Private Contractors Cost More than Government Employees

Thursday, September 15, 2011
The justification behind contracting out government work to private employees is that it’s supposed to be cheaper to let the private sector do it. Well, that may not be true.
According to a study by the watchdog group the Project on Government Oversight (POGO), the outsourcing of federal services actually costs more than letting government employees do the same work.
After studying 35 occupational activities, POGO concluded that agencies were paying more for outsourced work in all but two categories. Even after factoring in the costs of benefits, contracting out wasn’t realizing savings for the government.
The primary problem with the current system, which is costing $300 billion annually, as the report says, is that “the federal government is not doing a good job of obtaining genuine market prices, and therefore the savings often promised in connection with outsourcing services are not being realized.” On average contractors charge the federal government double what they charge private companies for the exact same services.
In some cases, certain types of contracted-out workers were making five times more than public employees (namely claims examiners). Private attorneys have made three times more, and auditors and accountants double that of civil servants.
Although exact numbers are not available, there are now approximately four private contractors working for the U.S. government for every federal employee.
-Noel Brinkerhoff, David Wallechinsky
Contracting Services Fails to Save Agencies Money, Report Says (by Charles S. Clark, Government Executive)
Government Pays More in Contracts, Study Finds (by Ron Nixon, New York Times)


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