Contractors who perform services for the Defense Department may be among the losers in the 2010 budget.

Outsourcing is being examined closely, Pentagon comptroller Robert Hale told the House Budget Committee on Wednesday.

Sometimes it costs less to hire Defense Department employees than to contract with outside firms for some types of work, he said. And work that is deemed to be "inherently governmental" should be done by government employees, he said.

"There are functions where contractors are more cost effective," Hale said. But if 10 contract workers replace 10 government employees to perform the same work, the contractors will probably cost more, he said.

Replacing government employees with civilian contract workers began in the 1990s and accelerated during the Bush administration.

Hale also said the new administration hopes to rely more on "firm fixed-price contracts" and reduce the use of cost-plus contracts that are widely used for major weapons programs.

To make that switch, the Defense Department "will have to discipline ourselves" to avoid the frequent requirements changes and capabilities increases that drive costs up, he said.

"We must find ways to reduce cost growth, minimize scheduling delays and improve performance of our weapons acquisition process," Hale said.

The Pentagon's acquisition system has been identified as "high risk" by the Government Accountability Office since 1990, but for two decades little has improved.

Now there is hope that may change, said Michael Sullivan, the GAO's director of acquisition and sourcing management. "There is momentum from the administration, including the secretary of Defense, and key congressional committees to address the issue," he said.

In a report to the Budget Committee, Sullivan recounted grim weapons acquisition statistics: 95 major weapons programs are a total of $295 billion over original cost estimates. On average, weapons are 21 months behind schedule.

Some of the problems are due to technical risk and complexities, but "all too often we have found that cost and schedule problems are rooted in poor planning, execution and oversight," he said.

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