Service Support Contractors One of the FY 2012 Budget Efficiencies American Society of Military Comptrollers October, 2011

Department of Defense Topline FY 2001 – FY 2016 Real Growth (Base Budget) FY11-12 3.0% FY11-16(Avg/yr) 0.5% (Current Dollars in Billions) 33 688 667 667 691 671 648 661 601 621 636 535 468 479 437 345 316 Numbers may not add due to rounding Base Budget OCO Funding Non-War Supplemental Base Budget Position Notes: ● FY 2012 – FY 2016 reflects levels included in the President’s FY 2012 Budget Request; FY 2009 Non-War Supplemental was appropriated through the American Recovery and Reinvestment Act of 2009 ● FY 2011 reflects the addition of the annualized 2011 Continuing Resolution and an adjustment to the Presidents FY2012 Budget Request Source: Department of Defense Appropriation Acts FY 2001 – FY 2010, FY2011 Continuing Resolution, FY 2011-FY2012 President’s Budget documents 2

Achieving $78 Billion for Topline Reductions in FY 2012 – FY 2016 Civilian workforce freeze (limited exceptions) $13 billion Two-year federal civilian pay freeze $12 billion Healthcare reform $8 billion Defense Agency/OSD Staff Baseline Review $11 billion Disestablished Joint Forces Command/BTA $2.3 billion Reduce staff augmentee contracts $6 billion Restructure the Joint Strike Fighter program $4 billion Reduce the size of ground forces in FY 2015/FY 2016 $6 billion Decrease reports, studies, boards and commissions $1 billion Reduce senior leadership positions $0.1 billion Lower economic assumptions $4 billion Many smaller efforts across the enterprise $11 billion

Context for the Efficiency Congressional interest in workforce management Applicable laws Related initiatives Inventory of Contracts for Services Budget Justification Requirement In-sourcing Civilian Workforce Freeze Service Support Contractor Reduction Reporting

Congressional Interest Laws Section 2330a of Title 10 Section 235 of Title 10 Section 8108 of the FY 2011 Appropriation Act Requirements Service Contract Inventory The FY 2011 NDAA added greater responsibility for USD(P&R) and USD(C) Specification of Contract Services in Budget Justification Materials Funding FTE Requires Navy and Air Force to leverage Army’s Reporting System Requires a D-W Plan These laws require the collaboration across the Contracting, Manpower and Budget Communities.

$248B CONTRACTED SERVICES $150B MILPERS $72B CIVPERS $B FY10 Reduction for In-sourcing $900M Total Increase from FY09 = $6B $248B CONTRACTED SERVICES Per Capita Costs will not go down. We must reduce the inventory by challenging military essentiality of the growing support tail – covert to CIV or eliminate. $150B MILPERS Default target for “savings” – but pressure here often creates unintended fiscal “consequences” in other areas $72B CIVPERS $B National Defense Budget Estimates for FY2011 (“Current Dollars”) – BASE and OCO $$ OUSD(P&R) – Requirements and Program and Budget Coordination Directorate

Inventory of Contracts for Services The first inventory was submitted for FY 2007 The FY 2009 inventory of contracts for services was submitted to Congress on July 20, 2010 Submitted for Defense Components with contracting authority (20 out of 65 with manpower requirements) Reported 767 thousand FTEs and $155 billion obligated dollars covering all appropriations The 2010 inventory preparation underway AT&L following the process they used for the 2009 inventory Within 90 days of submitting the inventory, review of contracts in the inventory for appropriateness Future concern for collecting and reviewing contractor direct labor hours

Budget Justification Requirement SEC 803 of the FY 2010 NDAA modified Title 10 SEC 235 to require the Department to submit with the annual budget justification The amount of funding requested for the procurement of contract services The associated estimate of contractor full-time equivalents Changes made for the FY 2012 President’s Budget Expanded OP 32 requirement to all accounts Aligned OP 32 lines to object class and sub object class Required reporting of contractor FTEs in the O&M OP 5 A summary exhibit of this data was included in the O&M overview book

Contract Services Reported O&M ($ Billions) FY 2011 FY 2012 Change 25.1 Advisory and Assistance 5.8 5.5 -0.3 25.2 Other Services 16.4 12.5 -3.9 25.4 Facilities 11.2 12.0 0.8 25.5 Research and Development 0.5 0.7 0.2 25.6 Medical Care 15.5 16.2 25.7 Equipment Maintenance 19.8 23.6 3.8 25.8 Subsistance of Persons 0.1 0.0 Total 69.3 70.5 1.2 Full Time Equivalents (thousands) 291 294 3 Numbers may not add due to rounding

Status of In-sourcing Original April 2009 initiative established goal of in-sourcing 33,254 contractor positions by FY 2014 17,000 new positions were created in FY 2010, 50% of these were considered inherently governmental or otherwise exempt The Civilian workforce freeze will slow in-sourcing Components must ensure compliance with sourcing inherently governmental work Work must be prioritized within established cap by shifting manpower from lower priorities Prohibition on converting work currently performed by civilians to private sector without first conducting a public-private competition Moratorium on conducting public-private competitions

Civilian Workforce Freeze The original guidance for a civilian workforce freeze was to the OSD staff and Defense Agencies The guidance was expanded to the Military Services during the FY 2012 budget review Some exceptions were given Acquisition workforce Joint Basing Intel increases Navy depot maintenance Overall direction to reduce civilian and contractor staffing This does not mean work can be out-sourced

Service Support Contractor Reduction Original perception was the contractor workforce should have declined with the in-sourcing initiative but appeared to have grown The Secretary directed a reduction in service support contractors of 10 percent per year over the next 3 years from the reported FY 2010 level Defined service support contractors as contract personnel who provide support as staff augmentation This definition did not align to a specific object class so a survey was completed to gather the universe of these contracts The reduction was applied to a base of 26 thousand FTEs and $4.3 billion Annual savings of over $400 million and $6 billion over the FYDP

Service Support Contractor Reduction All Appropriations ($ Millions) FY 2011 FY 2012 Army 101 198 Navy 57 111 Air Force 63 127 Defense Wide 197 370 Total 418 806 Numbers may not add due to rounding

Service Support Contractor Reporting OUSD(C) and CAPE memo signed May 6 The original survey will be updated to identify what contracts have been eliminated, reduced or added The revised survey will be used to report the status of this efficiency initiative to the OUSD(C) and DCMO Future initiatives will examine aligning service support contractors to specific object classes with the intent of removing manual data calls

Contract Services Future Direction The pressure to account for how the Department prioritizes and resources functions and activities will not diminish The goal is to have the right balance of military, civilian and contractor workforce There will be continuing interest in what services the Department is contracting for Continue to improve the inventory of service contracts Continue to improve the budget justification material to clearly identify the funding and FTEs for contractor services Ensure the reporting mechanisms for the inventory and budget are integrated Improvements will necessitate coordination across the manpower, contracting and budget communities

President’s Speech on Deficit Reduction (April 13, 2011) Secretary Gates has shown over the last 2 years that there is substantial waste and duplication in our security budget that we can and should eliminate – proposing savings of $400 billion in current and future defense spending. The framework sets a goal of holding the growth in base security spending below inflation while ensuring our capacity to meet our national security responsibilities, which would save $400 billion by 2023 The President will make decisions on specific cuts after working with Secretary Gates and the Joint Chiefs on the Comprehensive Review