Skip to Main Content
Project on Government Oversight

POGO Study: Private Service Contracts Cost Government Almost Double Expense of In-House Staff

Printer Friendly
September 13, 2011

The U.S. government is wasting billions of dollars each year paying contractors to do work that could be done for nearly half the price by federal employees, according to a first-of-its-kind report released today by the Project On Government Oversight (POGO).

The report, which analyzed 35 federal job classifications, debunks the myth promoted by industry that private contractors cost less than government employees. Instead, POGO’s study found that using contractors to perform services may actually increase, rather than decrease costs to taxpayers.

“Our report shows that not only has the federal government done a horrible job of creating competition in the marketplace, it actually has no idea what it should be paying for contract services,” POGO Executive Director Danielle Brian said. “As Congress and President Obama struggle to find ways to reduce the federal deficit, one of the first places they should look is the bloated federal contracting system.”

Since 2000, the amount the federal government spends each year on contracts has increased from $200 billion to well over $500 billion. Of that amount, the more than $300 billion it spends on services accounts for more than a quarter of all discretionary spending. Much of the increase was the result of the call to “reduce” the size of government.

Unlike other studies that compared the salaries of federal employees to their private sector counterparts, POGO’s analysis compared those salaries and benefits to what contractors actually billed the federal government for comparable services.

Of the 35 job classifications that POGO studied, contractor billing rates were on average 83 percent higher than what the government pays federal employees. In one instance, contractor billing rates were nearly 5 times higher than the full compensation paid to federal employees performing comparable services. Contractors were more expensive in all but two of the occupations—groundskeeping and medical records technician.

POGO’s study includes recommendations to reform the federal contracting system, including requiring agencies to adopt consistent job classifications and improve the way they track costs associated with government services performed by federal employees and contractors.

“We know this study isn’t the end of the debate,” said Scott Amey, POGO’s general counsel and an expert in federal contracting. “But the federal government needs to look at our analysis and ask why it’s paying a premium for work that could done for less by federal employees.”

Related Work