The Perils of Outsourcing

As we learned about IT outsourcing by the government, I came across a few articles, which make very strong arguments against IT outsourcing by the US Federal Government. As much as the benefits of IT outsourcing are visible, the demerits of having the whole system of putting more IT contractors than Civil servants in place has been stressful.

The U.S employment data released in October 2013 showed that the federal government employs 2.7 million people, which is the smallest number since 1966. This is due to the increased outsourcing. This results in increased spending by the government (by paying higher salaries to employees on contract and fewer bureaucrats).

One argument is that IT Outsourcing is only a way for corporations to be paid an amount of money which is much larger than what equally competent employees could be paid, if hired directly by the government. In reality, the American taxpayer ends up paying more money than they could have paid if the number of actual civil servants was enlarged. However, since the government employees lack expertise in certain areas, such as the use of complex IT procedures and software, they are bound to rely upon external contractors to perform the job. It also puts them in the situation of say an army led by generals who never learned to fire a weapon themselves.

On the other hand, private contractors are also sometimes termed as lousy at public services. The healthcare.gov is cited as the biggest example so far, as ‘train wreck’, built by contractors and overseen by the Department of Health and Human Services. Both government and private sector have their weaknesses. While the private sector is more competitive and has bigger networks, and is more efficient at collecting more bills, the efficiency gap between the two entities is not drastic.

The question sometimes also arises whether the Federal Government has gone too far in its reliance on contractors and they are performing mission critical functions better left to civil servants. In the early 1990s, Members of Congress raised concerns about governmental responsibilities being unacceptably transferred to contractors. The Office of Federal Procurement Policy in 1992 issued a policy on “inherently governmental functions”. According to the policy, “Inherently governmental function means, as a matter of policy, a function that is so intimately related to the public interests as to mandate performance by governmental employees”. Today, it is difficult to differentiate who is performing which function.

On the Contrary, some people have argued that this concern about contractors' usurping Federal roles may be outmoded and irrelevant to how government works today given the prevailing multi sector agency workforce. The civil servant plus contractor workforce has become an essential fact for how federal agencies carry out their responsibilities.

I think, at this point of time, contractors have become essential to the functions of the government; perhaps the term ‘inherently governmental functions’ needs to be revised if it has not already been done. The security risks regarding handing out sensitive information (say IT outsourcing by intelligence agency) can be made more secure through stricter contracts and sharing of profits after program has been implemented, that we discussed in class.