President’s Column - Contracting Out Just Doesn't Make Sense or Save Dollars

When one looks at contracting out (outsourcing) in the federal government rationally it really makes no sense. It saves no money; in fact even in the best of times it has proven to be more costly and less efficient. As a recent GSA Audit conducted by the GSA Inspector General documented that the existing process misuse has lead to wide spread fraud, abuse and waste.

I have demonstrated regarding the cost of contacting out a GS-4 administrative position, costing the Department of Labor $21.95 per hour. The contract employee only received a little more than $8.00 per hour with no benefits. The Department of Labor still had to supervise the employee and provide the equipment that was utilized to provide the service. With that scenario DOL could have hired two GS-4s with benefits for less money than then the cost of the contract.

This process added nothing to the local economy, even if the "work" remained in the community. Without benefits, an underpaid contract employee might easily become a burden on the local economy. Uninsured or underinsured workers cost the taxpayer millions of dollars each year in the cost of providing public assistance and cost of health care coverage for those who are not insured.

Speaking briefly regarding the economic impact of contracting out to low-paying federal contractors, it is part of phenomenon that some like to call "Wal-Martizing." That is to keep wages low so that they are forced to shop at places like Wal-Mart and are forced to apply for public assistance becoming a drain on the taxpayer and on and on and on. It seems to be a reprise of the early 1900s to keep workers poor!

But back to the main theme of whether contracting our makes sense. No matter the logic you apply to the process, it comes up short. Politicians extol the virtues of less government, but if someone is being paid with taxpayer’s money, performing the work that government is mandated to do. That’s not smaller government it is just shifting the money to, in most cases, a large contractor who might or not might not perform as efficiently. But this has become the right wing mantra and the public buys into it. They have somehow convinced the faithful and others that outsourcing is a way to save taxpayers money and make government smaller. When in reality the cost to the government is larger and it is merely a money-making proposition for the federal contractors and the politicians who get the campaign support from them. The taxpayer is the only loser in the process.

But the thing that puzzles me most is that Congress wants to contract out the work. If they belief is that the laws passed or regulations enacted are wrong, or that government agencies do not operate efficiently and it imposes undue hardship of employers, why not change the law or eliminate the regulations. Having a contractor perform the work still imposes the same regulations on companies it just pays someone else more money to do it. It provides neither efficiency to the process nor or less imposition on the companies.

One of the issues pointed out GSA Audit is that the contractor who received the original contract under the GSA regulations had in some cases sub-contracted the work out to other contractors who were not part of the original bid and may not provide the same level of efficiency nor security. So if the General Service Administration Inspector General’s audit is correct, it has cost the taxpayers billions of dollars in waste, abuse and even worse outright fraud!