Doctoral Proposal: Exploring the Impact of Outsourcing on a Government Agency By CHARLES KIMANI

A Dissertation Presented in Partial Fulfillment

Of the Requirements for the Doctorate.

Doctor of Management in Organizational Leadership with a Specialization in Information Systems and Technology.

University of Dedan Kimathi School of Technology
September 2013

Table of Contents CHAPTER 1 - INTRODUCTION ......................................................................................................1 Introduction ..................................................................................... .......................................1 Background of the Problem.............................................................................................................. 2 Problem Statement...................................................................................................................... 4 Purpose Statement ........................................................................................................................5 Significance of the Study....................................................................................................................5 Significance of the Study to Leadership.................................................................................... 5 Nature of the Study..............................................................................................................................6 Research Questions....................................................................................................................... 7 Hypothesis...........................................................................................................................................7 Theoretical Framework......................................................................................................................7 Scope, Delimitation and Limitations of Study................................................................................7 Assumptions........................................................................................................................................7 Definition of Terms..............................................................................................................................9 References: ..........................................................................................................................................10

CHAPTER 1 - INTRODUCTION
Introduction
Outsourcing or contract labor has been an important part of the government workforce since contractors were hired to care for the Continental Army’s horses during the Revolutionary War (Baldwin, Ausink, Campbell, Drew, and Roll, 2008). The military has relied on contract support for decades as a way to reduce cost, increase efficiency, and for the effective implementation of programs (Berrios, 2006). Outsourcing is a system used to reduce the size of the government, improve management, and create competitiveness within the private sector. This study will focus on the service contracts of the Department of Defense (DoD). The DoD is one of the largest executive government departments in terms of demand for services (Berteau, Hofbauer, Ellman, Kiley, & Ben-Ari, 2011). DoD contractors have become the supplementary workforce of the government http://vbpoutsourcing.com/.
Outsourcing governmental activities and tasks creates a gap between the workers and leaders because the two entities work toward similar goals but rely on disparate objectives. The ontact worker’s focus is primarily on job completion while the government leadership’s focus is on the processes and regulations leading to the completion of the task. However, the contracting of non-governmental workers allows agencies to adapt to the rapid changes in technology because many times contractors are certified and experienced knowledge workers and have the expertise to deploy the latest technical innovations (Chen and Soliman, 2002). For this reason the outsourcing of technical and complex tasks to contractors have become increasingly popular across both private and public organizations (Slaughter and Ang, 1996). Some of the emerging trends in outsourcing includes domestic verses offshore outsourcing. Domestic outsourcing is a perception of the local jobs in a country which is best for the local economy. It has rural outsourcing which makes rural parts carry out functions in a competitive basis rate as compared to other service providers from other countries. Offshore outsourcing is as a result of its spread to many countries and is brought forth by change in prices. Another trend is security issues whose major concern is the security questions on the sensitiveness of information that is accessed by outsiders of the firm. It has been a key concern and still remains as there have been reports of fraud and theft of assets which is a limiting factor to the growth of outsourcing locally and internationally.
In this chapter, the background of outsourcing within government agencies, the role that governmental leadership play in managing projects, and the DoD’s dependency on contract support to accomplish the mission is discussed. The problems related to outsourcing, the productiveness of government agencies, and the effectiveness of leadership to manage contractors describes the purpose of the research. Problems that may arise as a result of outsourcing includes gradual diminishing of accountability by contractors, provision of unequal services, might undermine the reliable delivery of the services and may also cause disputes in labor sector. These are pressing issues in many countries and needs to be dealt with great care. Chapter1 also contains the purpose of the study, significance of the study, nature of the study, research question, theoretical framework, definition of terms, assumptions, scope and limitations, delimitation, and summary.
Background of the Problem
In fiscal year 2009, the GAO reported that the DoD spent $140 billion on service contracts this was an increase from the $127 billion spend in 2008 (Brodsky, 2011). In 2010, the funds on service contracts doubled, the Federal Procurement Data System reported federal spending at $343 billion (Berteau, Hofbauer, Ellman, Kiley, & Ben-Ari, 2011). In 2010, the DoD awarded $161 billion for service contracts, which doubled from the $67 billion spent in 2000 (Erwin, 2011).
In 2009, Defense Secretary Robert Gates’ initiative to reduce 33,000 DoD contract positions was halted because in-sourcing had not yielded the expected savings (Erwin, 2011). The expected savings were not realized as some in-sourcing projects by non military departments that were for fiscal 2010 were to be allowed to continue, some military command centers still had plans for in-sourcing many jobs from private sectors and some private contractors who were to lose the in-sourcing projects sought intervention from the court and this made some defense bodies to cancel the in-sourcing projects, for example, the Air Force. By the summer of 2009, only 16,000 of the contractor positions were converted back to the civilian workforce. The conversion from contractors to government civilians was an attempt by Gates to restore the balance between the ratio of contractors and DoD Civilians and achieve budgetary savings (Berteau, Hofbauer, Ellman, Kiley, and Ben-Ari, 2011). However, based on the cost analysis report completed by the Center for Strategic & International Studies (CSIS), a bipartisan, nonprofit organization based out of Washington, DC, concluded that it is not clear if in-sourcing achieves the expected budgetary savings. In-sourcing was expected to reduce the cost for contractors by 40 percent (Berteau, Hofbauer, Ellman, Kiley, and Ben-Ari, 2011).
In a 2010 announcement, Secretary Gates acknowledged that the government’s reliance on contractors did not subside as expected (Berteau, Hofbauer, Ellman, Kiley, and Ben-Ari, 2011). In fact, Secretary of the Army John McHugh suspended all of the Army’s in-sourcing activities through February 2011 in the memorandum “Reservation of In-Sourcing Approval Authority”. McHugh wrote that because of constrained resources, in-sourcing activities of the functions currently performed by contractors; need to be carried out in a well-reasoned, analytically based, and systematic manner (McHugh, 2011). --- (direct) – Needs Reference
As the dependency continues, so does the need for contractors to perform inherently governmental or unauthorized personnel services, that were once restricted from contract services. Under the 1998 Federal Activities Reform (FAIR) Act, an activity is classified inherently governmental when it is intimately related to the public interest and critical for the agency’s mission. The FAIR ACT states that inherently governmental activities must be performed exclusively for federal employees (Brodsky, 2010). Cost benefit analysis of contractors is an assessment study and comparison of competing contractors alternatives that is carried out quantitatively and systemically to determine the cost/benefit cycle and it involves ending up with the best alternative. In 2009, OMB proposed new guidelines for work that must be reserved for Federal government employees (Federal Register, 2010). The intent is to clarify and provide a single definition of the term inherently governmental, assist agencies with differentiating between critical function and inherently governmental functions, and strengthen the accountability, management oversight, and control of contracts.
Over 45,934 contractors are reported to be providing services that are considered inherently governmental (Brodsky, 2011). These jobs include assisting in contract management or evaluating another contractor’s performance, awarding and administering contracts, determining budget priorities, and hiring and firing federal employees (Brodsky). The dependence on contractors to perform such activities directly influences the ability of the government to function and its efficiency and can create a conflict of interest (OMB Watch, 2011).
The DoD relies on contractors to perform a number of governmental activities, to include many of the core functions (Weigelt, 2008). Contractors perform work related to but not limited to programming, software testing and maintenance, IT research and development, software architecture, product design, project management, IT consulting and business strategy, product manufacturing (King, 2008). However, the government never had a defined count of the number of contractors employed or a handle on the jobs the contractors were performing.
In 2009, the GAO reported that the DoD and the military branches employed approximately 766,000 service contractors (OMB Watch, 2011). Because of the high number of contract employees, the government loses the capability to perform certain tasks without the aid of a contractor (OMB Watch). Contract employment was an unmonitored governmental activity for decades. At least until Congress directed OMB and other agencies to investigate the issues related to the multi-sector workforce (GOA, 2011). The administrations call for transparency and efficiency within the government contracting process resulting in improved accountability of outsourcing contracts. Before the creation of the GAO, contractor accountability was mismanaged and under-reported. Over the last few years, the Pentagon and military branches have been doing a better job at collecting data on contractors (OMB Watch, 2011).
Problem Statement
The problem is that increased government dependency on outsourcing services challenges the government’s readiness and efficiency because the reliance on contracting support to perform every day duties and core governmental functions (Highlights, 2007). In 1992, the DoD contract management was identified as a high-risk area by the GAO and since the GAO has identified the need for the DoD to better manage both strategic and individual contract levels (GAO, 2011). Areas that have been identified as high-risk by the GAO are defined as challenges that impede government effectiveness and cost the government billions of dollars annually (GAO, 2007).
The productiveness and effectiveness of a government agency and its leadership’s decisions making is directly tied to the contractors assigned to the project.
Purpose Statement
The purpose of the present triangulation mixed method study is to determine the perceived effects of DoD contract workers on project completion success statistics in a government organization. In a triangulation mixed method design, the researcher conducted qualitative and quantitative procedures separately to maintain the independence of data analysis (Yang, 2008). The approach is appropriate to examine the perception of 20 government contractors and 10 federal employees using an instrument to collect qualitative and quantitative data. A mixed method approach is used to gain a better understanding of the results and to explore new perspectives by bringing together qualitative and quantitative research methods to explain the data collected in the study (Dunning, Williams, Abonyi, and Crooks, 2008).
Significance of the Study
The current mixed method study, the perception of contractors and governmental leadership provides insight on the influence that outsourcing has on the outcome of DoD projects and the potential of overuse of contractors by the government for capabilities development and technical performance analysis. The government spends billions annually to fund outsourcing services and researching the results of government projects may lead to improving the efficiency and productivity of government organizations. The information from the current study may lead to improved efficiency of outsourcing practices resulting in decrease federal spending.
Significance of the Study to Leadership In order to retain public confidence in the government’s stewardship over taxpayers dollars, federal leaders need to understand the influence that contractors have on government projects to strengthen their ability to negotiate contract prices, manage contractors, and guarantee the products and services resulting from contract services (Highlights, 2007). Government agencies that rely solely on contractor support to operate are at high risk because of the government’s inability monitor the contractors. The GAO’s list of government high-risk areas includes contract management at the departments of Defense and Energy and at NASA (Highlights). These risks areas equate to hundreds of billions of taxpayer dollars vulnerable to waste and misuse (GAO, 2005).
Nature of the Study
The goal of the study is to explore the impact of outsourcing on a government agency by determining whether outsourcing influences the products and programs developed by the organization. The study will also examine the qualitative perception of both government and contract employees on the benefits and challenges of outsourcing on capabilities development and technical performance analysis for the DoD. The study will be conducted at a federal research and development lab located at Fort Gordon, Georgia in September 2011. concept testing and development of information technologies. Permission to conduct the research study will be granted by the Director of the Organization. A disclosure statement will be provided to each of the voluntary participants to inform them of the purpose of the study and to obtain informed consent.