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.
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.

  1. GregAllen says:


    Union workers do a job and get paid.

    It’s the “contractors” who drove up the prices of government services.

    The conservative theory of “faster, cheaper, better” through privatization was simply wrong.

    As for you theory that unions are driving up the prices of state bonds, I’d like to see your link for that. Seems far fetched.

  2. President Amabo says:

    #62 – You mentioned the key. No permanent funding for anything. All expenditures must be reauthorized periodically. That could take care of a LOT.

  3. RS says:

    One need only to drive around the mansions of the Washington DC suburbs to understand that servicing the government is high priced prostitution indeed.

    After all, these contractors will be the future homes for everyone in this and every other administration.

  4. jollycynic says:

    Okay, so whats the point of the comparison? Total compensation for private contractors (including material costs, not just labor, because they aren’t going to eat those costs out of the goodness of their hearts) is less than the cost of government labor alone (not including the separately budgeted material costs). Yeah, this is a classic example of how statistics can prove anything. You just have to word things in such a way that you obfuscate your omissions.

  5. Thomas says:

    Contractors bid by the job, not by the man hour

    It would be more accurate to say that some jobs are bit by the job and not the hour. Further, that very fact adds to the cost. As a contractor, if I’m told to bid the entire project, I’m going to incorporate into my cost the effort involved in preparing the proposal and building the specification. In the long run, fixed price bids typically cost more depending on the service being rendered because the contractor is going to make damn sure they don’t lose money. Often that process involves underbidding a project with a narrow specification and making up the money on the change orders. All that proves is that this is simply another way that a large organization wastes money.

    Government workers on the other hand would actually have to answer for this shoddy workmanship, unlike contractors.

    In my experience, the exact opposite is true. Government workers have little incentive to produce quality work or to produce it in a reasonable time frame whereas contractors have all the incentive in the world because their referrals and subsequent business depend on it. I think some types of work might be better done “in-house” by government workers just to avoid the proposal and red-tape costs that are incurred by contractors. However, in the computer world, my experience is that this isn’t the case. Government workers are probably best served by projects in which the technology required does not change rapidly which is why they are so poor at computer related projects.

  6. Sea Lawyer says:

    I have never seen it claimed that the short term costs are lower for contractors than for government employees. The rationale for contractors is most frequently given that in the long run, the cost of government employees is greater because of pension and other retirement benfits. So the trade-off is: spend more now or spend more later?


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