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.
I did a quick read of the NYT article, and it did not indicate if the study explicitly included benefits such as health care and RETIREMENT funding in their calculations.
Private contractors HAVE to factor those in their bids, whereas public employees might easily have those in different funding piles in terms of “payment” for work done (such as union contracts, government health care programs that cover any government employee, etc). If that wasn’t factored in, that could easily account for the 2x difference. What the employee gets paid is usually half the cost to the employer – the rest goes into health care, retirement, the costs of owning and maintaining facilities and equipment, utilities, etc. I strongly suspect these costs are not included in calculating the per person cost of government workers, since so many government workers work in buildings that have multiple agencies per building.
The article noted that the private sector data used in the comparison came from a small subset
of actual government contracting based on only a single agency – the Government Services Agency – which is known to be a haven for low priority political appointments and contractual payoffs to supporters for both parties.
We used to chase municipal jobs. The sales cycle is horrendously long (approximately one year).
You have to submit a proposal and then the City Council has to debate it for months on end, adding and subtracting features which means redoing the proposal numerous times. Then you have to worry about the regulations and laws that have to be followed and the reading of four inches thick specifications that spells out the color of the keyboard and mouse. Verify that color actually exists in 21st century and submit an exception if it doesn’t (which means another council meeting).
And you don’t get paid for doing these. If you don’t get the job, you are out of a couple of man-month’s of work.
So, everything had to be doubled in price to compensate should you get the job.
And, woo hoo, at the end of the project, there would be a whopping 3.5% profit. For those that aren’t good at math — $3,500 on a $100,000 job.
We don’t chase them anymore. It isn’t worth it.
Could the cities have done the work themselves? Sure. And cheaper if they knew what they were doing. But they don’t keep a staff of people on the payroll to put these projects together when they need them. They would just be overhead.
That’s why you hire contractors. They have the experience and technical know-how to put a system together. And, theoretically, they leave when the job is done.
The USS Lincoln produced more paperwork than would actually fit inside the hull would it have been completely empty.
Do the work is easy. Doing the paperwork is crazy.
All this proves is that POGO is a shill to some special interest group.
But, hey.
I work in municipal (local) government. I can tell you that it all costs the same in the end.
If you use contractors, they always under bid which makes them look good, then have to get extra money to actually finish.
The big difference is who gets the money. With union workers, a little goes to the union and it mostly goes to paying people an overly good wage. If done right, on a small enough scale, the work is second to none and done safely.
When it is contractors, the workers get paid less than they should, the work tends to meet the bare minimum in appearance only and more risks are taken. A big portion of the money goes to the contractor…who turn around and slips some of it into the campaigns of the municipal government.
All in all, if you can have small enough cities with small enough unions you get the best work.
Too often the ‘contract it out’ mentality leads to just as bad and shoddy work as giant union work.
Contractors will say it’s not true. POGO will say it is true. Where’s the truth? Folks making money off the government? Or the non-profit group who wants to cut government waste? What’s the motivation of either?
#1 says (implies) he works harder and more efficiently than anyone else (especially a government employee). If that’s truth, we should have hired him to kill Bin Laden.
To be fair, not everything in one’s life is the way of all things. Some things work better in Government; others, Private. It takes a unbiased eye to see the difference.
Here’s an idea …We gotta have both! Some jobs are best done in the private sector, some belong in government.
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Dallas2012
Would be interesting to see the actual study. Oh, well. As an occasional personal services contractor to the US Gov and others I just want to remind you of another way contractors save money:
When the job’s done, so is the salary.
Fed employees tend to have jobs forever.
All this hatred and disrespect towards our government paid military men and women. Sure Black Water can do some jobs but not all.
Why do Teabaggers hate America and our military?
Having worked for various government entities, I’ll tell you that this study is full of shit. Government employees are not more efficient at doing their jobs.
The BS is: that everyone has to work long hours to make BS wages in America.
The 40 hour week has become the BS standard.
Everything should be piecemeal. You produce more, you end work early or you earn extra (if more is requested, no “supply side BS” please). End work early, and go out and spend some of those wages.
People frack around all day looking impressive, but accomplish squat.
Some jobs must be hourly, retail for example.
But, if you know you have to spend xx hours at work, are you motivated to work hard and finish early?
The frack you are!
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 $25/hr to our cost and does nothing for the money. This arrangement is at the request of our government contacts.
Of course !!! The PROFITEERS ***MUST*** ENGORGE THEMSELVES WITH OBSCENE PROFITS AT THE PUBLIC TROUGH !!! Just like Prick Cheney and Haliburton !!!
#1 said – I wonder if the assumption was made in the study that government employees could perform the same amount of work in the same amount of time as the private contractors.
Really not the point. I work for contractors, and the amount of work in the amount of time is irrelevant. Contractors bid by the job, not by the man hour. Which means they try and rush the jobs as quickly and cheaply as possible. In 1-2 years most of the sub-standard work performed by many contractors has degraded or fallen apart and needs to be redone. Government workers on the other hand would actually have to answer for this shoddy workmanship, unlike contractors.
Sure contractors are a lot cheaper until you have to re-do the job a second or maybe third time.
I know what….contract out the government.
Hmmmm…..
All the proceeds go to the partners, who then hire barely holding green card recipients, who you can never understand a word they are saying. Partners live in luxury, employees get squat and everything useful is “additional services”. And you get 15 year old IE 6 compatible crap only. Cheaper to do in house and you’re not concentrating wealth on the partners.
Let’s see…
I have a nephew who flies F-16s in Afghanistan. Another nephew flies passenger jets for a Europe-based budget airline, mostly charter flights: sports teams, entertainment acts, some military transport. Which do you suppose gets paid more?
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Apparently a large subset has fallen for the Heinleinian ideal of the Competent Man, the man who doesn’t need any #($*@ 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.
No, that happens with Democratic legislators and unions. You can even see it by looking at the interest rates that different state bonds yield. The more unionized or Democratic a state is, the higher the interest rate that state has to pay, as the bond market is worried they’ll go bankrupt.
Disclaimer: I am a government engineer. I use private engineers and myself to do work. I do the stuff that would have way too much overhead on the job to make a contractor make sense. I then act as project manager for large, contract jobs to make sure we get what we really want.
My agency is cash poor and have a sunset clause in our dedicated tax that must be reauthorized by the people every 10 years.
My agency is very concious of how we appear to the public because if we piss them off we won’t keep our jobs. I think it’s a great way to run a program and most government programs should be run this way. It promotes responsiveness to the public and keeps you lean (almost too lean for us to complete our mission).