FOR IMMEDIATE RELEASE:
June 3, 2013
Failure to Identify Significant Savings in Bloated Contractor Workforce is Short-Sighted
WASHINGTON – The recommendations of a group of think tanks, purporting to provide scenarios for cutting the budget of the Department of Defense, fail to meet the laugh test because they focus on massive, indiscriminate and destructive across-the-board cuts in civilian and military personnel, while in most cases leaving the more expensive and less efficient contractor shadow workforce intact, the nation’s largest federal employee union said.
American Federation of Government Employees President J. David Cox Sr. blasted the plans as academically lazy and said it is financially disastrous to ignore growing contractor costs while recommending cuts ranging from 10 percent to more than 33 percent of the civilian workforce. The blatant failure to show balance and seriously analyze the true costs associated with various personnel recommendations invalidates the think tanks’ findings, he said.
The recommended cuts would be on top of the already mandated savings from the so-called “Efficiency Initiative” as well as the arbitrary 6% cuts on the civilian workforce imposed pursuant to the fiscal 2013 National Defense Authorization Act (NDAA). As with those earlier arbitrary cuts, these new recommendations also fail to link the proposed reductions to mission or strategy changes. There is nothing courageous about telling the Department to do the same with less, and there is nothing intelligent about imposing cuts in the absence of any workload analysis.
“It seems easy to pick on the federal employee, labeling him or her as a faceless bureaucrat, because civilian personnel and the associated costs are the most readily identifiable,” Cox said. “But transparency doesn’t equate to what’s most expensive. It is usually what you can’t see that will kill you, and that is exactly what is happening with the shadow workforce of contractors, which has exploded since 9/11 and even before.”
In fiscal 2010, DoD spent $35 billion more for contracted services than it spent on military and civilian personnel combined. That is worth repeating. DoD spent more on contracts for services, not including the purchases of good or payments to foreign national indirect hires, than on military and civilian personnel combined. And yet, the think tanks suggest gutting military and civilian personnel to save money, rather than touch the contractor community.
“The uniformed personnel and civilian employees are the backbone of the Department of Defense and should serve as the core workforce, not the oxen to be gored,” Cox said.
INCREASED COSTS IN SERVICE CONTRACTS FAR EXCEED INCREASED COSTS IN CIVILIAN PERSONNEL
While the exact number of service contractors employed by DoD is unknown because the department has failed to implement a now longstanding congressional mandate to develop a contractor inventory, the number of contractors skyrocketed during the post-Cold War drawdown of the 1990s, with contractors usually being paid far higher salaries than their civilian counterparts, according to none other than the former Republican DoD Comptroller Dov Zakeim.
That trend continued into this century. As the Senate Armed Services Committee observed in report language to the fiscal 2012 NDAA, “Over the last decade, DoD spending for contract services has more than doubled, from $72 billion in fiscal year 2000 to more than $150 billion (not including spending for overseas contingency operations), while the size of the Department’s civilian employee workforce has remained essentially unchanged.”
According to the Government Accountability Office, contractor costs doubled between 2000 and 2010, when the Pentagon spent at least $195 billion on contract services. And yet, the Commission on Wartime Contracting in Iraq and Afghanistan found that during that same basic timeframe (2001-2011), $60 billion was squandered through waste, fraud and abuse, mostly through contracts – enough to pay for more than an entire year of sequestration.
No mention was made of the staggering increases in the annual cap on taxpayer subsidies to tens of thousands of contractor employees, which will soon be increased to $952,000, with specialists regularly exempted from the cap. This compares to an average salary of just over $52,000 in fiscal 2012 for the employees AFGE represents, or the average salary of $72,000 across the entire federal workforce. Even a highly qualified civilian expert makes a relatively paltry $170,000, or 18% of the amount available to contractors under the cap.
INSOURCING HAS YIELDED SIGNIFICANT SAVINGS
As former Defense Secretary Robert Gates famously told The Washington Post in July 2010, federal employees are 25% less expensive than contractors: “And we find that a career person – you know, roughly speaking, a career person is about 25 percent less expensive than a contractor. When we started this insourcing process, we hoped it might be as much as 40 percent, but it’s – in practice, it’s turned out to be about 25 percent. But that’s a real savings.”
How is it that all of these think tanks managed to miss the success the department had with insourcing? In fiscal 2010 alone, the Pentagon acknowledged savings of $900 million. Thanks to insourcing, the Army reports savings of between 16% and 30% with dramatic reductions in costs: non-Overseas Contingency Operations spending on service contracts decreased from $51 billion in fiscal 2008 to $36 billion in fiscal 2010. Despite the insourcing, civilian personnel costs increased marginally during the same period—from $20 billion to $24 billion.
SEQUESTRATION SHOWS THE CIVILIAN WORKFORCE TO BE MORE FLEXIBLE
Sequestration has revealed that the major justification for hiring contractor staff over civilian personnel is a myth. No longer can anyone claim that the contractor workforce is the most flexible workforce because it is easier to divest in times of economic turmoil or downsizing. Virtually the entire DoD career civilian workforce will be taking 11 days of unpaid furlough days between early July and the end of September, or a 20% cut in pay for the fourth quarter of the fiscal year. Civilian term and temporary personnel were indiscriminately terminated at the end of March. Civilians also face the strong likelihood of Reduction in Force (RIF) actions later this year.
Not so for the contractor workforce. Service contracts have not been subjected to across-the-board 20% reductions for the fourth quarter. As a matter of fact, DoD leaders were told to do everything possible to maintain existing contracts and avoid terminations. There is no freeze on contractor salaries; far from it, the compensation cap is scheduled to increase this year by approximately 25%. Even with congressionally mandated caps ostensibly limiting service contract spending to the fiscal 2010 level, the Army still overspent by $2.3 billion in fiscal 2012, more than enough to have avoided the need to furlough nearly 700,000 civilian employees.
“We all recognize that the budget of the Department of Defense is going to come down with the end of the War in Iraq,” Cox said. “However, reductions should be based on mission, strategy, workload and the law, not some arbitrary, across-the-board formula that fails to consider the cost and appropriate roles of the various components of the DoD workforce.
“The Department and the Congress owe it to the American taxpayer to conduct the hard, honest analysis required to make the most economical and mission appropriate choices for the Department of Defense. We are confident that if they do that, it will be a win/win/win for the civilian employees of DoD, the warfighter and the taxpayer. There is no better deal in town.”
The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 670,000 workers in the federal government and the government of the District of Columbia. For the latest AFGE news and information, follow us on Facebook and Twitter.