I’m shocked, shocked to find that gambling is going on here!

POGO has reviewed cases where private contractors have assumed government functions, and in the overwhelming majority of the cases (33 out of 35) federal employees were cheaper than contractors:

Executive Summary

Based on the current public debate regarding the salary comparisons of federal and private sector employees, the Project On Government Oversight (POGO)[1] decided to take on the task of doing what others have not—comparing total annual compensation for federal and private sector employees with federal contractor billing rates in order to determine whether the current costs of federal service contracting serves the public interest.

The current debate over pay differentials largely relies on the theory that the government pays private sector compensation rates when it outsources services. This report proves otherwise: in fact, it shows that the government actually pays service contractors at rates far exceeding the cost of employing federal employees to perform comparable functions.

POGO’s study analyzed the total compensation paid to federal and private sector employees, and annual billing rates for contractor employees across 35 occupational classifications covering over 550 service activities. Our findings were shocking—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. Specifically, POGO’s study shows that the federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services.

Additional key findings include:

• Federal government employees were less expensive than contractors in 33 of the 35 occupational classifications POGO reviewed.
• In one instance, contractor billing rates were nearly 5 times more than the full compensation paid to federal employees performing comparable services.
• Private sector compensation was lower than contractor billing rates in all 35 occupational classifications we reviewed.
• The federal government has failed to determine how much money it saves or wastes by outsourcing, insourcing, or retaining services, and has no system for doing so.

POGO’s investigation highlights two basic facts about outsourcing government work to contractors. First, comparing federal to private sector compensation reveals nothing about what it actually costs the government to outsource services. The only analysis that will shed light on the true costs of government is that of contractor billing rates and the full cost of employing federal employees to perform comparable work. The Commission on Wartime Contracting in Iraq and Afghanistan recently completed a fundamental study of costs, and found that, in certain contingency operations, although savings resulted from hiring local or third-country nationals, military and civilian employees cost less than hiring American contractors.

Second, the federal government is not doing a good job of obtaining genuine market prices, and therefore the savings often promised in connection with outsourcing services are not being realized. The argument for outsourcing services is that, by outsourcing services on which the government holds a monopoly, free market competition will result in efficiencies and save taxpayer dollars. But our study showed that using contractors to perform services may actually increase rather than decrease costs to the taxpayers.

The big growth in the use in contractors began under the 1^st Bush administration with his Secretary of Defense, Dick Cheney, being at the vanguard of such efforts.

And then he went to run Halliburton, where he got millions to help them get billions of the slush funds that he set up.

Private contracting was never about saving the taxpayer money, it was about two things: reducing the capabilities of the government (because guvment is ebil), and creating an opportunity for corruption and graft.

It turns out that there are some unlikely voices who might agree, specifically Senate Intelligence Committee Chair Diane Feinstein^* and new CIA director David Petraeus, are calling for drastic reductions of the use of contractors by the intelligence community:

Sen. Dianne Feinstein (D-CA), who chairs the Intelligence Committee, pointed out the broken promise at a hearing Tuesday, noting that the intelligence community is not living up to a commitment to reduce private contractors by 5 percent a year.

“We had an agreement in 2009 to reduce [intelligence community] contractor numbers by 5 percent a year, but it’s clear that progress has not been maintained and sufficient cuts are not being made,” Feinstein told a joint-hearing of the House and Senate Intelligence Committees to assess progress in U.S. intelligence gathering and analysis over the last ten years.

The Office of the Director of National Intelligence reported that “core contractors,” meaning those who directly augment the government’s intelligence staffs, accounted for 23 percent of the total intelligence community workforce, down only 1 percent from the year before, Feinstein pointed out.

………

One week into his new role as CIA director, David Petraeus testified Thursday that contractors are at the top of his list of potential cuts in the new era of belt-tightening.

“Contractors – we’re looking very hard at that as one of the areas we can achieve some savings,” Petraeus said, recognizing the fact that many contractors have been devoted partners and have died in service to their country.

Nice to see some of the PTB getting a clue on this.

^*Full disclosure, my great grandfather, Harry Goldman, and her grandfather, Sam Goldman were brothers, though we have never met, either in person or electronically.