The U.S. government’s push to convert tens of thousands of defense contractor jobs into civil service jobs has begun, and is already causing consternation among contractors, who face the exodus of top talent and the dwindling of an already shallow pool of qualified candidates.

The move to bring jobs currently held by contractors onto the government payroll began several years ago, part of the administration’s attempt to cut costs amid an increasing federal deficit.

Which jobs are likely to be impacted? The government’s plans are to bring in-house, those jobs that it believes are “inherently governmental” in nature. These new, in-sourced positions include mostly administrative functions such as financial cost estimating, purchasing, contract administration, auditing and policy-making. However, the government is also seeking to increase its expertise in engineering and science, as well as intelligence, by hiring linguists and cyber security professionals in large numbers.

The Army is leading the charge in inscourcing. Unfortunately, the pool of security-cleared workers with the appropriate skills is already small. Latest estimates show there are almost five million security-cleared individuals overall, some are contractors, some government employees including active duty military. But approximately half of those, at most, are actually seeking or open to new jobs, regardless of the employer. Despite the recession and record unemployment, the number of new security-cleared aerospace and defense positions has remained consistent over the last two years, as measured by job postings on The government’s push to insource creates a struggle in the labor market to attract top talent.

Although the federal push to move jobs from contractors to in-house staff is still fairly new, some contractors have admitted that they are already concerned about losing skilled workers to the government’s payroll. This situation is compounded by the fact that defense contractors are already competing with each other for the best security-cleared talent, particularly cybersecurity. Now, they must compete with their best customer as well. For contractors, there’s no easy fix. Although many jobless workers would jump at the chance of a new job prospect, defense contractors can’t just hire out of the unemployment line. Most positions require security clearance and U.S. citizenship. Although the time to obtain a clearance for an uncleared individual has been reduced, most contractors are unable to wait months (and for problem cases, years) for a potential new employee to gain final clearance.

The government’s bigger presence as an employer is likely to complicate contractors’ hiring plans in more subtle ways as well. In the past, security-cleared individuals have moved easily from one contractor to another, creating a fluid marketplace for talent. In fact, almost 20% of cleared workers changing employers got a pay raise in the process. So even if security-cleared talent was in short supply, at least candidates could be enticed away by another company with the promise of higher earnings. Unlike the contracting world, most government employees tend to stay put when they get settled into a job. Once defense contractors lose an cleared worker to government, that employee may be out of the candidate pool for a long time, if not permanently.

For security-cleared individuals ready for a change, the insourcing initiative increases the possibility of working directly for the government. While survey data indicates that private sector jobs often pay up to 15% more than public sector ones, salary is only one consideration in evaluating the best career fit.

Traditionally, government jobs may pay less, but enjoy strong benefits and the security and structured career ladder that the competitive contracting world can’t entirely offer. On the flip side, private industry tends to not only pay more, but usually has access to the most current technology and generally promotes according to ability rather than tenure.

To be sure, the scope of this insourcing program may change over time, and will vary by agency. Not surprisingly, the government is already feeling pressure from members of congress and lobbyists to keep many of the jobs targeted for insourcing in contractors’ hands, who have a sizable economic presence in many states.

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Evan H. Lesser is the Co-Founder and Managing Director of Before founding ClearanceJobs, Mr. Lesser managed technical projects with CACI for the U.S. Navy's Science and Technology directorate at the Pentagon, and for the Joint Technology Panel on Electronic Warfare. Previously, he worked for Boeing on its Reserve Component Automation System program for the U.S. Army in metro Washington, DC. Mr. Lesser has a degree in Philosophy from the University of Georgia in Athens, and lives and works in the Atlanta metropolitan area.