OMB wants employee, contractor balance

The Obama administration will require agencies to take steps designed to improve how they manage and track their workforce and strike a better balance between federal employees and contractors.

Office of Management and Budget (OMB) Director Peter Orzag recently issued a memorandum that said agency management practices must recognize the proper role of contractors and federal employees. Orzag said contractors provide “vital expertise” to the government, but agencies need to be alert to situations where an over-reliance on industry undermines the government’s ability accomplish its missions.

“Current policies and practices must be improved so that agencies consistently identify the proper role of each sector and achieve the best mix of public and private labor resources to serve the American people,” Orzag wrote in the memo dated July 29.

Orzag said over-reliance on contractors can lead to an erosion of agencies’ in-house capacity to perform their jobs. He also said over-reliance on contractors has been encouraged by “one-sided management priorities” that have rewarded agencies for what they outsource while ignoring costs resulting from the inadequate management of contracted activities.

The administration plans to release guidance to clarify when outsourcing government services is appropriate on September 30, the memo said. Orzag also said OMB is reviewing the definition of “inherently governmental function” and is analyzing how agencies can track more detailed information on contracted work to improve management.

The memo requires agencies to:

• Adopt a framework for planning and managing their contractors and employees that emphasizes collaboration between the agencies’ different offices.

• Conduct a pilot program analysis of at least one program where the extent of reliance on contractors is a concern. The program should be complete by April 30, 2010, the memo said.

• Be consistent with OMB’s guidance when considering moving more work to federal employees.