Government outsourcing to private contractors increases costs

Despite a widespread belief that contracting out services to the private sector saves the federal government money, a new study suggests just the opposite — that the government actually pays more when it farms out work.Do you know anyone who believed that outside of some Republican robot?

The study found that in 33 of 35 occupations, the government actually paid billions of dollars more to hire contractors than it would have cost government employees to perform comparable services. On average, the study found that contractors charged the federal government more than twice the amount it pays federal workers.

The study was conducted by the Project on Government Oversight, a nonprofit Washington group. The federal government spends about $320 billion a year on contracts for services. The POGO study looked at a subset of those contracts.

The study comes after months of criticism, mostly by Republicans, about what they see as the high cost of salaries and benefits for federal workers. The House earlier this year passed a Republican budget plan that would freeze pay grade levels and eliminate raises for five years, and cut the government’s work force by 10 percent. Last year, President Obama announced a two-year salary freeze for federal workers, which Republicans said did not go far enough…

But POGO said its study did not just compare the salaries of the two sectors; instead it focused on what the government actually pays contractors to perform services versus how much it would cost to have that work done by in-house staff members.

“That’s a big difference,” said Scott Amey, POGO’s general counsel. “We compared the full compensation paid to federal government and private sector employees to the billable rates in federal service contracts. Across the board you see that it cost government more to pay for contractors…”

Paul C. Light, a professor at New York University who has studied the contractor work force, said he found the POGO study interesting. “Contracting out to the private sector is often oversold as the answer to better services, better performance and better cost,” Mr. Light said. “But doing this type of analysis shows that it’s not the case.”

Studies contracted with ideological hacks on Republican payrolls are like fundamentalist research on evolution. They start with a premise and then look for information which can be tailored to prove their point. Kind of like weapons of mass destruction in Iraq. And the “willing” who accept those studies are no less culpable than the craftsmen of sophistry producing them.

Republicans hope to end civil service and privatize federal work with firms owned by their contributors. Gee – I wonder how well Halliburton would run the Food and Drug Administration?

8 thoughts on “Government outsourcing to private contractors increases costs

  1. moss says:

    How can people delude themselves into thinking privatizing would save money?

    SSA runs at an operating cost <3%. Every corporation I worked for thinks they're golden if they approach 15%.

    Look at scumbags like Halliburton in Iraq and their contractors are being paid double what we pay troops on the line, mechanics, cooks, quartermaster corps, the whole 9 yards.

  2. cnredd (@cnredd) says:

    It doesn’t get to the heart of the issue…

    When the government contracts out their work to objective and reasonable services, the costs will be lower than federal employees…

    …but when the work is contracted out to the administration’s contributors, bundlers, and Chicago cronies, they’ll accept whatever number the contractors give them, because, after all, it the people’s money, not theirs…So why should they give a rat’s ass?…And these people NEED to be rewarded for their political donations…

    Political Wrinkles

    • moss says:

      Sorry, but your analysis may suit ideology but not objective fact.

      Take the best example, SSA. The management cost for the Feds to run SSA is less than 3%. The average cost among American insurance companies running comparable programs is 15-40%.

      No comparison.

  3. cnredd (@cnredd) says:

    That’s because the Fed. regulations require that these private contractors pay the grossly bloated union scale that Davis/Bacon demands. It also carries with a tremendous amount of additional non-value cost to comply with requirements that the same contract from a private company would have. It’s not the fault of private enterprise that the costs higher, it’s the fault of the gov’t and the useless and expensive regulations that have to be complied with.

    Political Wrinkles

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