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View Diary: Low-wage contract workers in Michigan veterans home come with hidden costs (31 comments)

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  •  Correct. Contracting out is usually more Expensive (2+ / 0-)
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    sharman, salmo

    You are absolutely right.  I work in a very large school district that contracts out significant amounts of work.  I know for a fact that contracting out "generally" costs more money.  Even studies have shown that.  While there are few exceptions to the rules, over 70% of the time government (the people) are getting swindled.

    Not only does the company have to pay taxes, etc. on the workers behalf, but they have lots of overhead, including profit margin.  In addition, the state has to hire staff to process contracts, auditing, payments, etc.  So that's extra staff they had to hire.  

    At my school district, contracting billing rates are about $200,000 versus $95,000 per employee, give or take.  That includes benefits, taxes, profits, pensions, overhead, etc.  

    Of course, what this means is someone is getting lots of $$ on the side.  Corruption at its finest and nobody is doing anything about it.

    •  wow (1+ / 0-)
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      salmo

      Outsourcing at publicly traded companies is the model I'm familiar with.  Unless the work is really short-term, of course it costs more.  But it allows the company to tell the Street that they've trimmed the labor force, for which they get cookies.

    •  10% is the normal kickback rate (0+ / 0-)

      When I worked for the State of Ohio in the early '70's  the standard kickback rate was 10%.  I know this because I was directed to supervise one of those contracts awarded after the lame duck Governor got a $200,000 "campaign contribution."  Looking the documents to that point over, I was perplexed.  So, I asked around, and got the lay of the land, so to speak.  There wasn't much I could do about the origins of the contract, it was public knowledge so blowing the whistle was futile.  What I could do was refuse to pay the contractor's monthly bills until and unless the work required was satisfactorily performed, and documentation of all claimed expenses were in order.  

      After three months of non-payment and increasingly acrimonious meetings, I was summoned to my boss' boss' office, where my intransigence was questioned.  I had the files,  the submittals of "work" performed, the claimed basis for the bills, and the contract.  The idea was to browbeat me into authorizing payment.  Fortunately for me, but not for the citizens of the State, the contractor had demonstrably failed to even pretend to work - the whole thing stunk of the corrupt payoff that it was.  

      I was told that in Ohio, honest politics means that when you are bought, you stay bought (really, in those words).  I said that my integrity wasn't for sale, and I sure as hell hadn't been bought in this instance.  I also said that if he wanted to authorize payment, he could, but not with my signature.  And so he did.  For what it's worth, that was not my best career move.  I joined the union with the attorney my friend in the AG's office said was the one his office least liked to oppose in court.  I also got out of there at my earliest opportunity.

      There are several points to this ancient history.  First, those kickbacks amount to a lot of money, even at the state and local level.  Second, the outsourced work is always more expensive, especially so when the actual work performed is shoddy or non-existent, which it will be when the whole deal is crooked and there are no penalties for non-performance.  Third, the citizens were cheated out of the work for which they had paid and damaged by its absence.  Fourth, the benefits of that union were significant to me and they should have been significant to the citizens in a less corrupt environment.  Finally, the agency didn't develop the staff, expertise, and experience to undertake this and similar work in the future, so the damage was compounded.  I see nothing to suggest to me that these lessons apply less forcefully today than they did then.

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