Defense Secretary Robert Gates has abandoned plans to replace civilian contractors with full-time federal positions, after admitting the idea has failed to save money so far.

Last year, the DoD announced it would reduce the number of service support contractors by about 33,000 by 2015 and replace them with 39,000 full-time government employees. Gates also outlined a reduction of funding for support contractors by 10 percent a year for the next three years.

Yet based on data available after the first year of cuts, Gates conceded he was not satisfied. “As we were reducing contractors, we weren’t seeing the savings we had hoped from insourcing,” Gates said.

Gates abandonment of the insourcing initiative was made clear when he froze the number of employees inside the Office of Secretary of Defense, military agencies and combatant commands at their fiscal 2010 levels for the next three years.

The Pentagon plans to no longer automatically replace departing contractors with full-time government personnel. Some exceptions, Gates said, could be made for critical areas like acquisition.

The Professional Services Council criticized the initiative in a letter to Gates, saying that the defense departments are insourcing routine commercial activities without demonstrating any verifiable cost savings.

Is the insourcing push over? Maybe not.  Insourcing still a go for the military

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