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To Restore Public Distrust-Increase Insourcing.

The very notion of Insourcing which is defined by hiring more government employees versus government procuring these services from government contractors at this time is a sign of a very disconnected government. We at Open Government TV have watched too much hard work from the White House, to Agency leadership, to both the House and Senate go into making government more of a publicly entrusted institution for government to have to unnecessarily face an angry and infuriated business community, especially anger from the small business community. To Increase insourcing would be like taking the reserved air out of the lungs of small business just as they are fighting to get a second wind because for many, recovery is not happening steadily or assuredly enough.

Additionally, implementation of increased insourcing at the risk of reducing outsourcing is a contradiction to one of the newly required goals of government which is to create the environment for market and free enterprise stimulation by incentivizing the private sector to participate in the trillion dollar government contracting arena. The Open Government Directive is designed to revolutionize the way government improves the quality of life for citizens, not to do the exact opposite.

With unemployment that continues to hover near 10%, and with the repeated assertion that small business is the back bone of our economy, 80-90% of our jobs in America are created by small business, and to live in a country whereby government currently is the largest buyer of goods and services, makes the idea of insourcing at increased levels indeed is a major disconnect to our current and foreseeable economic reality. As a small business who has nearly 10 years of experience in helping firms navigate through the government maze of contracting, we strongly believe that more insourcing would be a serious serious smack in the face of all the work that the White House and many of the government agencies have attempted to do over the last year with the Open Government Directive. There have been too many public leadership hours poured into plans to rebuild public trust back into government by opening government to public access so more can participate. To hire more government workers at the exclusion of business community engaged in contracting opportunities would fall way short of the goal of building trust and rebuilding our commerce during the American Recovery Reinvestment era. With health care costs, and salary cost of living increases, the math also seems to fall on the side of outsourcing. At the very minimum giving deference to some ideological reason why insourcing should even be considered in this economy at the very minimum, OMB must find a balance of hiring where mandatory like in GSA to increase those who process GSA schedules, and at the same time, respect the need for government contracting community to continue to deliver vital services to government.

Please do not advance insourcing with out using the new Gov 2.0 tools available to gain stakeholder engagement on this subject. At the very least, extend the public comment period if OMB is still considering the notion of increasing insourcing. www.opengovtv.com 202-449-7705.

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Avatar photo Bill Brantley

With all due respect Mr. Moore, your background might make you a little biased in this regard. Contractors provide valuable services but recent scandals involving contractors has led toward insourcing (http://www.ombwatch.org/search/google/contractors?query=contractors&cx=011461899401163846281%3Apuo8jotx4as&cof=FORID%3A11&sitesearch=#968).

Yes, outsourcing should be used to help small businesses but the bulk of contracts go to large companies either directly or through a specially-created “small business” to channel the contracts. And how does one address the conflict of interest caused by contractors’ political lobbying and the rewarding of contracts?

Henry Brown

I am somewhat torn about this issue:
Have never been a SUPER fan of outsourcing, however the government solution on how to insource is, as you mentioned, going to be rather harsh on the small business and probably will NOT have much effect on the big players in the arena which is where a significant percentage of the abuses occur.

Keith Moore

Bill. I indeed appreciate your response. Two things of note, at a quick glance of your link, OMB highlights from the links fraud in the Afghanistan war, where there is well documented and repeated incidents of fraud. And depending on where you sit on the issue of the war, this project is, was and may continue to be wrought with suspect procurement practices. This international and protracted project such as the war should not be the measuring stick for
developing domestic contracting policies for small businesses here at home. In other words,

DOD should perhaps be one of the agencies precluded from my expressed advocation for insourcing, Maybe an increase in armed force staff hiring is more appropriate at the DOD level, but not necessarily at the HUD, GSA, USDA, NASA level (for example).

Secondly, here is an article that further proves that fraud runs rampant in contracting, but once again, these highlighted discoveries should not result in policies that result in hurting small and especially economically challenged businesses who depend on government contracting for their base of revenue.

The following examples are specific incidents that were found by GAO to be fraudulent schemes by business who were contractors. When you read the cases, determine how many were small economically challenged and or minority owned firms and then see if these same small economically challenged businesses should be further forced out of opportunities to engage in outsourcing opportunities. The stakeholder input on this should at minimum be extended out a little longer. Rules that make it even harder for the small business, is really not the right direction we should be heading.

Your continued thoughts are most welcomed.

Fourteen Ineligible Firms Received $325 Million in Sole-Source and Set-Aside Contracts
March 2010
March 2010
Highlights of GAO10-425, a report to the Chairwoman, Committee on Small Business, House of Representatives
Why GAO Did This Study
The Small Business Administration (SBA) helps socially and economically disadvantaged small businesses gain access to federal contracting opportunities through its 8(a) program. To participate, firms must be at least 51 percent owned and controlled by an individual who meets SBA’s criteria of socially and economically disadvantaged. The firm must also qualify as a small business. Once certified, 8(a) firms are eligible to receive sole-source and set-aside contracts for up to 9 years.
GAO was asked to (1) determine whether ineligible firms are participating in the 8(a) program, (2) proactively test SBA’s controls over the 8(a) application process, and (3) determine what vulnerabilities, if any, exist in SBA’s fraud prevention system. To identify cases, GAO reviewed SBA data and complaints to GAO’s fraud hotline. To perform its proactive testing, GAO created four bogus businesses and applied for 8(a) certification. GAO did not attempt to project the extent of fraud and abuse in the program.
GAO makes six recommendations to improve SBA’s ability to screen and monitor fraud and abuse within the 8(a) program. SBA agreed with five recommendations and stated that it would evaluate our recommendation related to how family members’ assets are included in the assets of the 8(a) participant based upon the comments received as a result of the proposed 8(a) rule change.
View GAO-10-425 or key components.
For more information, contact Gregory Kutz at (202) 512-6722 or [email protected].
Accountability Integrity Reliability
What GAO Recommends
Fourteen Ineligible Firms Received $325 Million in Sole-Source and Set-Aside Contracts
What GAO Found
GAO identified $325 million in set-aside and sole-source contracts given to firms not eligible for the 8(a) program. Most were obtained through fraudulent schemes. In the 14 cases GAO investigated, numerous instances were found where 8(a) firm presidents made false statements, such as underreporting income or assets, to either qualify for the program or retain certification. For example, one firm president who is not socially disadvantaged misrepresented her ethnicity to SBA. GAO also found cases where ineligible companies used certified firms to secure 8(a) work. For instance, a West Virginia company that graduated from the program in 2001 used a series of three certified companies as pass-throughs to continue obtaining set-aside and sole-source contracts. In some cases, SBA did not detect the false statements and misrepresentations made by certified firms. In others, SBA became aware of the firms’ ineligibility but failed to take action. The table below shows details on 3 of the 14 case studies.

Selected Case Studies of Fraud and Abuse in the 8(a) Program Ineligible 8(a)
awards / awarding Industry department Case details
Roofing/ construction
Landscaping/ janitorial
Source: GAO.
$48.3 million— ␣! Agriculture, Commerce, Defense, Interior, EPA, GSA,
$ 11.2 million— ␣! Defense, Homeland Security
$13.8 million— ␣! Defense
This firm is ineligible because it operated as a pass- through for a graduated company—both firms were being run by the same white, father-and-son team at the time of our investigation.
This firm is ineligible because the president fraudulently reported his adjusted net worth to be $217,000 on his application when it was actually at least $806,000—an amount clearly exceeding the allowable $250,000 threshold. We estimate his current adjusted net worth to be at least $1.7 million dollars— nearly double the allowable $750,000.
This firm is ineligible because it operated as an extension of a graduated 8(a) firm run by the same father-and-son team that owned the previous firm— effectively giving them an extra 9 years of eligibility.

Henry Brown

Interesting article from FCW:

Also, the guidance would allow agencies to give “special consideration” to federal employees. Agencies could take work from a contractor if any number of federal employees had done it in the past, if the agency awarded the contract non-competitively or if the contractor has done a poor job, according to the amendment.

Suspect the “operative” terms in the amendment are “would allow” and “could