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

2. 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

3. 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 $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

4. 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

5. Congressional Interest
Laws
Section 2330a of Title 10
Section 235 of Title 10
Section 8108 of the FY 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.

6. $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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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