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.
In fact, in many of the occupational classifications, federal compensation rates are not just lower than contractor rates but are lower than private sector ones. Naturally, the Heritage Foundation isn't letting this get in the way of some cherished beliefs:
James Sherk, a policy analyst with the Heritage Foundation and the author of [Heritage's] federal salary study, said he was skeptical of the POGO findings. “It’s not a real apples to apples comparison,” he said. “When the federal government hires contractors, it’s for the short-term. When they hire for the public sector, they are on the hook for the salaries and compensation for years.”
[POGO General Counsel] Mr. Amey counters that the government usually pays contractors for multiple-year jobs, not just short term.
Doubtless there are cases where using an expensive contractor is necessary—for instance, if the government needs highly specialized legal expertise it may make more sense to pay a high rate to an outside lawyer for a time rather than keeping such a lawyer permanently on staff. But cemetery administration services? Security guards? Government jobs should offer decent middle-class wages, but the rates private contractors draw for the same work, often double or more that of federal workers, deserve another look in the right's rush to privatize government functions.