By Carlo Munoz - 07/17/12 09:00 AM EDT
Professional Services Council President Stan Soloway has seen a lot in his 20 years inside and outside the Pentagon.
As deputy undersecretary of Defense for acquisition reform under the Clinton administration, Soloway spearheaded then-Defense Secretary William Cohen’s effort to fundamentally change the way DOD did business.
“It is such a fundamental question for government and the taxpayers — how government interfaces with and works with the private sector,” particularly in the area of private contractors, Soloway said in a recent interview with The Hill.
Looking out over Northern Virginia from the council’s headquarters in Rosslyn, Soloway noted that, while government’s demands on the private sector have become more complicated over time, the relationship between the two forces is as old as the republic itself.
“How you handle this relationship is both fascinating and critical,” he said.
Even in the face of tremendous budget reductions, the private contracting and services industry is expected to do upwards of $500 billion a year in business with the U.S. government, according to Soloway.
Of that, DOD is expected to contract nearly $250 billion in services alone over the next year, he added.
“The necessity is not changing” within the government for those billions of dollars of specialized goods and services, he said.
“This is a permanent fixture of the way government works [and] anybody who is thinking we are going to fundamentally reverse this embedded relationship, it is not going to happen, [at least] in our lifetimes,” Soloway said.
While service contractors remain an inextricable part of the way Washington does business, negative publicity on the exploits of certain private security and defense contracting firms in Iraq and Afghanistan have turned the phrase “private contractor” into dirty words within some circles on Capitol Hill.
The alleged actions of companies like the infamous Blackwater private security firm have turned the government contracting industry into “a punching bag” for lawmakers, he said.
“Some of the actual and perceived incidents in Iraq and Afghanistan have clearly … shaped opinions and attitudes, as has the tremendous growth in contracting, as has a continued frustration” with DOD and other governmental agencies to do the jobs currently being contracted out to the private sector, Soloway said.
He noted that the ratio of contractor-to-soldier on the battlefields of Iraq and Afghanistan has not been much greater than the ratio in past conflicts.
But the scope of work and the visibility of those contractors have led to the perception that private contractors were vastly outnumbering U.S. troops.
Overseas security work by private contractors is “a relatively small portion of the broader professional services sector” when compared to the large number of service contractors throughout the U.S. government, Soloway said.
Further, as U.S.-led development and reconstruction work winds down in both countries, the number of defense contractors overseas will drop as well.
“What you are going to see in Iraq [and Afghanistan] is there will be a continuing contractor presence,” Soloway said. “I do not think you are going to see a dramatic increase.”
While the perception of rogue private security firms running roughshod in Iraq and Afghanistan has largely run its course on Capitol Hill, concerns over the possibility of a small contracting army doing the same within the Pentagon bureaucracy remain.
But, according to Soloway, the rise in private contractors inside the Defense Department can be traced to decisions made during his days inside the Pentagon.
The large-scale defense drawdown initiated under the Clinton White House also resulted in massive cuts to the department’s workforce, particularly in the acquisition directorate where Soloway was in charge.
According to Soloway, lawmakers were champing at the bit to cut DOD overhead and saw that significant savings could be made within the Pentagon workforce.
“Every year, we were fighting … over mandatory cuts to the acquisition workforce,” he said.
But Soloway and his colleagues in DOD at the time never could have guessed that nearly a decade later, the United States would be embroiled in two major wars and with not enough in-house personnel to handle the workload.
But by then it was too late, Soloway said. By that time, government wage scales were “way out of whack” compared to wages being offered in the private sector, and agencies like DOD simply could not compete for talent.
“There is, in fact, a pay gap between the government sector and the commercial world, and it is more pronounced the higher up the chain you go, in terms of level of sophistication,” Soloway said.
The problem has only gotten worse as DOD and the rest of the government look to recruit talent in the highly competitive field of information technology.
“What does it cost to get someone with significant cyber or analytic or [information technology] skills? Let alone someone with a [security] clearance?” he said.
But the problem is just as much a case of the culture inside DOD as it is a case of dollars and cents, Soloway noted.
Since the 1990s, DOD has been “backsliding” into a much more rules-based process that could be hindering the department’s ability to bring in and retain talent.
“One of the goals of some of the acquisition changes we made in the 1990s was an increased professionalism of the workforce and to empower them to really use critical thinking,” Soloway said. “Much of what we see today is taking that empowerment away.
“You have to encourage risk-taking and be able to tolerate the failures,” he said, in order to spark the needed innovation within the Pentagon’s workforce.
“The reward for taking risk [now] is punishable, often even when you are successful,” Soloway said.
Emphasizing his point, Soloway recalled a speech Cohen gave to members of the DOD workforce in the late 1990s after an embarrassing incident at the Pentagon’s logistics agency.
During the speech, Cohen vehemently defended DOD employees after they became involved in a small row regarding overcharges for spare parts that ended up causing a congressional uproar.
“What I want my workforce worried about is pursuing innovation, not worried about making a mistake,” Soloway recalled Cohen telling the audience full of DOD workers in an auditorium inside the Pentagon.
“That was in 1998 … and that was the last time the head of an agency said, ‘Don’t worry about it, we got your back,’ ” he said.