Wednesday, September 28, 2011

Corporate Welfare for Dummies: The Federal Government Overpays Private Companies for Contract Employees

Government employees have come under a lot of fire recently from the right wing as our nation’s “leaders” wrestle with reducing our insane federal budget deficit. For example, Congressional Republicans have put forth the idea of reducing the number federal workers by 10% or more in order to save money. Sounds like a plan, right?

Well, what you never hear those same Republicans say is that if you really want to start trimming the cost of the federal government workforce, a FAR MORE efficient method would be to get rid of all the contractors. As was demonstrated in a report issued last week by the nonpartisan Project On Government Oversight, the government actually pays well above fair market value for contractors. Here are the details from CBS News:
As Washington's use of private contractors grows, the government is paying those contractors billions more than it would pay their government workers to do the same job, according to a new study released Tuesday.

In an attempt to verify frequently made claims that the government can save money by outsourcing its work, the nonprofit Project On Government Oversight (POGO) compared the total annual compensation for federal (and private sector) employees with federal contractor billing rates.

The group found that in 33 of the 35 occupational categories it reviewed, federal government employees were less expensive than contractors. On average, the federal government pays contractors 1.83 times more than it pays federal employees and two times more than what comparable workers in the private sector are paid.

For instance, the government on average pays contractors $299,374 for accounting services, while it pays federal employees $124,851 for accounting services. By comparison, workers in the private sector (not under contract by the government) make on average $83,132. The government on average pays contractors $198,411 for information technology management, while they pay federal workers $124,663.

That discrepancy is significant, given the federal government spends over $320 billion on service contracts each year, and about one-quarter of all discretionary spending goes to service contractors. According to POGO's report, the contractor workforce rose from an estimated 4.4 million in 1999 to 7.6 million in 2005 -- while the size of the federal employee workforce has remained relatively steady at about 2 million.
Given the above, it should be OBVIOUS to any sentient being that outsourcing costs the government FAR more money than if the work were done in house. So why don’t you hear the Republicans advocating for eliminating contractors? Oh that’s right, because the contract companies whose profits are reflected in that cost difference also write big campaign checks.

In the DC-area, such companies are not-so-affectionately referred to as “Beltway Bandits.” Most of them exist solely because of the contract services they provide to the federal government. Without the hefty profits from this setup, they would be out of business. The notorious Erik Prince of Blackwater fame, for example, became a multimillionaire on the backs of the taxpayers by profiting off of government contracts to provide security personnel in high risk locales. According to Wikipedia, since 1997 Blackwater alone has won more than $1.6 billion in unclassified federal contracts and an unknown amount of secret work.

This is yet another example of how you can tell that the Republicans are NOT in any way, shape or form serious about deficit reduction. They are all about reducing spending that doesn’t help their own political constituencies, but in reality they don’t give a damn about the deficit itself.

Keep this in mind the next time you hear the likes of the odious Mitch McConnell, John Boehner or Eric Cantor on your teevee screen yelling about the need to reduce spending. America does need to get its fiscal house in order, of course, but it should be done fairly, with the greatest burden being placed upon those with those most ability to pay. But you will never hear that said by any of those assholes.


  1. They do this to hide the size of government. Nothing more.

    In Suzanne Mettler's book "The Submerged State: How Invisible Government Policies Undermine Democracy", it's shown that what most politicians (especially conservatives) want is to hide how big our government really is. Running federal jobs through contractors keeps this spending a layer or two inside the onion so most people don't notice, and that said politicians can say they are for smaller government, and privitization while still spending like "libruls".

  2. @John - agreed. That is a great additional benefit for the politicos. But I still think the profit motives/campaign contributions are the number one reason.

  3. Agreed, Bill. If "conservatives" can hide their own "big government liberalism" from the public with "tax cuts" that in essence funnel money directly to no-bid contractors, and corporations they can still fool the public AND give money to the greatest contributors - Financial, Health Care and Real Estate organizations.


  4. Stop wasting time with quibbles. Simply reduce the amount of government expenses and let the government figure out if it wants to have contractors or Feds do it. The Fed bureaucracies should simply be held accountable for results, and let them do whatever they think will produce them. If they don't, cut their budgets.
    This is a fantasy of course. Congressional pork will never be touched.