U.S. contract workers cost 3X civil servants


When Eastman Kodak Co. was downsizing in the 1980s, it sometimes happened that a laid-off worker went back to work at Kodak as an employee of a temporary help agency.  There were cases where they were hired to do the same jobs that they had done before—except at lower pay and with little or no benefits.

Investigative reporter David Cay Johnson wrote that it doesn’t work that way with the federal government’s contract workers.

The budget deal just worked out between the White House and Capitol Hill … does nothing to curtail wasteful spending on companies that are among the nation’s richest and most powerful – from Booz Allen Hamilton, the $6 billion-a-year management-consulting firm, to Boeing, the defense contractor boasting $82 billion in worldwide sales.

In theory, these contractors are supposed to save taxpayer money, as efficient, bottom-line-oriented corporate behemoths.  In reality, they end up costing twice as much as civil servants … . Defense contractors like Boeing and Northrop Grumman cost almost three times as much.

via Newsweek.

The federal government does not count the number of its contract employees.  Prof. Paul C. Light of New York University is widely quoted as saying that, based on government procurement data, the number of employees working on government contracts exceeds the combined total of federal civil servants, postal workers and members of the armed forces, and employment of contract workers is increasing faster.

Johnson reported that there is a two-tier system for paying government contractors—a lavish system for profit-seeking corporations and a stringent system for charities and non-profit organizations.

For-profit contractors charge not just for salaries, but also for management pay and perks – like corporate golf outings and executive retreats – as well as the cost of renting space or operating buildings the contractors own, plus any other overhead.  In a congressional hearing in March Senator Claire McCaskill, D-Missouri, revealed that of the $31.5 billion in invoices contractors submitted to the U.S. Army, $16.6 billion was for overhead.

The nonprofit contractors that get federal contracts are varied.  They include soup kitchens and emergency shelter providers, some run by churches and others by secular institutions.  They are forced to operate under much more stringent rules than those regulating the for-profit sector.

A study by the investigative arm of Congress, the Government Accountability Office, found that many nonprofit contractors get between nothing and 3 percent of a contract to cover overhead, a sum the office said was woefully inadequate. Urban Institute studies show that overhead costs for nonprofit human services agencies typically run about 17 percent. 

“The government expects nonprofits to do work for less than the cost of doing the work,” said Rick Cohen, who negotiated nonprofit contracts with federal agencies and now writes about such issues for Nonprofit Quarterly.

via Newsweek.

It’s unlikely that the government will reduce contractor employment anytime soon.  Many government agencies lack the in-house capability to do the work they contract for.  The contract employees often serve as long as the civil servants and do the same work, but under less supervision than the civil servants.


The U.S. Government Is Paying Through the Nose for Private Contractors by David Cay Johnson for Newsweek.  Hat tip to Bill Moyers.

Use of Private Contractors Doesn’t Save the Government Money, Study Finds by Ron Nixon for the New York Times.  A 2011 study by the Project on Governmental Oversight as saying that contract employees on average are paid double what civil servants are paid for the same work.

DoD Contractors Cost Nearly 3 Times More than DoD Civilians by Scott Amey, general counsel for the Project on Government Oversight.  This article is the source of the chart at the top of this post.

The Real Crisis in Government by Paul C. Light for the Washington Post.    Prof. Light is an advocate of efficient government, which he says the United States lacks, and not just (or mainly) because of out-of-control contract employment.  Although Light is frequently quoted, few of his writings are available on-line.

America’s $320 Billion Shadow Government by Louis Peck for the Fiscal Times.

Government did a poor job on HealthCare.gov | A private firm might have done worse by Lydia DePillis for the Washington Post.

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