This can’t be. Conservatives say reducing government will save money. There must be a mistake.
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.
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.
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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.
Around 2008, it was revealed that the IRS was paying contract collectors more than what the contract collectors were bringing in.
I echo what was said by #1. My experience is that talent-wise in software development at least, government workers do not compare favorably to the private sector. Thus, you cannot take the time it took a contractor to complete a project but substitute the Federal worker’s rate of pay to come up with cost if done in house. Contract workers typically have far more knowledge about current technologies than government workers who must requisition for training. Further, this study almost assuredly discounts all the other work that the the employees have on their plate in addition to the project in question. Lastly, there is the issue of completion incentive. As a worker paid on salary, there is little incentive to finish a project in a timely fashion or to put in additional hours to complete a project which is different for a contractor.
#31
From the study: “the contractor billing rates published by GSA include not only salaries but also other costs including benefits contractors provide their employees”
In the methodology section.
http://www.pogo.org/pogo-files/reports/contract-oversight/bad-business/co-gp-20110913.html
#42
The federal government doesn’t do much software development work itself. That is also a business that shows an enormous variation in quality among private enterprises. Hard to generalize from there.
To get even more from that picture situation, go back to that spot and toss the branch, substituting a kitten.
Supposedly the private contractors bid for the work. And the lowest priced one, gets the work. But apparently, the fix is in, and they won’t under bid each other by very much. And then tack on unforeseen expenses. The real problem here is that government lets them get away with charging more. If the military, if a service man came up with an idea, he might get a $50 reward. But if a civilian contractor, copied and submitted the very same idea. They’d get a $1000 for it. That’s the story I was told, back in the mid 1970s. And I believe it’s just indicative of the collusion being most private contractors and their government hosts. It’s either that, or the government workers who are being paid half of what their skills are worth, in the private sector. That’s certainly true of most military personnel. The grunts, not the general staff.
#10 is saying the US Government owes him .05 in reimbursement. I say become a contractor and charge $20.
#10 says cut the deadwood and dispose of it. I say cut the deadwood and burn it in your fireplace. Then charge $50 for tree pruning and disposal services.
The rules remain shady, when it comes to links between government and private contractors, and a lot of costs are just not getting much publicity when they should. However, the qualifications needed in many fields of expertise can no longer be found in the public sector – yet we would definitely need more transparency as far as how the money is spent.
What’s notable in this thread is that an independent study conducted research and provided an ‘undesirable outcome’.
Let the Teapublican sheep revolt!
My last client had a division taking care of “outsourcing and offshoring” of work (and therefore jobs and associated costs.)
That added to the time and expense but it was still more profitable for my client to do that (creating and maintaining a clear and unambiguous set of specs, getting the work done, verifying the work completed, keeping track of schedules and commitments, administering all of the details, communicating with the vendors) than to do the work themselves BECAUSE THEY REALIZED THAT THEY WOULD HAVE TO DO ALL OF THAT ADMINISTRATIVE SCUTT WORK ANYWAY.
I’m just saying…
But, and this is a big fat but, the true cost to the organization was in responsiveness of execution.
Everything new took a YEAR of setup.
One other factor is that when our company does federal work, we subcontract through a minority-owned agency that adds $25/hr to our cost and does nothing for the money. This arrangement is at the request of our government contacts.
You guys aren’t looking at this from the right perspective. Private contractors working for the government have a set of goals and incentives that are not in line with that of the government organization they’re contracting to. That is not the case for G-scale employees.
When your livelihood depends on you generating additional dollars out of your client, you cost more. It’s just simple.
S.
Of course !!! The PROFITEERS ***MUST*** ENGORGE THEMSELVES WITH OBSCENE PROFITS AT THE PUBLIC TROUGH !!! Just like Prick Cheney and Haliburton !!!
#1 said – I wonder if the assumption was made in the study that government employees could perform the same amount of work in the same amount of time as the private contractors.
Really not the point. I work for contractors, and the amount of work in the amount of time is irrelevant. Contractors bid by the job, not by the man hour. Which means they try and rush the jobs as quickly and cheaply as possible. In 1-2 years most of the sub-standard work performed by many contractors has degraded or fallen apart and needs to be redone. Government workers on the other hand would actually have to answer for this shoddy workmanship, unlike contractors.
Sure contractors are a lot cheaper until you have to re-do the job a second or maybe third time.
There’s plenty of contractors out there working by the hour. That’s a bigger part of the issue in my opinion. When the hours run out the contractor is at risk — his parent company (particularly in the DC area) is likely running very lean and won’t carry the employee unless he’s billable. There’s a very real incentive for the contract worker on-site to generate new business.
I have more work than I know what to do with (I’ve worked Fed, State, and County jobs in the DC area for years) so I don’t have the same level of incentive to churn more hours. But there’s plenty that do, making it a point to not finish projects in the hours allotted so that the agency employing them is incentivized to extend projects. Projects come in 75% complete when the hours run out, they propose “upgrades and add-ons” for additional funding, and they protect their position in their companies for an additional year. This isn’t an evil plot, is just basic game theory playing out. Contractors have incentives to minimize risk to their well-being just like anyone else.
In-house government employees make it work with what they have. Since they pretty much all are covering two PINs worth of work, there’s no significant fear of being fired and they find ways to pull together what they need with a minimum of fluff attached to it. This lets them get to the other four or five tasks on their plate. Like the contractor they’re responding to the incentives their position is placing upon them — get the work done and move on to the next thing.
It worst at the Federal level, much better at the State level, and even better at the County level. I think this is largely due to the size of the players in the game because of the size of the funding at each. A county job simply doesn’t have the additional money. If you don’t get the job done on-budget it’s likely you’ll get thrown out anyway because there’s just no money to keep you there. The Fed level just seems to fall for the big players’ stories (Lockheed, Grant-Thornton, etc.) and continues to re-fund projects that grow in scope and cost as time continues.
Throw security clearance into the picture and things get worse. Loser contractors keep their jobs because it’s more difficult to replace them. Those guys are complete leeches on the system. I work damn hard to stay off of secure projects because I find the glacial pace very frustrating.
In my opinion the Fed would do well to work contractors back out of the picture and start taking control of their own destinies. As it stands they lost the cultural knowledge necessary to manage their jobs, making the problem even worse.
S.
I know what….contract out the government.
Hmmmm…..
All the proceeds go to the partners, who then hire barely holding green card recipients, who you can never understand a word they are saying. Partners live in luxury, employees get squat and everything useful is “additional services”. And you get 15 year old IE 6 compatible crap only. Cheaper to do in house and you’re not concentrating wealth on the partners.
Let’s see…
I have a nephew who flies F-16s in Afghanistan. Another nephew flies passenger jets for a Europe-based budget airline, mostly charter flights: sports teams, entertainment acts, some military transport. Which do you suppose gets paid more?
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Apparently a large subset has fallen for the Heinleinian ideal of the Competent Man, the man who doesn’t need any #($*@ gummint tellin’ him what to do — the man who can be his own Army, Navy, Air Force, Marine Corps, Coast Guard, mail carrier, Diplomatic Corps, central bank, food and drug inspector, road and bridge builder, teacher and policeman. The problem is, this only works with a population density of around 1-5 persons per square mile.
#5 and #50 hit the nail on the head. Part of getting a government contract is satisfying all the red tape. Which in turn jacks up the cost of doing business. Working a number of years for the government, I have always found a contractor or supplier that can give me a better rate than our contracted providers. However, I can hardly ever use them because they do not have the time or resources to comply with the red tape. Our contract price for a bottle of Windex $4.50 (plus freight), price at our local Wal-Mart $2.47. The other stories of waste could fill a book.
State of Missouri contracted out underground storage tank inspections some years ago. A contractor could do it cheaper per inspection. More inspections done per dollar. The state saved money. One little problem. Contractors don’t do follow up on inspections, nor do they have the legal authority to refer to legal action to obtain compliance. Lots of inspections lots of dollars out the door.
Guess what happened to compliance with the clean water law? Guess what happened to the number of concerns received by the state which had to be investigated by law? Guess how many of those inspected facilities were found to be in non-compliance? Guess what happened to the number of facilities referred for legal action?
Yeah you guessed it.
Contractors have a place, but so do government workers.
The conservatives 25 year obsession with “privatization” was nothing more than looting our government tax dollars.