Government Contractors: Contracting Out Implications of Streamlining Agency Operations

GAO discussed the interrelationship between contracting out and streamlining agency operations through personnel reductions. GAO noted that: (1) contracting out could provide valuable, up-to-date expertise that agencies do not have in-house or do not need on a permanent basis; (2) agencies should consider the cost of contracting out versus the cost of having services performed in-house, the length and nature of the work, and the quality and timeliness of the services needed before deciding their course of action; (3) Office of Management and Budget (OMB) guidance does not require agencies to conduct cost comparisons before contracting out for advisory and assistance services; (4) nine studies on advisory and assistance services indicated potential cost savings if services are performed in-house under certain circumstances, but the studies' limitations reduced their applicability to the government as a whole; (5) although federal law prohibits agencies from contracting out services due to personnel reductions, OMB needs to clarify its guidance to require cost comparisons for advisory and assistance services; and (6) agencies need the flexibility to perform their work in the most cost-effective manner and should not be subject to arbitrary personnel ceilings if they determine that using federal employees to accomplish work is more advantageous than contracting out.