Obama Flips On the Role of Government Contractors


One of President Barack Obama’s campaign promises was to reduce wasteful government spending. Recently, though, he has backed away from that pledge.

After his election, Obama directed his staff to develop new policies for government contracts. He wanted increased contract competition as well as better oversight of contractors. He also wanted to eliminate private industry’s performance of work inherently designed for government employees. Recently, Senator Dick Durbin (D-Ill.) tried to support those efforts. He inserted language into a bill that prevents the government from hiring contractors to perform intrinsically governmental functions.

Unfortunately for Durbin, the Obama administration’s Office of Management and Budget (OMB) does not support the language. Instead, OMB suggests that proper government oversight would allow contractors to perform inherently government functions. The OMB position was outlined in a recent Office of Federal Procurement Policy letter.

Is it possible that OMB would set policy without informing the president? That is unlikely. It is more probable that Obama now understands that federal contractors are embedded in the government and its functions. It is easy to point to contractors performing government functions in Afghanistan and Iraq as “necessary” to successful outcomes. It becomes more difficult, though, to justify contractors performing inherent government functions outside of combat support.

First, government contractors cost more than just their respective salaries. Indirect costs that fall into the areas of “general and administrative” or “overhead” are passed on to the government. These costs are converted into rates that are multiplied by the basic labor price. Depending on the organization’s rates, a contractor that makes $80,000 can actually cost the government $120,000 or even more.

Second, as new federal requirements emerge, some are based on actual needs and some are based on contractor influence. Federal contractors utilize business development personnel as well as gathered intelligence to create contracting opportunities. Many will propose hiring contracted support personnel to address problems that could be addressed in other ways like training or policy changes. Hiring an expert is often easier than addressing the underlying issues for the need.

Finally, politicians are realizing that contractors are part of the federal workforce. While it is easy to point to a number of federal employees needed to keep government working, it is not easy to find a number of contractors needed to support the government. If asked, each government organization will substantiate the need for their contracted support. After all, this means justifying the past as well as increasing the workload for current employees. I doubt that either will come peacefully.  

The Obama administration had an opportunity to live up to a campaign pledge as well as “change” government. It didn’t. Was it because Obama finally understood “how” government works or doesn’t work? Maybe the task was too daunting for him. Maybe Obama didn’t want to increase the size of the federal workforce during his first term. Maybe he didn’t want to add to the unemployment rate by getting rid of government contractors. Only time will tell as he gets ready for the upcoming elections and new promises of “change” we can believe in.

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