U.S. Wasting Billions on Over-Priced Service Contracts; Government Lacks Data to Make Informed Contracting Decisions, POGO Tells Congressional Subcommittee

The federal government more than doubled its spending on service contracts over the last decade, despite having inaccurate data on the “true” cost of those contracts—largely because of the misguided notion that outsourcing is more cost effective than using federal workers, the Project On Government Oversight (POGO) told a Senate subcommittee today.

The flawed system is costing taxpayers billions of dollars each year, POGO General Counsel Scott Amey told the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight in written testimony.

Amey urged Congress to overhaul the way it tracks service contracting costs ($320 billion last year) and how it compares those cost to the expense of hiring federal workers. As a guide he referred them to POGO’s ground-breaking Bad Business report released in the fall, which found that using contractors to perform services may actually increase, rather than decrease costs to taxpayers.

Of the 35 job classifications that POGO studied, contractor billing rates were on average nearly double what the government pays federal employees to do the same work. 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.

The money wasted on hiring service contractors is the result of the government operating under two myths, Amey wrote. The first is that contract employees do not increase the size of government, despite the fact that they are paid with taxpayer dollars, often work inside government office and perform government functions. The second myth is that the private sector is in all ways more cost efficient, more innovative and more flexible than government.

“Most of us wouldn’t buy a new car without, at the very least, doing some comparison shopping. So why is the government spending hundreds of billions on service contracts without knowing what those services cost in comparison to doing the work in-house?” Amey said. “The government has been making contracting decisions based on incomplete, inaccurate and flawed data, and it’s costing taxpayers billions.”