Two familiar snags await DHS

The Homeland Security Department’s initiative to bring more government work in-house is running into some familiar obstacles. Although the new president has reversed the overall strategy — urging the government to insource jobs rather than looking for more government jobs that could be contracted out — the challenges regarding how to decide which jobs are inherently governmental have not gotten any easier to solve.

DHS Secretary Janet Napolitano got the ball rolling in May when she told department officials to review all large professional services contracts to make sure contractors aren’t performing work only a federal employee should do. But experts say Napolitano's department — and others that follow suit — will certainly hit two snags.

First, she will need to try to define inherently governmental work reserved for federal employees. Second, she will need to figure out who can do the insourced work. It won’t be easy to fill insourced jobs with federal employees when the workforce already has a full workload.

So some experts are urging Napolitano to slow down and create a plan rather than moving quickly to take work out of the private sector.

“You need a strategic approach,” said Raj Sharma, president of the Federal Acquisition Innovation and Reform Institute. “And it has to be sustainable.”

On May 28, Napolitano announced that DHS would conduct mandatory reviews of all new professional services contracts worth more than $1 million, including renewals of existing contracts. This additional review adds a new level of rigor to the DHS contracting process, according to the announcement. But DHS is still developing the criteria for the reviews and had not released more information a month after releasing that memo.

Some industry sources say pending contracts might come in just below that $1 million threshold, adjusted downward to avoid the reviews. Experts also warn about the problems awaiting Napolitano.

“Defining intergovernmental work is very, very difficult to do,” said Kenneth Weckstein, a partner at the government contracts group of the Brown Rudnick law firm. This type of review “is going to cause problems. I predict there will extensive lobbying on this,” he said.

Napolitano is entering what is historically a controversial task in defining inherently governmental work. It can include supervisory, contracting, oversight and investigative functions. While the Office of Management and Budget, the Federal Acquisition Regulation and other documents offer guidance, there are frequent arguments about how to interpret the rules.

“I think it is a wonderful idea to do the reviews,” said Scott Amey, general counsel for the Project on Government Oversight, a watchdog group. “But it will be very difficult.”

In practice, defining inherently governmental work requires a critical look at the tasks that employees perform, he said. “It is a fine line,” Amey said. “I think crossing the line happens more than we would expect.”

“There is no bright-line test for what is inherently governmental,” said Alan Chvotkin, senior vice president of the Professional Services Council, a trade group for contractors. “There is trepidation with respect to the definition they are using.”

One point of discussion is whether to expand reviews at DHS and elsewhere to include so-called core competencies. Although not necessarily inherently governmental, those skills are considered critical to an agency’s mission. Napolitano said her reviews will span core functions, too.

“Beyond a small circle of inherently governmental functions, there are concentric rings that might include critical functions,” Chvotkin said. These might include areas such as cost analysis or supervision of contracts, he suggested. “Everyone is struggling to define critical functions. We know they are the positions that are critical to the success of the agency’s mission.”

But the definitions of core functions are subject to interpretation, too. “That makes it more problematic,” said Lexy Kessler, officer at Aronson and Co. “Anything without clarity will lead to misinterpretation and more anxiety on the contractors’ side.”

Meanwhile, Napolitano must figure out how to implement insourcing despite significant attrition in the government's acquisition staff in recent years. Agencies already need to hire people with experience to oversee acquisitions. Some agencies are rehiring retired acquisition workers. Experts say reversing the trend will require a lot of work.

“Too many decisions are being delegated to contractors,” said John Chierichella, a government contracts attorney at the Shepard Mullin law firm. “Changing that may be a laudable goal, but unless they are willing to staff up and pay for the people, it’s really a Hobson’s choice. You cannot cut the staffs and at the same time criticize the agency” for not doing the work.

It’s difficult to ensure that the government personnel who supervise contractors have at least as much expertise as those contractors, who may be paid more. “If you have someone overseeing a $1 billion program, you need to make sure that person is qualified,” Sharma said. “Until we address the systemic problems, it will be challenging and potentially dangerous [to insource] without undermining capabilities.”

Also, there is risk in trying to sustain the government workforce over time and maintain its efficiency, Sharma said.

“In this economy, it may be possible to hire staff," he said. "But we cannot retain them over time without understanding roles, responsibilities and skills."

Aronson's Kessler added: “How can federal agencies maintain efficiency, accountability and performance? It has not been demonstrated. With outsourcing, it is easier to create accountability.”

Overall, if the insourcing reviews at DHS and elsewhere are strategic, they are more likely to be well-received, Chvotkin and others say.

“As long as there is a standard, we welcome the review,” Chvotkin said. “If you are trying to find jobs to convert for the sake of converting, without an analysis of performance or value, we would have concerns about that.”