Navy, AF outsourcing to save billions

The Navy and the Air Force hope to save about $2.5 billion each in their fiscal 1999 budgets by outsourcing or privatizing selected tasks, including information technology functions, according to internal documents.

In a Jan. 15 Navy-wide message from Chief of Naval Operations Adm. Jay Johnson, the Navy's "program review for fiscal 1999 included a wedge projecting [more than] $2.5 billion in savings from outsourcing." The message added that "outsourcing competitions on approximately 80,500 full-time equivalents must be initiated to meet the challenge posed by this ambitious but achievable goal."

The Air Force plans to save $2.4 billion from outsourcing, according to an issue paper from the Air Force Office of Legislative Liaison.

The document details plans to double the share of savings indicated in the budget due to identified initiatives that "could potentially yield tremendous savings."

Although the Navy has not identified specifically what it intends to outsource or privatize, Johnson's message makes it clear that the Navy intends to meet its outsourcing goals by putting a wide variety of support services, ranging from plain-vanilla ADP operations to warehousing and tugboat operations, out for bid to the private sector.

While Johnson's message does not identify how many IT jobs the Navy intends to outsource throughout the service, the message acknowledges that more than 6,700 civilian positions already are on the chopping block, with approximately 950, or about 6.5 percent, of those coming from IT fields such as telecommunications, ADP, administrative telephone services and audio-visual services. If the same percentage is applied to the entire 80,500 positions up for competition, about 5,200 Navy IT positions in fiscal 1999 would be outsourced.

The message identifies large cuts in civilian and military personnel from Naval Computer and Telecommunications stations scattered from Hawaii to Maine. ADP and telecommunications functions supporting Naval Air Systems Command operations in California, Maryland and New Jersey also were targeted for outsourcing in the message.

Warren Suss, a Pennsylvania-based telecommunications analyst at Warren H. Suss Associates, said he believes there is a "very strong possibility" that either GTE Corp. or Lucent Technologies Inc. could pick up much of the Navy's IT outsourcing business through the Voice, Video and Data contracts.

While the Air Force has yet to identify publicly the functions it plans to outsource, Suss said the service completed a survey of functions suitable for outsourcing last month, and the Air Force is due to issue its recommendations this month. Suss predicted that IT and command, control, communications and computer functions "will account for a very large percentage of the total...up to 25 percent."

Maloy Jones, vice president of military systems for Electronic Data Systems Corp., said many of the specific outsourcing opportunities contained in the Johnson message are "at a very low level and can be done with contract personnel, which will result in very limited savings to the government."

Jones said if the government wants to "achieve significant cost savings, outsourcing should be considered at a higher level. In IT this would be distributed systems management at a regional and base level...legacy system management and migration to new platforms, help-desk functions and technology refreshment."

Jones added that "to achieve the cost savings required by the government, these outsourcing contracts should be for a minimum of five or 10 years to make the necessary investments that result in short- and long-term savings. The functions outsourced should be of significant magnitude to allow the contractors to leverage infrastructure and management across functions to eliminate costs."