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How Does Contracting Impact Human Capital Within Your Agency?

Recently I read a memo written by Peter Orszar, former Director of the Office of Budget and Management. In the memo, Orszag has identified that the goal for government is to find the optimal mix of public and private resources to deliver the highest level of service to citizens. He also cautions that an overreliance on contracts can lead to an erosion of the federal workforce.

With an increasing use of public/private partnerships, there are new challenges facing the public sector workforce, at all levels of government. As government competes with the private sector for talented employees, outsourcing work may inadvertently put government at a disadvantage to recruit talent.

In the memo, Orszag explains that an overreliance on contractors can potentially negatively impact the federal workforce. “Overreliance on contractors can lead to the erosion of the in-house capacity that is essential to effective government performance,” states Orszag. He continues:

“Such overreliance has been encouraged by one-sided management priorities that have publicly rewarded agencies for becoming experts in identifying functions to outsource and have ignored the costs stemming from loss of institutional knowledge and capability and from inadequate management of contracted activities. Too often agencies neglect the investments in human capital planning, recruitment, hiring, and training that are necessary for building strong internal capacity – and then are forced to rely excessively on contractors because internal capacity is lacking.”

These are important observations, and should not be taken lightly by government. Although Peter Orszag is speaking to a federal audience, the implications are true at all levels of government. As more and more baby boomers start to exit the workforce, and government is left with a potential skill gap, government needs to be paying close attention to its workforce.

Do you support Orszag’s comments?

How does contracting impact the workforce in your agency?



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Profile Photo Linda Oestreich

Interesting questions, indeed! I am currently a contractor and am quite pleased to have the job and to still be supporting my government by supporting the command where I work. I served the Federal Government for more than 20 years and if an appropriate job becomes available, I would probably jump at the chance to take advantage of my reinstatement eligibility. However, I think that contractors are a great support and needed part of the Federal Government. I’m not sure that the contractor/fed employee mix is always managed appropriately, but I do believe contractors bring in needed expertise, added value, and respected versatility. The Federal Government is one of the few employers left in this country where someone can stay in one job for 20 to 30 years. I believe that to truly understand one’s profession and the industry one works in requires some knowledge outside the focused areas we can sometimes find ourselves in. If one doesn’t move from job to job (every 3-5 years or so), I recommend that folks join a professional organization so that they can have a network of people who do have knowledge outside of one’s own experience. And, of course, contractors provide expertise from the outside world and can enhance any group when combined with strong and dedicated Federal workers.

So, although I seem to have strayed from the original question, my response is that contractors, when managed well, are a valuable part of the Federal workforce and should be considered an important partner with Federal civilian employees.

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Profile Photo Patrick Fiorenza

Hi Linda, thanks for your comment! Agreed with your comments – contractors are absolutely a critical part of government and need to be managed well. Seems like management is the key – agencies watching costs, skills and knowing if outsourcing or staying in-house will best serve the agency. It’s interesting as we’ve seen a lot of agencies turn to the private sector for help, always wondered if it is out of necessity or really a culturally shift. Thanks again for you comment.

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Profile Photo Mark Sullivan

Thank you for the post. Orszag asserts that “in-house capacity…is essential to effective government performance.” I think this assumption needs to be explored further. It certainly resonates with those of us who have spent our careers in the public sector. I wonder, though, whether it prevents us from expanding our concept of government’s true human capital.

I’d also suggest that private sector outsourcing is an oversimplified approach. I’ve seen too many examples of government services outsourced to private providers only to achieve the same results at a higher cost. Leveraging outside talent doesn’t inherently add value unless something fundamentally changes in the service provided.

Public-private partnerships (including partnerships with non-profit and philanthropic organizations) can improve public services when the partnership leverages the comparative advantages of each organization, and creates new sources of value for customers. If we can achieve this through transforming ‘government-by-bureaucracy’ to ‘government-by-network’ then perhaps in-house capacity will become moot.

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