The Real “Waste of Taxpayer Money”: Contracting-Out
Contracting-out is a vast and growing part of the U.S. federal government. Outsourced government mushroomed from $200 billion in 2000 to $530 billion in 2011. Indeed, the majority of government functions at the federal level may already have been outsourced. Studies indicate that the ratio of private contract workers to civilian government employees is likely four to one, or even higher.
Contrary to common assumptions, contracting out generally costs more than direct government provision. A 2011 report by the Project on Government Oversight (POGO) found that, on average, the federal government pays contractors at rates 1.83 times greater than federal employees’ total compensation, and more than 2 times the total compensation paid in the private sector for comparable services (Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors
). 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.”
This finding is contrary to beliefs shared by those inside and outside government, public workers and politicians, on the political left and right. It is a belief that springs from the axiom of mainstream economics, itself unsupported, that markets are more efficient than government and that therefore private providers—inspired by the profit motive—are more efficient and will cost taxpayers less. Instead, research shows, contracting-out generally cost more.