WASHINGTON – Contracting out federal jobs to the private sector – a favorite cause of both political parties – wastes billions of dollars, a new study by the non-partisan Project on Government Oversight (POGO) shows.

The study reveals the government not only employs almost four times as many contractors as it does workers – 7.6 million to 2 million – but that private companies charge the government for the same services up to almost five times as much as the government would spend if the jobs were done in-house.

The contractors also charge the government for those same functions, in occupations ranging from accounting to nursing to highly technical fields, more than they pay private-sector workers in those jobs, POGO’s study adds.

The government spends more than $320 billion yearly on contractors.

Not only that, but more than 80 percent of all savings from “contracting out” came when federal workers were pitted against their private counterparts and – to win the contests and keep their jobs – had to give up such things as better health care choices.

POGO’s study covered 35 different job categories and years of payment data comparisons. It attracted the attention of the American Federation of State, County and Municipal Employees, which is fighting budget-cutting and similar-contracting-out schemes on the state and local levels. Union President Gerald McEntee said the federal data shows the fallacy of the contracting-out craze.

“In the wake of the worst recession in our lifetime, federal, state and local governments should not be doling out billions of dollars to private contractors to perform services that can be done more efficiently and at lower cost by public workers,” he said.

“Privatization has always been a recipe for disaster. This study confirms what AFSCME and its allies have been saying time and time again: Privatizing services leads to cost overruns and in most cases lower quality. The only ones benefiting from privatization are the private companies and the campaign coffers of the politicians who push for privatization,” he concluded.

POGO reported that the worst comparison among the 35 occupations was in claims assistance and examining. The average federal claims examiner earns $57,292 and the average private examiner earns $75,637. But private firms charge the government $276,598 for each claims examiner’s services – 4.83 times the federal paycheck. In only two of the 35 occupations, groundskeeper (80 percent), and medical records tech (99 percent), did the contracting companies charge less than what a federal worker would earn.

The average charge by firms using contractors to do federal work is 2.09 times the amount the government would pay if it employed those workers itself, POGO found.


Mark Gruenberg
Mark Gruenberg

Award winning journalist Mark Gruenberg is head of the Washington, D.C., bureau of People's World. He is also the editor of the union news service Press Associates Inc. (PAI). Known for his reporting skills, sharp wit, and voluminous knowledge of history, Mark is a compassionate interviewer but a holy terror when going after big corporations and their billionaire owners.