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Ear to the Ground

Billions of Taxpayer Dollars Wasted on Private Contractors

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Posted on Sep 13, 2011
Flickr / trekkyandy

Contracted accountants billed the government $299,374 on average for a year’s work, while federal accountants were paid $124,851.

A study conducted by the Project for Government Oversight (POGO) found that on average the U.S. government pays private contractors more than twice what it pays federal workers for a number of public services. The disparity amounts to billions of dollars in overpayment each year.

“Our findings were shocking,” researchers wrote. “POGO estimates the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services.” In one instance, contractor billing rates were nearly five times the compensation paid to federal employees doing comparable work. Additionally, the government has no program for determining how much money it saves or wastes by either using its own employees or outsourcing.

The findings seem to refute an argument dear to political conservatives: that commissioning the private sector to perform essential public work saves taxpayer money.

Read the whole analysis here. —ARK

The New York Times:

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 comes after months of criticism, mostly by Republicans, about what they see as the high cost of salaries and benefits for federal workers.

… For human resources management, the federal government paid contractors an annual rate of $228,488, more than twice the $111,711 to have the same services done in-house.

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By Contractor, September 15, 2011 at 12:49 pm Link to this comment
(Unregistered commenter)

As with everything, the more planning that goes into a project or service, the better the end result. With government contracting, the world is changing at a pace that our cold war government can’t keep pace with, so they contract out for their critical requirements and to increase their capacity. And, since there aren’t enough government program managers or contracting staff to plan, write good specs, and oversee the work, more regulations get added to try to force contractors to be ethical. The more regulations, the more expense to the contractor for compliance activities, and those costs get passed right back to the government. So either you slow the world down a bit, or you get used to higher costs - either for an appropriate number of government staffers to oversee the work, or for over-regulated businesses to [expensively] do the work.

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By a govvie, September 14, 2011 at 7:28 pm Link to this comment
(Unregistered commenter)

This is a CONSTANT debate in federal circles, but I can assure you that these numbers are NOT the full story.  Four points.

1) The 125k number is what you average-pay while the person is working, but not
including locality pay or retirement.  Average amortizing is tough, but over time it
can get expensive.

2) You can’t hire against “permanent” government billets on non-base funded programs
by law.  (i.e. you don’t have a budget line for it)  This makes it REAL hard to hire
in some cases, especially for the military. (half the discretionary budget)

3) You hire government staff to DO things, (capabilities) you hire contractors to do
MORE of the things that the govvies are doing. (capacity)  It’s damned near-
impossible to fire govvies, so when money gets cut, you can save money by dropping
capacity without losing capabilities. (which could be very irresponsible)

4) Specialized skills.  Somebody charging $150/hr (300k/yr) is in a senior labor
category.  You can get contractor bodies for 60k-150k/yr if they are junior/mid. 
Seniors are SUPPOSED TO have specialized skills that the government can’t just go out
and decide to hire.  Just like you can’t “print more food” you can’t “decide to hire”
somebody that REALLY knows how to do something like make a twirly widget that goes in
a nuclear reactor or whatever.  That said there are plenty of people making senior
money simply because they are old and good at negotiating.

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PatrickHenry's avatar

By PatrickHenry, September 14, 2011 at 5:26 pm Link to this comment

The largest hosing of the American taxpayer comes from overseas contracts.

In the US there is too much competition on bid work, it is the secret no bid work which results in the contractor shakedown.

Sometimes members of congress can steer contracts to their favored constituents.

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By Mandy Evans, September 14, 2011 at 5:16 pm Link to this comment

My boss used to be assistant plant manager for a company that made fabricated metal parts. He was telling me that when they bid a government project, it was routine to multiply the price of a part by thirty.

The reason they were still winning contracts were:
a) Other companies were inflating prices even more
b) Contrary to what the small-government advocates will tell you, the government doesn’t have the man power to actually look at a bid and see that they are being charged $90-150 for a part you can buy at any hardware store for $5.

If they did, they would throw all the bids out and start over until they got an honest bid

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By SoTexGuy, September 14, 2011 at 4:44 pm Link to this comment

The only plan that is ‘dear’ to most every politician either Republican or Demoract..
is their own re-election or that post-term they can land a job in that part of the
private sector that feeds from the tax spigot..

The so-called ‘privatization’ of public sector jobs and projects and assets is the
biggest robbery of public worth and revenue of all time. That this private
enterprise cult also achieves plans and goals of the worker-hating and union-
busting Right is just a bonus.

Adios!

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By gerard, September 14, 2011 at 3:26 pm Link to this comment

How many babies are starving just to make this possible?  Just askin’.

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By RGO, September 14, 2011 at 1:11 pm Link to this comment

Why does this happen? Contrators make huge campaign contributions, federal employees do not.  Simple enough to undestand.

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By Paranoia_i_think_not, September 14, 2011 at 12:06 pm Link to this comment

It’s a conspiracy. its a tool that the government is
using to manipulate the distribution of wealth in the
country. Why would the government shell out millions
more if they could hire government workers decreasing
the unemployment rate and saving millions? BECAUSE if
they are able to keep money out of the hands of the
working class, then we will remain dependent on them.
we will need to eat their cheap food, and beg for
their handouts.

These contractors have friends in Washington and in
the lower levels of government. they are also helping
officials embezzle tax money. a contracted agency is
hired to do a job at 5 times the rate that government
hired workers are getting paid, this agency is owned
by another corporation that Senator _________ has
retired from to become a senator. in the senator’s
contract, it is agreed that his retirement increases
when the profit margin increases. So the happy
senator gets to sit his comfortable self behind a
government desk.

The only reason this is is able to happen is because
the senator was on a committee that contracted
another senator’s agency.

But i could just be paranoid

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By MD, September 14, 2011 at 11:38 am Link to this comment
(Unregistered commenter)

Really?  No way?  Gee I wonder if any of these people contribute to the campaigns
of the people who steer work their way?  No? It could not be?  I mean that is like
saying our government is corrupt!  There is no way our government is corrupt!

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Hulk2008's avatar

By Hulk2008, September 14, 2011 at 11:34 am Link to this comment

Outsourcing to very large corporate “body shops” like Halliburton and TaTa is always a waste.  And government, like many large businesses, think these large entities provide phony “economies of scale”.

In reality, hiring individual skilled selective contractors DOES provide many benefits, not the least of which is to encourage SMALL contracting businesses.

The real problem is with those who choose the contracting firms - they want to cut their own mental efforts in the choosing process.  And cronyism is far more rampant in choosing large contractors than in choosing smaller ones or individuals.

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By Aaron Ortiz, September 14, 2011 at 9:13 am Link to this comment

The problem here is both government corruption and corporate greed.

The solution: expose and punish all those involved.

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By Dave L., September 14, 2011 at 8:42 am Link to this comment

The amount of waste, fraud, and abuse in the Govt. is astounding. That’s why any call to raise taxes is a joke.

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By frecklefever, September 14, 2011 at 8:39 am Link to this comment

PBS HAD A PROPAGANDA PIECE ON UNCLE MILTY FRIEDMAN…AND THE
VIDEO PRETTY MUCH DEIFIED HIM…CORPORATIONS COULDN’T EXIST
WITHOUT ENTITLEMENTS AND SUBSIDIES…AND THE MYTH OF RUGGED
INDIVIDUALISM IS A LIMP WRIST FANTASY OF THE INTELLECTUAL
SHUTINS…THEY NEED SOME SERIOUS SUNLIGHT…

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PatrickHenry's avatar

By PatrickHenry, September 14, 2011 at 3:29 am Link to this comment

I guess this article was aimed at those comming out of a 10 year coma.

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By ardee, September 14, 2011 at 3:29 am Link to this comment

The myth of outsourcing as a savings continues to thrive despite mounted evidence to the contrary. Corporations reduce employees, saving benefits and pensions only to increase their own salaries and bonuses.

Now we see, at least in one sector, that outsourcing is also more expensive than retaining qualified employees. Republican politics is far too often based upon untruth. Democratic politics are apparently missing from the fray.

Instead of confronting head on the myths that extremism on the right advances unchallenged, Obama continues to adopt a less extreme but equally wrongheaded Republican position. Is it any wonder that a number of our electorate continues to believe the lies?

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