Contracting Out Gov't Work Costs More

Seen something interesting in the news or on the intertubes? Discuss it here.

Moderators: Zamfir, Hawknc, Moderators General, Prelates

User avatar
sardia
Posts: 6801
Joined: Sat Apr 03, 2010 3:39 am UTC

Contracting Out Gov't Work Costs More

Postby sardia » Tue Sep 13, 2011 1:28 am UTC

http://www.nytimes.com/2011/09/13/us/13 ... f=politics
Spoiler:
WASHINGTON — 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. The House earlier this year passed a Republican budget plan that would freeze pay grade levels and eliminate raises for five years, and cut the government’s work force by 10 percent. Last year, President Obama announced a two-year salary freeze for federal workers, which Republicans said did not go far enough.

The Heritage Foundation, a conservative research group in Washington, released a report last year that found that federal employees earn 22 percent more in hourly wages than the private sector. The Heritage study also found that if federal employee compensation were adjusted to match that of their private sector counterparts, federal spending would be reduced by $47 billion in 2011 alone.

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.

“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.

The Office of Personnel Management, which administers the federal work force, did not respond to questions about the study, but in the past it has criticized reports that say federal workers are overpaid.

Mr. Amey said the study was limited because it looked only at General Services Administration schedule, or previously negotiated, contracts, which are unfinanced five-year contracts listing the fees the federal government has agreed to pay for outside commercial products and services. Financing occurs when an order is placed and signed by a federal agency. Mr. Amey said schedule contracts were also the only ones that had salaries and benefits information included.

“Part of the problem with doing studies like this is the lack of data about what the government pays contractors,” he said. “While this study is limited to a subset of government contracts, it’s the only area where you have information.”

James Sherk, a policy analyst with the Heritage Foundation and the author of the federal salary study, said he was skeptical of the POGO findings. “It’s not a real apples to apples comparison,” he said. “When the federal government hires contractors, it’s for the short-term. When they hire for the public sector, they are on the hook for the salaries and compensation for years.”

Mr. Amey counters that the government usually pays contractors for multiple-year jobs, not just short term.

Paul C. Light, a professor at New York University who has studied the contractor work force, said he found the POGO study interesting. “Contracting out to the private sector is often oversold as the answer to better services, better performance and better cost,” Mr. Light said. “But doing this type of analysis shows that it’s not the case.”

I've mentioned this before during some of the Iraq War threads, but now I've got a study to back me up. The article is pretty simple, Private contractors charge the government twice what it costs for federal workers. Meaning if I had 100 contractors, I could have just hired federal workers for half the cost. The study is limited though, so keep your eyes open and see if you agree with their generalization from their sample. Also, keep in mind the conservative Heritage's organization's response to the study.

User avatar
Velict
Posts: 609
Joined: Wed Dec 24, 2008 9:07 pm UTC
Location: Icecrown Citadel

Re: Contracting Out Gov't Work Costs More

Postby Velict » Tue Sep 13, 2011 1:38 am UTC

There's some pretty stupid inefficiencies in the US government. This immediately calls to mind a recent article in Wired. In short, the Army trained linguists and then relied on a native contractor (who was being paid multiples of what the linguists made) to translate anything and everything.

User avatar
Jahoclave
sourmilk's moderator
Posts: 4790
Joined: Thu Oct 25, 2007 8:34 pm UTC
Contact:

Re: Contracting Out Gov't Work Costs More

Postby Jahoclave » Tue Sep 13, 2011 2:25 am UTC

Velict wrote:There's some pretty stupid inefficiencies in the US government. This immediately calls to mind a recent article in Wired. In short, the Army trained linguists and then relied on a native contractor (who was being paid multiples of what the linguists made) to translate anything and everything.

But having the guberment do it cheaper is socialism. Fuck fiscal responsibility if it means doing anything vaguely socialist.

nitePhyyre
Posts: 1280
Joined: Mon Jul 27, 2009 10:31 am UTC

Re: Contracting Out Gov't Work Costs More

Postby nitePhyyre » Tue Sep 13, 2011 2:32 am UTC

Paying someone to do a job and then paying their bosses to make a profit costs more than just paying someone to do a job? Shocking!
sourmìlk wrote:Monopolies are not when a single company controls the market for a single product.

You don't become great by trying to be great. You become great by wanting to do something, and then doing it so hard you become great in the process.

User avatar
Jessica
Jessica, you're a ...
Posts: 8337
Joined: Tue Oct 23, 2007 8:57 pm UTC
Location: Soviet Canuckistan

Re: Contracting Out Gov't Work Costs More

Postby Jessica » Tue Sep 13, 2011 3:29 am UTC

Especially when you get your best buddies to bid on the job and not let anyone else in. But, hey - it's not government waste when it's lining your (and your friend's) pockets.
doogly wrote:On a scale of Mr Rogers to Fascism, how mean do you think we're being?
Belial wrote:My goal is to be the best brain infection any of you have ever had.

User avatar
CorruptUser
Posts: 10498
Joined: Fri Nov 06, 2009 10:12 pm UTC

Re: Contracting Out Gov't Work Costs More

Postby CorruptUser » Tue Sep 13, 2011 3:56 am UTC

Does the government employee salary include the cost of the pensions and other benefits? And how much does the government get back through taxes on the contract work?

User avatar
Garm
Posts: 2241
Joined: Wed Sep 26, 2007 5:29 pm UTC
Location: Usually at work. Otherwise, Longmont, CO.

Re: Contracting Out Gov't Work Costs More

Postby Garm » Tue Sep 13, 2011 4:35 am UTC

CorruptUser wrote:Does the government employee salary include the cost of the pensions and other benefits? And how much does the government get back through taxes on the contract work?


First question is good but you'll have to count taxes taken from Govt. workers as well to balance the equation. From my general experience, Contractors get paid more so they can pay for their own health insurance and such so I agree that you'd have to add those hidden costs in for the calculation of the govt. workers compensation.
Those who make peaceful revolution impossible will make violent revolution inevitable.
- JFK

User avatar
Zamfir
I built a novelty castle, the irony was lost on some.
Posts: 7594
Joined: Wed Aug 27, 2008 2:43 pm UTC
Location: Nederland

Re: Contracting Out Gov't Work Costs More

Postby Zamfir » Tue Sep 13, 2011 7:15 am UTC

Hiring contractors is always more expensive on per-job basis, in the government or elsewhere. It's the price you pay for flexibility, for only hiring people when you need them without having to find work for them in less busy times, for not having to train them, not having to select them, etc. Usually a lot of back-office work is implicitly transferred too when you hire people on contract basis, like payroll management of people.

My company regularly sends me on contract jobs, and they charge much, much more than the hourly cost of a fixed worker (alsomuch, much more than my own income). Still no one complains, and no one is really getting rich either. It's just that all the hidden costs of keeping me employed are born by my main employer, while the people who hire us on contract basis pay a higher cost for the benefit of having someone who can start working immediately and will leave when the work is over.

User avatar
addams
Posts: 10268
Joined: Sun Sep 12, 2010 4:44 am UTC
Location: Oregon Coast: 97444

Re: Contracting Out Gov't Work Costs More

Postby addams » Tue Sep 13, 2011 7:33 am UTC

Jahoclave wrote:
Velict wrote:There's some pretty stupid inefficiencies in the US government. This immediately calls to mind a recent article in Wired. In short, the Army trained linguists and then relied on a native contractor (who was being paid multiples of what the linguists made) to translate anything and everything.

But having the guberment do it cheaper is socialism. Fuck fiscal responsibility if it means doing anything vaguely socialist.


http://www.nato.int/docu/review/2011/11 ... /index.htm
Is this where this belongs. NATO is having a meeting today in Brussels. It is fairly impossible to get anywhere near the place, without an invitation.
Ten years. It has been ten years and NATO is still being reorganized to fit the American way of thinking. What a mess! Is there anything that 'the people' can do?

NATO is a good idea. Article 5 is a good idea. But, to have NATO bowing to American ideas and reorganizing to fit those American ideas, because, of 9/11-01, ten year after the event is bad for NATO and for the people of the world.
Life is, just, an exchange of electrons; It is up to us to give it meaning.

We are all in The Gutter.
Some of us see The Gutter.
Some of us see The Stars.
by mr. Oscar Wilde.

Those that want to Know; Know.
Those that do not Know; Don't tell them.
They do terrible things to people that Tell Them.

kiklion
Posts: 513
Joined: Fri Mar 14, 2008 5:02 am UTC

Re: Contracting Out Gov't Work Costs More

Postby kiklion » Tue Sep 13, 2011 11:57 am UTC

Zamfir wrote:Hiring contractors is always more expensive on per-job basis, in the government or elsewhere. It's the price you pay for flexibility, for only hiring people when you need them without having to find work for them in less busy times, for not having to train them, not having to select them, etc. Usually a lot of back-office work is implicitly transferred too when you hire people on contract basis, like payroll management of people.

My company regularly sends me on contract jobs, and they charge much, much more than the hourly cost of a fixed worker (alsomuch, much more than my own income). Still no one complains, and no one is really getting rich either. It's just that all the hidden costs of keeping me employed are born by my main employer, while the people who hire us on contract basis pay a higher cost for the benefit of having someone who can start working immediately and will leave when the work is over.


^This. I would want to see how open the bidding processes are because I know first hand a lot of contracts are not bid on openly. I work as IT for an accounting firm and get contracted out to other companies. The other companies pay $125 an hour, however they have the benefit of not paying for an IT guy for a year. To have an IT admin you are looking at $60,000+ a year, but if you are say... the mayor of a small township with an office staff of 5 people, you don't need a dedicated IT guy. We probably bill them for maybe 25,000 a year and that number would be lower if the average age of their staff wasn't 68. (When we set up their new computers the mayor wanted us to setup netflix on the computer and spent about 4 hours getting the background to rotate through images in a folder and training them on how to change which folder it rotates through.)

However this benefit of not paying for what you aren't using mainly benefits smaller operations. We recently took over the IT functions of a charter jet agency due to their sole IT guy being fired and we bill them a lot now. They have about 200 staff with multiple departments, 6 servers, multiple locations etc. They should hire a full time IT staff to save cost.

User avatar
Zamfir
I built a novelty castle, the irony was lost on some.
Posts: 7594
Joined: Wed Aug 27, 2008 2:43 pm UTC
Location: Nederland

Re: Contracting Out Gov't Work Costs More

Postby Zamfir » Tue Sep 13, 2011 12:15 pm UTC

kiklion wrote:However this benefit of not paying for what you aren't using mainly benefits smaller operations. We recently took over the IT functions of a charter jet agency due to their sole IT guy being fired and we bill them a lot now. They have about 200 staff with multiple departments, 6 servers, multiple locations etc. They should hire a full time IT staff to save cost.

In business, there's a big difference between "probably could save money" and "certainly would save money". if you're in the first situation but everything is running smooth and the costs are clear and bearable, it can be very wise to keep it that way. Lots of attempts to get cost savings end up messing up stuff in unexpected ways, have cost overruns, take up valuable management time and attention. Especially if it's not the field of expertise of your people, so you do not know for sure how big the cost savings could be and what the involved risks are. So the savngs should be considerable before it becomes smart to change to running things yourself.

On the other hand, it can be worthwhile to have your own staff even when it's not a guaranteed cost saver. Exactly because that gives you the expert people who you can rely on to judge future changes, instead of those pesky consultants who are always selling you a new project.

kiklion
Posts: 513
Joined: Fri Mar 14, 2008 5:02 am UTC

Re: Contracting Out Gov't Work Costs More

Postby kiklion » Tue Sep 13, 2011 12:28 pm UTC

Zamfir wrote:
kiklion wrote:However this benefit of not paying for what you aren't using mainly benefits smaller operations. We recently took over the IT functions of a charter jet agency due to their sole IT guy being fired and we bill them a lot now. They have about 200 staff with multiple departments, 6 servers, multiple locations etc. They should hire a full time IT staff to save cost.

In business, there's a big difference between "probably could save money" and "certainly would save money". if you're in the first situation but everything is running smooth and the costs are clear and bearable, it can be very wise to keep it that way. Lots of attempts to get cost savings end up messing up stuff in unexpected ways, have cost overruns, take up valuable management time and attention. Especially if it's not the field of expertise of your people, so you do not know for sure how big the cost savings could be and what the involved risks are. So the savngs should be considerable before it becomes smart to change to running things yourself.

On the other hand, it can be worthwhile to have your own staff even when it's not a guaranteed cost saver. Exactly because that gives you the expert people who you can rely on to judge future changes, instead of those pesky consultants who are always selling you a new project.


Oh... don't get me started on the guy that sits behind me. Who was transferred from accounting to IT sales because customers were specifically requesting 'anyone but that guy'. In the last 3 months we have billed them $90,000. I just don't see how that is efficient. Though you are correct i don't see their financials and they may have had bad experiences with multiple IT guys before us.

Heisenberg
Posts: 3789
Joined: Wed May 14, 2008 8:48 pm UTC
Location: Uncertain

Re: Contracting Out Gov't Work Costs More

Postby Heisenberg » Tue Sep 13, 2011 1:20 pm UTC

Garm wrote:First question is good but you'll have to count taxes taken from Govt. workers as well to balance the equation.

The Contractor also pays payroll taxes. Although I'm not sure, does the Government pay payroll taxes to itself every time it writes a paycheck? Property taxes for office space?

User avatar
Dauric
Posts: 3989
Joined: Wed Aug 05, 2009 6:58 pm UTC
Location: In midair, traversing laterally over a container of sharks. No water, just sharks, with lasers.

Re: Contracting Out Gov't Work Costs More

Postby Dauric » Tue Sep 13, 2011 2:26 pm UTC

Heisenberg wrote:
Garm wrote:First question is good but you'll have to count taxes taken from Govt. workers as well to balance the equation.

The Contractor also pays payroll taxes. Although I'm not sure, does the Government pay payroll taxes to itself every time it writes a paycheck? Property taxes for office space?


IIRC it depends on the department and what kinds of facilities they're using. Also depends on the Fed/State relationship as far as taxes. Military bases are classified "Federal Reservations" IE: they're not under a state's jurisdiction so the state doesn't collect property taxes on them, but federal offices located in office buildings in the middle of a city still have to account for property taxes since the property is in city and state jurisdiction.

The other thing to keep in mind is that "Government" isn't monolithic. Taxes are paid to the Treasury Department, not "the Government", so if you're doing the budget for the FCC (or any other government department) you're not "paying taxes to yourself" you're paying social security taxes to the Social Security Administration, Income taxes to the Treasury Department, property taxes to the Treasury and local State Treasury Dept., etc., etc., etc. The EPA, FDA, CIA, DoT,... aren't Treasury departments and as such on't have the bureaucracy to deal with handling taxation, so it's easier to shuffle the money around as though each department was a separate entity than it would be to have repeating branches of every department dedicated to taxation accounting.
We're in the traffic-chopper over the XKCD boards where there's been a thread-derailment. A Liquified Godwin spill has evacuated threads in a fourty-post radius of the accident, Lolcats and TVTropes have broken free of their containers. It is believed that the Point has perished.

User avatar
rigwarl
Posts: 759
Joined: Wed Dec 09, 2009 9:36 pm UTC

Re: Contracting Out Gov't Work Costs More

Postby rigwarl » Tue Sep 13, 2011 4:07 pm UTC

Zamfir wrote:Hiring contractors is always more expensive on per-job basis, in the government or elsewhere.


Can someone enlighten me on why this is considered news? Is it the amount that's the issue?

User avatar
Dauric
Posts: 3989
Joined: Wed Aug 05, 2009 6:58 pm UTC
Location: In midair, traversing laterally over a container of sharks. No water, just sharks, with lasers.

Re: Contracting Out Gov't Work Costs More

Postby Dauric » Tue Sep 13, 2011 7:23 pm UTC

rigwarl wrote:
Zamfir wrote:Hiring contractors is always more expensive on per-job basis, in the government or elsewhere.


Can someone enlighten me on why this is considered news? Is it the amount that's the issue?


It's news because the Project on Government Oversight study confirming this was released recently, and contradicts a Heritage Foundation study released a year ago that asserts the opposite and has been a founding talking point in Republican rhetoric with regards to government services Vs. privatization.

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. The House earlier this year passed a Republican budget plan that would freeze pay grade levels and eliminate raises for five years, and cut the government’s work force by 10 percent. Last year, President Obama announced a two-year salary freeze for federal workers, which Republicans said did not go far enough.

The Heritage Foundation, a conservative research group in Washington, released a report last year that found that federal employees earn 22 percent more in hourly wages than the private sector. The Heritage study also found that if federal employee compensation were adjusted to match that of their private sector counterparts, federal spending would be reduced by $47 billion in 2011 alone.

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.

“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.”


The Heritage Foundation, arguably in order to bolster an anti-government bias, looked at how much govt. and private sector employees were being paid and found government employees were being paid more and H.F. went "Ah HA! the government is paying federal workers more, therefore it's costing the government more to do all this work in-house." but the Government Oversight study compares what the government is actually billed from the contracting companies, and even though government workers are being paid more for the same work, the private contracting companies are pulling more overhead, so private contracting company employees are being paid less but the government is paying more for the same work.

Basically the only people in the 33 of 35 departments in the study for whom hiring private contracting companies to provide government services is beneficial is the upper management of the contracting companies. Everyone else, the guys doing the work and the taxpayers, get the shaft.
We're in the traffic-chopper over the XKCD boards where there's been a thread-derailment. A Liquified Godwin spill has evacuated threads in a fourty-post radius of the accident, Lolcats and TVTropes have broken free of their containers. It is believed that the Point has perished.

Heisenberg
Posts: 3789
Joined: Wed May 14, 2008 8:48 pm UTC
Location: Uncertain

Re: Contracting Out Gov't Work Costs More

Postby Heisenberg » Tue Sep 13, 2011 7:47 pm UTC

No. We don't actually know if contracting saves money, because the new study left out how much the government is paying in overhead.

Heritage: Contractor salary < Government salary
POGO: Contractor salary + Contractor benefits + Contractor profits > Government salary

Neither study tells us which way is more expensive in the long run.

Steroid
Posts: 549
Joined: Wed Mar 26, 2008 10:50 am UTC

Re: Contracting Out Gov't Work Costs More

Postby Steroid » Tue Sep 13, 2011 8:21 pm UTC

Heisenberg wrote:No. We don't actually know if contracting saves money, because the new study left out how much the government is paying in overhead.

Heritage: Contractor salary < Government salary
POGO: Contractor salary + Contractor benefits + Contractor profits > Government salary

Neither study tells us which way is more expensive in the long run.

This, also, I don't think that the point the Heritage Foundation was trying to make was, "Private workers are cheaper than government workers, so the government should contract out more work," as much as, "Private workers are cheaper than government workers, so the government should cut the pay of its workers, since those workers will not be incentivized to quit for a better-paying job in the private sector."

User avatar
Zamfir
I built a novelty castle, the irony was lost on some.
Posts: 7594
Joined: Wed Aug 27, 2008 2:43 pm UTC
Location: Nederland

Re: Contracting Out Gov't Work Costs More

Postby Zamfir » Tue Sep 13, 2011 8:27 pm UTC

Are there still people who change their mind as result of a Heritage study? Or are they mostly intended to rally the base?

User avatar
Dauric
Posts: 3989
Joined: Wed Aug 05, 2009 6:58 pm UTC
Location: In midair, traversing laterally over a container of sharks. No water, just sharks, with lasers.

Re: Contracting Out Gov't Work Costs More

Postby Dauric » Tue Sep 13, 2011 8:31 pm UTC

Steroid wrote: also, I don't think that the point the Heritage Foundation was trying to make was, "Private workers are cheaper than government workers, so the government should contract out more work," as much as, "Private workers are cheaper than government workers, so the government should cut the pay of its workers, since those workers will not be incentivized to quit for a better-paying job in the private sector."

Wait.. wha?

Private workers are cheaper.. so government should cut pay to public employees so lower salaries in the private sector won't draw public sector employees to private sector jobs...

... Lower wages are preferable and people gravitate by choice towards lower incomes?
We're in the traffic-chopper over the XKCD boards where there's been a thread-derailment. A Liquified Godwin spill has evacuated threads in a fourty-post radius of the accident, Lolcats and TVTropes have broken free of their containers. It is believed that the Point has perished.

Steroid
Posts: 549
Joined: Wed Mar 26, 2008 10:50 am UTC

Re: Contracting Out Gov't Work Costs More

Postby Steroid » Tue Sep 13, 2011 8:35 pm UTC

Dauric wrote: Wait.. wha?

Private workers are cheaper.. so government should cut pay to public employees so lower salaries in the private sector won't draw public sector employees to private sector jobs...

No, no. Private workers are cheaper. . . so government is free to cut pay to their workers without fear that their workers will go to the private sector. They should do so because it will save money, because a) we need it for deficit reduction, and b) the government should always be trying to save money so it can give more back to the taxpayers.

User avatar
rigwarl
Posts: 759
Joined: Wed Dec 09, 2009 9:36 pm UTC

Re: Contracting Out Gov't Work Costs More

Postby rigwarl » Tue Sep 13, 2011 8:44 pm UTC

Thank you Dauric, excellent explanation.


Steroid wrote:No, no. Private workers are cheaper. . . so government is free to cut pay to their workers without fear that their workers will go to the private sector.


Steroid, that is not true. You can't look at average pay, I know if my wages are cut I will IMMEDIATELY check online to see what other jobs are available (further action would depend on the severity).

User avatar
Dauric
Posts: 3989
Joined: Wed Aug 05, 2009 6:58 pm UTC
Location: In midair, traversing laterally over a container of sharks. No water, just sharks, with lasers.

Re: Contracting Out Gov't Work Costs More

Postby Dauric » Tue Sep 13, 2011 8:59 pm UTC

rigwarl wrote:Thank you Dauric, excellent explanation.


Steroid wrote:No, no. Private workers are cheaper. . . so government is free to cut pay to their workers without fear that their workers will go to the private sector.


Steroid, that is not true. You can't look at average pay, I know if my wages are cut I will IMMEDIATELY check online to see what other jobs are available (further action would depend on the severity).


Well, Steroid's clarification at least makes sense in the abstract, and if the policy was being implemented sensibly then it would be a reduction in the pay grade for -new- employees rather than leaving existing government employees trying to figure out how to make their mortgage payments on a reduced salary. Cutting wages impacts employee morale, and if you're in a field where your own pay is subject to sudden declines one may be inclined to look for more stable employment, even if the pay is less, because stability in pay has a certain amount of value that makes up for a decreased salary.

There's places I could earn more money than I do right now, but I know the place I work at I'm needed as the only resident IT guru at an office that has significant reliance on it's computer systems, and I value the knowledge of a stable income higher than increased wages with significantly less certainty of stability.
We're in the traffic-chopper over the XKCD boards where there's been a thread-derailment. A Liquified Godwin spill has evacuated threads in a fourty-post radius of the accident, Lolcats and TVTropes have broken free of their containers. It is believed that the Point has perished.

User avatar
Isaac Hill
Systems Analyst????
Posts: 543
Joined: Wed Mar 14, 2007 9:35 pm UTC
Location: Middletown, RI

Re: Contracting Out Gov't Work Costs More

Postby Isaac Hill » Wed Sep 14, 2011 2:12 am UTC

Heisenberg wrote:
Garm wrote:First question is good but you'll have to count taxes taken from Govt. workers as well to balance the equation.

The Contractor also pays payroll taxes. Although I'm not sure, does the Government pay payroll taxes to itself every time it writes a paycheck? Property taxes for office space?
I'm a U.S. Federal government employee, and they take taxes, Soc Security and Medicare out of my paycheck just like they do everyone else. For a while, there was a separate pension system for government employees which they had in lieu of Social Security. Some of my older coworkers are on that system, but not any new hires.

Like Dauric said, it's easier for the different agencies to act separately. It also ensures that govt employees get the same deductions for charitable contributions, mortgage interest, etc as everyone else. It probably makes these comparison studies easier, too.

Does anyone know when that Heritage study was published, and how much discrepancy it found? There's no cost-of-living increases for govt employees for two years. They were tied to inflation, usually around 4% annually. Skipping a couple of those might bring the two pay scales more in line with any private sector industries that aren't doing the same thing.

As for contracting in general, I'm not impressed. A few years ago, we started contracting our IT services, which I've already complained about here. There's also the cost of double dipping. Remember that alternate pension system I mentioned a few paragraphs back? People on that system retire, then come back as contractors doing their same job. The government's then sending them two paychecks, one for the pension and one through the contracting agency, for doing one job. This problem will solve itself as the people in the old system die off, but I don't know how long that'll take, since I don't know when they chaged over.

I can see the point in contracting out part time work, since you don't want people sitting idle or working an alternate task they may be less skilled at. It also makes sense for temporary work, since you don't want to go through the process of building and training a team, just to have to get rid of them once the job is done. In those cases, it makes more sense to contract with outside professionals. But for day to day operations, you're better off hiring the person directly than paying a contracting agency a continuous fee to provide the person.
Alleged "poems"
that don't follow a rhyme scheme
are not poetry

nitePhyyre
Posts: 1280
Joined: Mon Jul 27, 2009 10:31 am UTC

Re: Contracting Out Gov't Work Costs More

Postby nitePhyyre » Wed Sep 14, 2011 3:33 am UTC

Heisenberg wrote:No. We don't actually know if contracting saves money, because the new study left out how much the government is paying in overhead.

Heritage: Contractor salary < Government salary
POGO: Contractor salary + Contractor benefits + Contractor profits > Government salary

Neither study tells us which way is more expensive in the long run.
Ummm, No.
“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.”
sourmìlk wrote:Monopolies are not when a single company controls the market for a single product.

You don't become great by trying to be great. You become great by wanting to do something, and then doing it so hard you become great in the process.

User avatar
F117Landers
Posts: 203
Joined: Wed Dec 08, 2010 6:00 pm UTC
Location: Japan

Re: Contracting Out Gov't Work Costs More

Postby F117Landers » Thu Sep 29, 2011 6:39 pm UTC

There's a lot of other bs that comes with contracting and Government Civilans. For example, a military member in Afghanistan cannot build a shelf for their office, as it takes that job away from a contractor. In order to have the shelf built, the request had to be routed up to a higher approving official, due to the cost of the shelf exceeding $2500. The end product was made entirely with plywood and screws.

Seraph
Posts: 343
Joined: Mon Jul 16, 2007 4:51 pm UTC

Re: Contracting Out Gov't Work Costs More

Postby Seraph » Thu Sep 29, 2011 8:45 pm UTC

nitePhyyre wrote:
Heisenberg wrote:No. We don't actually know if contracting saves money, because the new study left out how much the government is paying in overhead.

Heritage: Contractor salary < Government salary
POGO: Contractor salary + Contractor benefits + Contractor profits > Government salary

Neither study tells us which way is more expensive in the long run.
Ummm, No.
“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.”

Uhh yes? The quote you give more or less matches up to what Heisenberg said.
"full compensation paid to federal government . . .employees" = government employee salary * 1.3625
"billable rates in federal service contracts" = full cost of a contractor including, as the study put it, "other costs including benefits contractors provide their employees"

User avatar
Vaniver
Posts: 9422
Joined: Fri Oct 13, 2006 2:12 am UTC

Re: Contracting Out Gov't Work Costs More

Postby Vaniver » Thu Sep 29, 2011 8:51 pm UTC

Zamfir wrote:Are there still people who change their mind as result of a Heritage study? Or are they mostly intended to rally the base?
The vast majority of politics-related studies do this. The primary difference is that Heritage is known to be conservative, and that university researchers are overwhelmingly liberal is rarely mentioned.
I mostly post over at LessWrong now.

Avatar from My Little Pony: Friendship is Magic, owned by Hasbro.

User avatar
22/7
I'm pretty sure I have "The Slavery In My Asshole" on DVD.
Posts: 6475
Joined: Fri Jul 06, 2007 3:30 pm UTC
Location: 127.0.0.1

Re: Contracting Out Gov't Work Costs More

Postby 22/7 » Fri Sep 30, 2011 1:40 am UTC

Seraph wrote:
nitePhyyre wrote:
Heisenberg wrote:No. We don't actually know if contracting saves money, because the new study left out how much the government is paying in overhead.

Heritage: Contractor salary < Government salary
POGO: Contractor salary + Contractor benefits + Contractor profits > Government salary

Neither study tells us which way is more expensive in the long run.
Ummm, No.
“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.”

Uhh yes? The quote you give more or less matches up to what Heisenberg said.
"full compensation paid to federal government . . .employees" = government employee salary * 1.3625
"billable rates in federal service contracts" = full cost of a contractor including, as the study put it, "other costs including benefits contractors provide their employees"
Except that full compensation paid to federal government employees doesn't include overhead, which is included in the contractor costs because they bill directly. Government employees that charge directly to a given effort charge significantly more than they actually make, even including benefits. If the above is the equation, no overhead is being taken into account. Additionally, the vast majority of government jobs are separated into (and charge based on) pay bands. So you may be at a given step within a payband, but that step only determines how much you're paid, not how much they charge. As someone who regularly looks at both government rates and contractor rates, I can tell you that contractors *CHARGE* much less than government employees, though they generally make more since there's far less overhead involved.

I guess what I'm saying is that this isn't an apples to apples comparison, and there's really not a good way to put a specific number on one that is comparable to the other.
Totally not a hypothetical...

Steroid wrote:
bigglesworth wrote:If your economic reality is a choice, then why are you not as rich as Bill Gates?
Don't want to be.
I want to be!


Return to “News & Articles”

Who is online

Users browsing this forum: No registered users and 15 guests