 

hiring process is one of the obstacles. We were very happy to see 


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the memo from President Obama. We are delighted to see a move 

away from a very cumbersome application process to the use of resumes, which certainly makes a lot of sense to us. That is an obstacle to people applying for Federal jobs. So those things, we see as 

very welcome improvements, and I do not think we can do that fast 

enough. 

The other thing that we have been doing is we have been discussing with Director Berry some options to try to do a direct hire 

authority for contractor conversion. What we have been looking at 

is really a unique solution to this unique problem of how we 

can—— 

Senator VOINOVICH. But it gets to the point that OPM has the 

opportunity to grant flexibilities to shops. In my opinion, if you are 

going to do this thing rapidly, there is going to have to be a lot of 

creativity where you are going to have to look out. Mr. Gordon, my 

record says you have 17 people. I do not know how many you have 

now. 

But how are you going to tailor these things in order to get the 

job done while the new hiring system gets into place and we get 

comfortable with it? That is the real issue. 

Mr. NEAL. We believe we have actually come up with an innovative way of using direct hire authority. We recognize that there are 

concerns about direct hire authority. Every time an agency asks for 

it, there is interest in that. A lot of folks are concerned about 

whether or not it has an ongoing impact on the merit system and 

the Federal competitive process. So what we have been discussing 

is what we are calling a disposable direct hire authority, usable 

only once for each position that is converted from a contractor position to a Federal position. 

So if you filled 3,000 positions, as each one is filled, the direct 

hire authority for that would go away. The next time that position 

is filled it would be through normal attrition, and it would be filled 

through the normal Federal competitive hiring process. That is a 

very different way of approaching direct hiring authority. We do 

not believe there is any regulatory or statutory bar to doing it that 

way. It is simply in the way it would be granted. 

We have had a number of discussions with Director Berry about 

that. A member of my staff is going to be meeting with another 

member of his staff within the next couple of days to discuss it in 

much more detail. 

But we believe that is an innovative approach that would allow 

us to address our immediate hiring needs and the needs that we 

will have as positions get converted, but not walking away from the 

merit system and just using direct hire as a normal way of doing 

business. We believe this would actually solve the problem and address the concerns about direct hire authority. 

Senator VOINOVICH. It is good news to me. I think you understand that you are going to have to have some real flexibilities in 

the beginning as the thing starts to trickle down. 

Mr. NEAL. Yes, Senator. Absolutely. And I love hearing someone 

talk about giving us flexibility. That is a very good thing for us. 

Senator VOINOVICH. Mr. Gordon, have you hired anybody. You 

had 17 staffers at OPM. How many do you have now? 


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Mr. GORDON. We have a very small shop, sir, although we are 

a policy shop. We are not the people that are carrying out the policy. We work very closely with our colleagues and friends across 

the agencies, but we can only do it by working together. 

Senator VOINOVICH. So OMB has got a different hiring system 

than the other agencies? 

Mr. GORDON. No, the hiring system is very similar. I was about 

to say I am pleased to tell you that we have actually just hired a 

senior level person, the Associate Administrator for Acquisition 

Workforce, a very important role in our office, to support the acquisition workforce. 

Senator you are a longstanding supporter of improving our hiring 

process, and we very much appreciate that. 

I would also say that it is not just a challenge of hiring. There 

is also the challenge of training. We need to be sure that we are 

providing the right training. Especially in the acquisition area, 

training needs to be a combination of book-learning and on the job 

training. 

Senator VOINOVICH. Mr. Gordon, Senator Akaka has had a hearing on training. 

Mr. GORDON. It is very much appreciated, sir. Thank you. 

Senator VOINOVICH. The other question is the General Schedule 

(GS)—— 

Mr. GORDON. GS salaries, yes, sir. 

Senator VOINOVICH [continuing]. In terms of its relevance to 

some of the challenges that you may have, to get the people that 

you would like, that you need to have to do some of these. I mean 

in some of these cases where you have outsourced, it is just a matter of finding the right people. With the IT field, it is tough—cyber 

security experts, for example. 

Has anybody looked at general salary schedule, to determine 

whether or not it is competitive enough to draw these folks in? And 

if it is not, can you change that within an agency, on a temporary 

or limited basis, in order to get somebody that you really want? 

Mr. NEAL. We do have a degree of flexibility within the general 

schedule by using recruitment bonuses, using retention allowances. 

Those are two tools we can use. 

In some occupations, we are concerned about whether or not the 

general schedule provides the flexibility. You mentioned one that is 

very high on our priority list right now, and that is cyber security 

professionals. Everybody is looking for cyber security professionals 

right now because of the concerns about security in that environment. So that talent is going to get more and more expensive. 

It is a simple supply and demand issue. As that talent gets in 

more and more demand, it is going to be more and more expensive. 

The most we can pay somebody as a GS–15 is in the high 150s. 

If you are looking at a true expert in cyber security, 150K is not 

impressive. So we are very concerned, particularly in cyber security, about our ability to recruit the right—— 

Senator VOINOVICH. The fact is if you have a cap on what you 

can do, the only choice in some instances is say we have to go to 

a contractor to get the help, right? 

Mr. NEAL. Yes, Senator, because they can pay what they want. 


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Senator VOINOVICH. The last thing I want to mention is one of 

the things that Senator Akaka and I did, and I really thought we 

were going to raise the profile of this function, is the human capital 

officers in the various agencies. I am very disappointed here with 

you, Mr. Neal. We had hoped that over this period of time there 

was going to be upgrading. In fact, I asked the previous Administration, have you done an analysis of the human capital people that 

you have? They said, ‘‘Oh, yes, we are getting it better.’’ 

Is that happening as you have looked at these DHS components? 

Or, Mr. Needham, have you looked at agencies to see whether or 

not they have the people there, say in that human capital area? 

And last, but not least, is we hoped the CHCO Council would upgrade the agency CHCOs and that they would get together and 

that with all these challenges facing Federal HR, maybe assign a 

couple with Ms. Medina, the new person. 

Mr. NEAL. Kathryn Medina? 

Senator VOINOVICH. Yes, to do that. And the thing that I was impressed with is that John Berry is going to the meetings. 

But I am saying it seems to me that is an absolutely wonderful 

opportunity. When I was governor, that is what we did. We 

brought these people together, even in the information technology 

(IT) area, and started to have them talk to each other. It is amazing how you will find one or two places that really are doing the 

job, and then you can use those as models to help the other people. 

But if they do not get together, if they do not have the leadership, then it does not accomplish what we want it to accomplish. 

Mr. NEAL. As a chief human capital officer, I certainly appreciate 

the work that the two of you did since my position exists because 

of that work, and I think DHS is very fortunate that we have a 

Chief Human Capital Officer whose job is to be the Chief Human 

Capital Officer and nothing else. So that is all I do, which is more 

than enough, believe me. So I think that has been a real benefit 

for us. 

We have had, as you know, an issue within DHS with turnover 

in Chief Human Capital Officers. I am number five. I have actually 

outlasted a couple already, and I intend to be around for quite a 

while. 

Senator VOINOVICH. Good. 

Mr. NEAL. So I do not plan to go anywhere anytime soon. 

As a former career Federal employee, I actually am covered by 

the retirement system, and I am not even eligible to retire for another year and a half. So I think everybody is stuck with me for 

a while. 

The Chief Human Capital Officers Council, I think, is an extremely important tool. I have been very pleased to see that. I have 

gone to every meeting since I was appointed to this position 11 

months ago. 

Director Berry has been at every meeting. He is very actively involved, and he has begun the process of turning that into a very 

deliberative body. He is putting larger issues on the table. Instead 

of going to a meeting where we just hear a bunch of reports about 

things that are going on, we are actually having real discussions 

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tify issues that need governmentwide solutions and where OPM 

and OMB can help us. 

OMB is also attending all of those meetings. The last meeting 

was this week. Jeff Zients was participating in that meeting and 

has been in many of the meetings. 

That partnership between OPM and OMB and the agencies, I 

think, is really vital. What I have seen so far is really encouraging, 

that we are actually able to talk about substantive issues. 

Senator VOINOVICH. Thank you. 

Mr. GORDON. If I could, just a word, Senator, to add to that. I 

will tell you that within OMB, under Jeff Zients’s leadership—he 

is our Deputy Director for Management as you know—we have a 

team that is integrated in just the way you are talking about, Senator. That is the E–Government team, the controllers shop, the financial management shop, the personnel and performance team, 

and us in the Office of Federal Procurement Policy. 

The leadership meets very regularly, very frequently. We talk 

constantly about issues. I could give you lots of examples, whether 

it is the challenge of insourcing at the Department of Defense 

where the performance and Federal procurement teams are working very closely together, the issue of hiring, especially veterans 

preferences where we meet and talk about it together. We are 

doing this in a coordinated fashion, so we are sharing information. 

And I think it is fair to say that Jeff Zients’s vision, and it is a 

vision that we share, is one of sharing lessons learned across the 

government. So when you have a success story at an agency that 

is integrating its approach properly, we share that with other agencies to show them a path forward. I think it is working, although 

we appreciate that we have a lot of work ahead of us. 

Senator VOINOVICH. Thank you. 

Senator AKAKA. Thank you very much, Senator Voinovich, for 

your questions. 

I want to thank this wonderful panel and thank you especially 

for your responses to our questions. Without question, some things 

are changing, the culture is changing. To hear you say that you are 

talking to each other, breaking down barriers that separated us before and to begin to speak about issues that concern the people who 

work in the Federal Government is really wonderful to hear. 

So I want to thank you so much for this. It will be valuable for 

what we are doing here legislatively, and hopefully we can continue 

to work together with you to improve the working conditions, the 

morale and all of that of our Federal employees. 

So I just want you to know that you have been very helpful. 

Thank you very much. 

Mr. GORDON. Thank you. 

Mr. NEAL. Thank you. 

Mr. GRIMES. Thank you. 

Mr. NEEDHAM. Thank you. 

Senator AKAKA. And now I call on the second panel to come forward. I would like to welcome our second panel. Good to have you 

here, Maureen Gilman, Legislative Director of the National Treasury Employees Union; Alan Chvotkin, Executive Vice President 

and Counsel at the Professional Services Council; and Mark WhetVerDate Nov 24 2008 10:44 Oct 14, 2010 Jkt 057942 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 P:\DOCS\57942.TXT SAFFAIRS PsN: PAT

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1The prepared statement of Mr. Whetstone with attachments appears in the Appendix on 

page 71. 

stone, President of the National Citizenship and Immigration Services Council at the American Federation of Government Employees. 

It is the custom of this Subcommittee to swear in all witnesses. 

So will you please stand and raise your right hand? 

Do you swear that the testimony you will give before this Subcommittee is the truth, the whole truth and nothing but the truth, 

so help you, God? 

Ms. GILMAN. I do. 

Mr. CHVOTKIN. I do. 

Mr. WHETSTONE. I do. 

Senator AKAKA. Thank you. Let the record note that the witnesses answered in the affirmative. 

As a reminder, although statements are limited to 5 minutes, 

your entire statements will be included in the record. 

Mr. Whetstone, will you please begin with your statement? 

TESTIMONY OF MARK WHETSTONE,1 PRESIDENT, NATIONAL 

CITIZENSHIP AND IMMIGRATION SERVICES COUNCIL, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO 

Mr. WHETSTONE. Thank you, Chairman Akaka and Ranking 

Member Voinovich. My name is Mark Whetstone, and I am the 

President of the American Federation of Government Employees’ 

National Citizenship and Immigration Services Council. I greatly 

appreciate this opportunity to provide our union’s input in today’s 

hearing. 

As an employee of the Citizenship and Immigration Service, I am 

regularly employed as an Immigration Services Officer at the Nebraska Service Center, where I adjudicate benefit applications and 

petitions. I hope that my own experiences will provide the Subcommittee with an important perspective that might otherwise be 

missed, that of rank and file Federal employees who work on the 

front lines in the Department of Homeland Security and are confronted every day with the consequences of wholesale privatization. 

In fact, I used to work as an Immigration Information Officer 

(IIO), and the Members of this Subcommittee may remember that 

beginning in 2003 the previous Administration reviewed for privatization the work of several hundred IIOs in DHS who are responsible for the investigation and adjudication of applications for immigration benefits. If not for the extraordinary leadership of Chairman Joe Lieberman and the key support from Ranking Member 

Susan Collins for the amendment to stop the IIO privatization 

study, I would not be here today because my job and many other 

inherently governmental employees would have likely been 

privatized. 

Please allow me to present AFGE’s recommendations for rebalancing the Federal Government’s civil service and contractor 

workforces: 

First, expand, clarify and, above all, enforce the definition of inherently governmental. OMB’s proposed definition of work that 

should be reserved for performance by Federal employees should 

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form commercial functions, establish a rebuttable presumption that 

Federal employees should perform functions that are critical and 

closely associated with inherently governmental functions, should 

adequately protect the public from the contractor influence on 

agency decisionmaking, and should provide meaningful criteria to 

identify crucial functions and those positions necessary to develop, 

and maintain, sufficient organic expertise and technical capability. 

Second, compile and review service contractor inventories, consistent with the law, and then integrate the results into the budget 

process. Although the definition of inherently governmental is important, the processes by which the agencies identify contracts that 

include functions that are inappropriate for contractor performance 

and then correct those contracts through insourcing or modification 

are even more important. If we are serious about ensuring in-house 

performance of functions that should be reversed for the Federal 

employee performance, then we must block attempts to gut the requirement that non-DOD agencies establish contractor inventories. 

Third, correct through insourcing or modification contracts that 

include functions that should not be outsourced where inappropriately outsourced or inefficiently performed, consistent with the law. 

We have heard the DOD term ‘‘target-rich environment.’’ Given the 

documented large number of contracts that were awarded during 

the previous two Administrations without competition, that include 

functions that are inappropriate for contractor performance and are 

being poorly performed, it is safe to say that we are in an obscenely 

wealthy target environment. Everywhere one turns, almost literally, there are opportunities to insource, consistent with both law 

and public interest. 

Given its critical importance, I want to address the Transportation Security Administration, specifically the Screening Partnership Program (SPP). This is the system that converts the inherently governmental Federal screening duties performed by the 

Transportation Security Officers to private contractors. The SPP is 

contrary to the congressional intent to federalize the airport security and violates statutory prohibitions against the outsourcing of 

Federal jobs without allowing Federal employees to compete for 

those jobs. 

Before privatizing work performed by Federal employees, agencies are generally required to demonstrate through a cost comparison study that a contractor is more efficient. The SPP includes 

none of the safeguards such as the cost comparison of the Federal 

employee performance to that of the contractor, risk analysis determination or any demonstration of savings. 

This concludes my statement. I look forward to responding to 

your questions. 

Senator AKAKA. Thank you very much, Mr. Whetstone. 

Mr. Chvotkin, please begin with your statement. 


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1The prepared statement of Mr. Chvotkin appears in the Appendix on page 103. 

TESTIMONY OF ALAN CHVOTKIN,1 EXECUTIVE VICE PRESIDENT AND COUNSEL, PROFESSIONAL SERVICES COUNCIL 

Mr. CHVOTKIN. Mr. Chairman, thank you very much for the invitation and the opportunity to appear today before the Subcommittee. 

As you well know, the debate about the right balance between 

Federal employees and Federal contractors to maximize the government’s ability to meet its missions is not new. Although the size 

of the Federal workforce is growing, there has been too little attention to targeted hiring, to permit the Federal Government to restore core capabilities across a wide range of functions, with a special focus on the critical acquisition workforce. 

Over the past several years, Congress has pushed Federal agencies to undertake comprehensive workforce skills competency analyses and strategic workforce planning. Senator Akaka, you and 

Senator Voinovich have reinforced the importance of that in the 

legislation which was passed just this past Tuesday. Regrettably, 

agency efforts have been far too ineffective in that regard. 

An organization’s primary workforce objective must be to have 

the right number of people at the right place, with the right skills 

at the right time, to fulfill its organization’s current and future 

needs. There is no magic formula for determining the right mix of 

Federal employees and contractors to meet mission needs, but it is 

not about a fight between Federal employees and contractors. 

An agency must assess the total resources available to it to execute its mission, whether Federal employees or contractors. That 

assessment should have but one goal: To ensure that the delivery 

of services in support of Federal missions is done in a manner that 

best serves the interests of the American taxpayer. 

Regrettably, based on extensive examples we have collected, nonstrategic insource is occurring regularly, from Maine to Ohio, and 

from California to Hawaii. 

As we consider the many aspects of workforce planning on the 

insourcing question, it is best to analyze these issues from two 

broad categories of work. 

The first is work involving activities that must or should be performed by Federal employees, such as inherently governmental 

functions or those activities that are not inherently governmental 

per se but are critical to an agency’s ability to maintain control and 

direction of its missions and operations. And I am staying away 

from code words like ‘‘closely associated’’ because these terms are 

rarely defined, and specifically using phrases like ‘‘functions critical 

to an agency’s ability to maintain control and direction of its missions.’’ Such work requires one set of strategic thinking and planning. 

The second broader category involves all other types of functions 

not in the inherently governmental realm which require a different 

set of processes. 

The Professional Services Council has been a strong supporter of 

initiatives such as that undertaken by the Secretary of Defense in 

April 2009, to focus on the hiring and development of thousands of 

professionals with those critical skills. In an April 2009 letter to 


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Secretary Gates, we endorsed his initiative but raised concerns 

about the challenges of implementation. 

Mr. Gordon already talked about the OFPP policy letter entitled 

‘‘Work Reserved for Federal Employees.’’ The policy letter is balanced. It is founded on sound management strategy rather than on 

ideology and provides a narrowly tailored single definition of inherently governmental functions as required by Congress and the 

White House. 

It also offers meaningful and relevant guidance to agencies in 

making the determination of what work, other than inherently governmental functions, is best performed by Federal employees and 

what is appropriate for contractor performance. 

Critically, the proposed policy letter requires agencies to develop 

a focused, strategic human capital plan to define those critical 

skills they need to meet their missions and ensure they have 

enough internal staff to maintain government control of operations. 

We intend to comment by the June 1 deadline as he suggested. 

While these agency workforce efforts are important, significant 

challenges and questions remain, and they need to be addressed 

continuously and immediately. Specifically, agencies should pay 

careful attention to the principles set forth in OMB’s July 29, 2009 

policy guidance as well as the proposed policy letter. 

In these policy documents, OMB makes clear that the Agency’s 

highest priority must be to bring in-house the inherently governmental activities that may have been outsourced, followed by addressing any residual core set of capabilities that are essential to 

enable the agency to manage and control its operation. But OMB 

explicitly states that not all activities or functions closely associated with inherently governmental activities must be performed by 

Federal employees. 

We have witnessed thousands of contractor positions being 

insourced. The objectives of the Secretary’s workforce remain both 

appropriate and important. But unfortunately they have, in the 

field, devolved increasingly into a numbers game to meet personnel 

and dollar value quotas that each of the military departments has 

been given. Indeed, the so-called savings from insourcings have already been baked into the current and future year budgets of the 

Department of Defense, without the benefit of real analytical rigor. 

We are pleased that the House Armed Services Committee has 

taken another important step to prevent DOD from setting 

insourcing quotas and to provide greater transparency into DOD’s 

current insourcing initiatives. That committee’s action is a step in 

the right direction towards establishing an accountable process for 

how DOD implements its Strategic Workforce Initiative, and that 

prohibition should be made governmentwide. 

Insourcing for the sake of insourcing is no more intelligent, no 

more effective and no more defensible than outsourcing for the 

sake of outsourcing, nor should government accept repeating the 

mistakes of past outsourcing efforts when implementing insourcing 

initiatives. OMB has taken strides to craft appropriate guidance to 

balance the workforce of Federal agencies, yet all the tools to conduct comprehensive insourcing decisions have not been established. 

Where the guidance exists, we should demand that it be followed. 

And where the tools are insufficient or nonexistent, we should work 


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1The prepared statement of Colleen M. Kelley submitted by Ms. Gilman appears in the Appendix on page 112. 

expeditiously to repair or create them. As taxpayers, we deserve no 

less. 

Thank you for the opportunity to provide this statement. I look 

forward to your questions. 

Senator AKAKA. Thank you very much, Mr. Chvotkin. 

Ms. Gilman, will you please proceed with your statement? 

TESTIMONY OF MAUREEN GILMAN,1 LEGISLATIVE DIRECTOR, 

NATIONAL TREASURY EMPLOYEES UNION 

Ms. GILMAN. Chairman Akaka and Ranking Member Voinovich, 

I am pleased to be here today on behalf of the National Treasury 

Employees Union (NTEU), to provide comments on efforts to rightsize the Federal employee-to-contractor mix. 

The dramatic increase in Federal Government contracting over 

the last decade has resulted in contractors inappropriately performing inherently governmental functions and erosion of the inhouse capacity of agencies to perform many critical functions central to their ability to accomplish their missions. 

One example of over-reliance on contractors is the Department of 

Homeland Security. DHS has approximately 188,000 civilian employees and 200,000 contractors working for it. As Chairman 

Lieberman noted during a recent hearing, the sheer number of 

DHS contractors currently onboard again raises the question of 

whether DHS itself is in charge of its programs and policies or 

whether it inappropriately has ceded core decisions to contractors. 

Concerned that the line between what is inherently governmental and what can properly be contracted out had become 

blurred, President Obama ordered OMB to undertake a comprehensive review of the Federal contracting process, including clarification of what constitutes inherently governmental functions. 

NTEU believes that the term ‘‘inherently governmental’’ should 

be defined exclusively by the Federal Activities Inventory Reform 

Act. The Act defines inherently governmental as a function which 

is so intimately related to the public interest as to mandate performance by government employees. Examples include those activities that require either the exercise of discretion in applying government authority or the making of value judgments in making decisions for the government. This definition is longstanding and provides sufficient guidance and needed flexibility in determining 

which functions are best reserved for government workers. 

NTEU is pleased that in late March, OMB’s Office of Federal 

Procurement Policy issued a proposed policy letter on inherently 

governmental functions and other work reserved for performance 

by Federal Government employees that adopted this definition of 

inherently governmental. 

Under the policy letter, OMB also provided guidance on two concepts related to inherently governmental functions: Those closely 

associated with inherently governmental and critical functions. 

NTEU believes that these types of functions should rarely, if ever, 

be contracted out, even under the circumstances outlined by OMB 

in the policy letter. 


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NTEU also believes that in its final policy guidance OMB should 

expressly repudiate the presumption in the 2003 revisions to the 

A–76 Circular that a government function is commercial in nature 

unless affirmatively shown otherwise. The presumption is not only 

bad policy; it is at odds with the FAIR Act’s definition that simply 

delineates between commercial and inherently governmental functions. 

Because of the recent history of over-reliance on contractors, efforts to right-size the Federal employee-to-contractor mix will have 

to involve an increase in insourcing. In determining what criteria 

agencies should use in deciding whether an activity should be 

insourced, NTEU believes Congress has clearly indicated the direction that should be taken. Section 736 of the 2009 Omnibus Appropriations Act requires agencies subject to the FAIR Act to 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. 

Last July, OMB issued guidance providing agencies with criteria 

to facilitate consistent and sound application of insourcing requirements set forth in Section 736. The criteria consist of four sections 

that address different aspects of the statute, and describe circumstances and factors agencies should consider when identifying 

opportunities for insourcing. 

Also, the 2010 Consolidated Appropriations Act requires agencies 

to create an annual inventory of all contractors providing services 

for the government and to review whether to return the work to 

government employees. By providing agencies with the necessary 

framework to better monitor and oversee the vast number of service contracts, they will be better able to determine if contractors 

are meeting their responsibilities or if the agency would be better 

served by having Federal employees perform that work. 

In addition to the criteria outlined in these pieces of legislation, 

NTEU believes other criteria that agencies should consider, in 

identifying which functions should not have been outsourced and 

should be brought back in-house, include the following: 

Has there been an actual monetary savings realized as a result 

of the contract? 

Has the contractor defaulted on the statement of work? 

Was the contract renewed without a recompetition? 

And what other costs do agencies incur in the contracting-out 

process? 

By clarifying the type of functions that should be restricted to 

performance by Federal employees and providing agencies with 

guidance on bringing contracted-out work back in-house, a more 

appropriate balance in Federal contracting can be achieved, resulting in more efficient and effective delivery of services to the public. 

Thank you again for the opportunity to submit our views here 

today. I would be happy to answer any questions. 

Senator AKAKA. Thank you very much, Ms. Gilman. 

Ms. Gilman, as the government rebalances its workforce, an increase of thousands of Federal employees in an agency may bring 

about challenges in areas such as training, security clearances, and 

office and equipment needs. What challenges do you expect as the 


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Federal workforce grows, and how can agencies best manage these 

challenges? 

Ms. GILMAN. Well, I think, Mr. Chairman, as Mr. Neal said previously on behalf of DHS, and I believe OPM concurred, they need 

to be doing planning for that now. And I believe some agencies are 

doing a good job of planning for that. They need to make sure that 

they have the appropriate resources in place. They need to have 

processes in place to bring employees on in a fair manner. 

Normally, NTEU is a big supporter of competitive hiring and 

thinks it should be used whenever possible. If there is a situation 

that is out of the ordinary, where there is a critical need, where 

contractors have been performing inherently governmental functions, for example, and that workforce needs to turn over quickly 

to Federal employees, we would support working with the agencies 

and OPM to find ways to make that happen quickly outside of the 

normal competitive process. 

Senator AKAKA. Mr. Whetstone, new government employees may 

be hired to manage and oversee contractors. Federal managers also 

will need to supervise new Federal employees hired during 

insourcing efforts. It is important that agencies provide the right 

training for the employees. What can agencies do to ensure that supervising and nonsupervising employees receive the proper training? 

Mr. WHETSTONE. Well, I think that Ms. Gilman hit it on the 

head as well when she said that they need to start planning now. 

It would be very critical to have an extensive training program 

for just the matter that you are talking about. I think most of that 

training actually is in place now with the Department of Homeland 

Security. It would be a matter of ramping up the volume of training that you would need when you bring the accessions from the 

insourcing. 

Senator AKAKA. Mr. Chvotkin, in theory, the Competitive 

Sourcing Initiative was supposed to push agencies to contract for 

services that the commercial sector could provide at a lower cost. 

This led to controversy on how to account for contract costs versus 

in-house costs. 

In your testimony, you fault agencies for not performing in-depth 

cost analysis before insourcing. Often contracting involves different 

direct and indirect costs that are difficult to compare with the costs 

of hiring, and the data available may be inadequate for a sound 

comparison. The question is how do you recommend agencies address these challenges through in-depth cost analysis? 

Mr. CHVOTKIN. Mr. Chairman, it goes to one of the very hearts 

of the whole issue. As you laid out earlier, cost is an element for 

those activities that are not inherently governmental and are not 

critical for an agency to perform its mission. 

The mythology is that contractors are more expensive than Federal employees. What I suggested in the testimony and what some 

agencies have tried to do is to put a balance together, to try to 

identify cost comparability. It is impossible to have accurate costs 

on both sides. The contractor costs are pretty clear because that is 

what the government is paying. You would always know those 

kinds of costs. Federal employee costs are a lot more challenging 


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and a lot more difficult to arrive at. But the inability to have a perfect answer does not mean we should have no answer. 

So we have suggested a number of alternatives. The Defense Department has a rudimentary cost analysis memo out that we are 

going to be commenting on very shortly and raising some questions 

about it. 

The A–76 model that you are so familiar with had a cost comparison tool that compared the most efficient organization on the 

government side against work to be performed by Federal contractors. It is not perfect by any means. I think we would all agree on 

this panel that the cost model was not perfect, but it was a model 

that agencies were familiar with and can use. 

Right now, Federal agencies have no model that they can rely on. 

One of the gaps in the OFPP policy letter is they highlight the 

issue of cost and then do not give the tools to any of the agencies 

to provide that. 

Senator AKAKA. Thank you. 

The monetary costs and benefits of insourcing or outsourcing are 

frequently discussed but not as much as other costs and benefits. 

For example, I believe that every person who works for the Department of Veterans Affairs, no matter what their job, should feel that 

they are part of a critical mission, serving our Nation’s veterans. 

I think contractors may not feel that as much. On the other hand, 

contractors can move quickly, and offer more flexibility and innovation. 

I would like to hear your thoughts on how the nonmonetary costs 

and benefits of contracting decisions should be evaluated. 

Ms. GILMAN. Mr. Chairman. 

Senator AKAKA. Ms. Gilman. 

Ms. GILMAN. If I could start, I think some of the issues that were 

outlined by the Office of Federal Procurement Policy are a good 

place to start. I think there are things that are inherently governmental and are critical to agency mission in a sense that can be 

defined. 

I think you are right. I think all of the employees that we represent feel that they are critical to the agency and to the work that 

they do. But I think that there are definitions of critical in the 

sense of actually using discretion and judgment, binding the government in decisions, that should never be done by contractors. I 

think that area may be broader than OMB included in its initial 

draft of its policy letter. 

Senator Voinovich alluded to the oil spill in the Gulf and the 

agency that is supposed to be overseeing that clearly not being up 

to the task to do that. That is the agency’s responsibility, to put 

in place measures, so that the contractors that came in to do the 

drilling really did have the ability to prevent what is happening 

now. That was the agency’s responsibility, whether it was done 

with Federal employees or contractors, to oversee that work, and 

it was not done. 

And I think that is a legacy of some of the contracting that we 

have seen over the last 10 years, and I think it is a legacy that 

we need to turn away from. We appreciate the efforts of yourself 

and this Subcommittee and the Administration to do that. 

Senator AKAKA. Thank you. 


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Mr. CHVOTKIN. Mr. Chairman, again, I think you have put your 

finger on an important area. It is unquestionable that contractors 

performing work under a contract of the Federal Government are 

seeking to make a profit, and some of them do. Sometimes that 

profit is little, and sometimes others are better at it. 

But the mythology that you touch on is that contractors do not 

feel aligned or supportive of a mission and that for some reason the 

work in those agencies is only driven by the profit motive. Having 

had the privilege of working with so many of our member companies, contractors who are supporting the Veterans Administration 

are veterans. Contractors who are supporting the Agency for International Development have spent their life in the community of 

international development, many of them having served in the 

Peace Corps and at the agency beforehand. So to simply dismiss 

that service as their being unsupportive of the mission or otherwise 

being only interested in a profit motive undervalues the contributions that so many of these individuals have made, as well as the 

companies. 

There are truly noncost factors to be taken into account. Many 

of those are set by the agencies themselves in the contract. I think 

we ought to evaluate those, and I would be happy to work with you 

to identify some of those in greater detail. 

Senator AKAKA. Thank you. Mr. Whetstone. 

Mr. WHETSTONE. I think that you will find that in my particular 

agency we have currently some folks that were contracted to do investigation checks for the Interagency Border Inspection. This is 

what we have always felt to be an inherently governmental duty— 

look up databases, conduct national security checks. 

There is a place for contractors, of course. This is not one of the 

areas. The Agency would let this vital duty that is done by adjudication officers, trained Federal employees be done by contractor 

staff who might not have the benefit of the extensive training of 

adjudication officers. 

I think when you reach into the nonmonetary costs of this contracting, this is not an area, that should be allowed to occur, and 

I think that would be devastating. It could be a devastating cost 

in the end if somebody is ill trained or if corners were cut in any 

way. 

Senator AKAKA. Thank you. Mr. Chvotkin, at the conclusion of 

your testimony, you said we should not repeat the same mistakes 

of past outsourcing efforts as we implement insourcing. As you 

know, I was critical of the conduct of outsourcing in A–76 competitions. What were the biggest lessons from outsourcing that we 

should apply now as we rebalance the workforce? 

Mr. CHVOTKIN. Mr. Chairman, thank you for picking up on that 

conclusory statement. There were several lessons that we learned. 

First of all, the process, to the extent that it was true or not, 

gave the impression that it was quota driven, that agencies had a 

specific number of employees that they should look to outsource. I 

do not believe the agencies ever had that, but the Congress was 

right in putting a limit, a freeze, and saying no quotas. It ought 

to be strategic. It ought to be looking to the right mix of employees. 

Second, it took a long time to get the cost methodology correct. 


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Third, there was no opportunity for the respective parties to 

challenge the agencies and Congress spent a lot of time looking at 

the roles and responsibilities and rights of various parties to the 

process. Remember the OMB Circular went through a number of 

changes itself over time, including with the 2003 revision. 

So commenting on those to make sure that: 

First of all, we do not have a quota driven process. 

Second, that we have a transparent process so that everybody 

knows the rules of engagement. That A–76 went through a number 

of changes. 

Third, that we have accountability for it. So much of what was 

taking place in the Executive Branch agencies at the time was invisible, and companies and Federal employee organizations had to 

use alternative means like protests to try to drill down into the 

agencies. We do not need to go back that way. 

As I said in my statement, this is not a question of contractors 

versus Federal employees. There is a role and a responsibility for 

each. We ought to create a process that values that. 

Senator AKAKA. Thank you very much. 

Let me follow up with Mr. Whetstone and Ms. Gilman. What do 

you think are the lessons we should take from outsourcing efforts 

and apply that to insourcing? 

Ms. GILMAN. Well, I think the No. 1 lesson is that agency heads 

need to be responsible for the mission of their agency, and that decisions need to be made based on having the agency currently and 

into the future be able to accomplish those missions. There have 

been a lot of questions raised here today about agencies losing capacity in critical areas because so much work has been contracted 

out. 

I think that the A–76 process was actually used in a relatively 

small number of cases. Most of the contracting work was done outside of the A–76 process. Federal employees were not given an opportunity to compete for the work in a lot of instances. 

There was no transparency; I agree on that. And there was not 

accountability for the questions about if you contract this work out 

today, how is your agency going to maintain capacity in the future 

on the critical missions that you are charged with delivering. 

Senator AKAKA. Well, Mr. Whetstone? 

Mr. WHETSTONE. I would say one of the critical lessons learned 

that we need to pay attention to is that the agencies need to find 

the balance in exactly where the line is drawn on what items are 

actually contracted out and what are not. If they take the approach 

like they did in the past decade, they will leave behind things that 

should rightly be brought back into the Federal service. Interagency border inspection checks were not identified as something 

to be brought back into the Federal service, and I think that is an 

error that DHS needs to look at. 

So, when agencies are considering insourcing, everything needs 

to be on the table. They need to be able to review each and every 

item and determine what should be and what should not be, and 

not be so territorial as what should remain in the contracting 

realm. 

Also, the transparency is a great point. Sometimes these decisions are made in the back room, and you never know how they 


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came around to them. I think that transparency is a vital component to a lesson learned. 

Senator AKAKA. Thank you. 

Ms. Gilman, during these tough economic times, many people are 

looking for jobs. This presents the Federal Government with an opportunity to recruit top-notch employees. We need to ensure that 

government employment continues to be attractive enough that we 

retain new Federal employees once the economy gets better. What 

do agencies need to do to retain new hires? 

Ms. GILMAN. Well, first of all, before they get to retaining them, 

they need to hire them. And I did want to congratulate you on getting your bill through the Senate this week, to improve the hiring 

processes, which I think will do a lot and is very important, especially at this time when as you say there are so many good people 

looking for work. We really need to get our hiring processes in 

order, so we can attract the best people into the Federal Government. 

Once they are here, I think there are a number of things that 

can be done to try to retain them. Training, which you also have 

legislation on, that NTEU supports—providing adequate training 

and support is a very good way to keep people. 

There are many flexibilities available to agencies: Retention bonuses, excuse me, awards and extra annual leave. All of these 

things can be given to good performers to give them incentives to 

stay. 

But I think one of the most critical things that agencies can do 

is respect the employees, allow them to have a process for communication, to share ideas on how the work can be done better. Having them feel that they are really contributing to the mission of the 

agency, I think, is one of the best ways to keep them in the Federal 

workforce. 

Senator AKAKA. Mr. Chvotkin, earlier this month the Professional Services Council (PSC) sent a letter to the Department of 

Defense, stating that its insourcing efforts are quota driven. Also, 

recent recommendations by the Acquisition Reform Working Group, 

which PSC is a member of, raised similar criticisms. Can an agency 

release human capital targets in a way that does not imply a 

quota? 

Mr. CHVOTKIN. They can, Mr. Chairman. Our concern with the 

quota-driven approach taken by the Defense Department to date 

has been really on the budget side. Commands and activities have 

been given mandatory reductions in spending, as well as positions 

to achieve. We think those are quota driven. 

It is rare, but if the process is strategic and if the process is 

transparent so that the agencies are identifying those functions 

that are inherently governmental, they ought to come back inhouse without question and without regard to cost. That is not a 

quota. 

If an agency is looking at its core capabilities—Senator Voinovich 

and you talked earlier about cyber security professionals—sufficient to maintain the agency’s mission and operation, that is not 

a quota-driven approach. That is a strategic hiring approach and 

we fully support that. 


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Senator AKAKA. Well, I want to thank you, this panel, very 

much, and also all of our witnesses. 

As we have heard, insourcing is an important new issue that deserves close oversight. Many of the issues that this Subcommittee 

has examined, especially hiring reform, will play important roles in 

the insourcing process. Human capital planning is also important 

as agencies look at their current workforce needs and bring inherently governmental work back in-house. 

As always, I want to thank Senator Voinovich who has been a 

partner on these issues, and I hope that in our time left here together we will continue this important work. 

The hearing docket will be open for 2 weeks for additional statements or questions from other Members who may have some questions on anything pertaining to the hearing. 

This hearing is adjourned. 

[Whereupon, at 4:50 p.m., the Subcommittee was adjourned.] 


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