Outsourcing government services costs more

When the federal government pays contractors to take over work done by public employees it ends up paying more than twice as much, according to a new study by the Project on Government Oversight.

The New York Times

[Project on Government Oversight] 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.

“That’s a big difference,” said Scott Amey, POGO’s general counsel. “We compared the full compensation paid to federal government and private sector employees to the billable rates in federal service contracts. Across the board you see that it cost government more to pay for contractors.”

For example, the study found that, on average, the federal government paid contractors $268,653 per year for computer engineering services, while government workers in the same occupation made $136,456.

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.

In a white paper on privatization Penn State University law professor Ellen Dannin writes that outsourcing often involves hidden costs.

Many privatizers get special subsidies or in-kind services from governments. Often these are not counted when comparing before and after costs. The only fair way to compare would be to add these items to the cost of privatizing. Among the added costs that should be added in are services such as oversight and supervision, use of government-paid facilities or equipment, or outright subsidies.

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