Federal Outsourcing Expected to Grow 8 percent

Driven by the Office of Management and Budget's Lines of Business (LOB) initiatives, federal outsourcing spending is expected to increase more than $5 billion in the next four years, according to Reston, Va.-based research firm Input.

Federal agencies will increasingly look to the private sector for help in meeting OMB standards in human resources management, financial management, grants management, case management, federal health architecture and IT security. "Generally from an IT market standpoint, things slowed down in relation to the whole budget," says Chris Campbell, senior analyst of budgets at Input. "But outsourcing generally remains strong."

While competitive sourcing remains a priority for the administration, only time will tell whether it actually results in more work moving to the private sector though the principles of competition. Once again conflicting legislation appears in this year's appropriations bills that throws roadblocks in front of efforts to pass work to the private sector. Still, Input expects competitive sourcing to contribute to an 8 percent annual growth rate of the federal outsourcing market, an increase from $12.2 billion in 2005 to $17.6 billion in 2010.

Because Input's analysis focused on budget requests, no guarantees exist that procurements will actually materialize; but the Department of Homeland Security and the Department of Defense continue to request the most funds. The Navy, with its joint Intranet initiative with the Marine Corps to improve internal processes, again holds the top spot in terms of outsourcing dollars budgeted by an individual agency, though Campbell expects that to change next year.

"That project's moving to the operational and maintenance category and away from the development stage," Campbell says. "I expect that will cause a drop in required dollars come next year, with [the Office of Systems Development] moving up in terms of project spending."