SAVE MONEY BY INSOURCING?

Stan Soloway, President and CEO of the Professional Services Council (PSC), has written senior Department of Defense (DOD) officials in reaction to suggestions that one way DOD could implement sequestration (or just save money) would be to insource currently contracted work "on the faulty assumption that doing so will 'save money.'"  Stan goes on to point out that based on recent insourcing initiatives, the assumption of saving money is not supported by the facts.

PSC urges DOD to do proper cost comparisons, complete the analysis of the impact on small businesses, provide timely notice as required by statute and assess potential cost savings that could be achieved by bilaterally modifying contracts rather than terminating them.

The relevant statute provides:

The Secretary of Defense shall establish procedures for the timely notification of any contractor who performs a function that the Secretary plans to convert to performance by Department of Defense civilian employees pursuant to subsection (a).  The Secretary shall provide a copy of any such notification to the congressional defense committees.

On March 21, 2012 we wrote about challenging the insourcing decision in court.  It is possible to undertake such an action in the Court of Federal Claims (COFC) where at least one judge has held a contractor has standing to challenge insourcing.

The propriety of insourcing also can be challenged at the Government Accountability Office (GAO).  If a solicitation requires a cost comparison of in house to contractor performance, GAO will examine the reasonableness of the decision to go in house.  GAO also will examine an agency's rationale for cancelling a solicitation to see if cancellation is as mere pretext or "flimsy excuse" for going in house.

PSC has made a clarion call to DOD that any insourcing of other than inherently governmental functions be subjected to the analysis of  complete cost comparison, consideration of impact on small business, timely and proper notice to contractors and an assessment of whether savings can be accomplished by contract modification.

Whether sequestration happens or not (we believe it won't), budgets will shrink. It's just bad business to cut contractors without performing the analyses Stan suggests.

bill@spriggslawgroup.com            www.spriggslawgroup.com