Sam Uretsky

Faith in the Private Sector

As everybody knows, private enterprise can do anything and everything better, faster, and less expensively than government can. That’s why we should shut down the government and privatize everything, except maybe Congress. After all, Congress is to the K Street lobbying firms what the Big Ten is to the National Football League – but other than that, one of the avowed goals of both parties has been to reduce the size of the federal civilian workforce.

On Sept. 13, 2011, the Project on Government Oversight, happily known as POGO, released a report that concluded the government is wasting hundreds of billions a year on private contractors.

While the private companies may pay their employees less than the government would pay a comparable worker, the price paid to the private company includes profit and overhead. Private sector workers may make less than those in the public sector, but private sector executives make way more than comparable federal employees.

The most dramatic illustration of cost excesses that POGO found was in the area of claims assistance and examining.

This is an essentiality clerical position which involves reviewing claims by and for the government. In this case, the federal employee is paid significantly less than the private sector employee, $57,292 for the government worker compared to $75,637 private sector (all figures are adjusted, as far as possible, for the costs of benefits). POGO found that the average annual contractor billing rate is $276,598 per year, which is not only 5 times as much as it would cost to have a government employee do the job, it costs more than the government pays a federal judge. In other examples, hiring an outside lawyer may cost the government $554,923, which is more than 3 times as much as it costs to have the government hire a staff lawyer (again, benefits are included.)

When the Army did a similar analysis, they found that if the employee lasted more than 2 years on the job, the initial costs were written off. Similarly, the Army reported that its current staffing was adequate to provide management over the private contractors without adding additional full time staff.

The New York Times interviewed James Sherk, the author of the Heritage Foundation salary study. The newspaper quoted him as saying, “It’s not a real apples to apples comparison, 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.”

Scott Amey, POGO’s general counsel and an expert in federal contracting said that the government routinely contracts for multi-year services, which would make hiring additional staff more economical than outsourcing the jobs.

Looking at the jobs that POGO studied, most are occupations such as food inspector, nurse, attorney, where long term employment is the rule, rather than the exception. You might want to hire a security guard for a single day to keep order at a party, but a Corrections Officer will be needed for as long as you have prisons. It appears that the POGO study is the more valid of the two since it compares actual expenditures. The Heritage Foundation analysis compared the amounts that the workers are paid, while the POGO study compared what the government is paying to have the work done, which is a very different matter.

The POGO study is worth examining. If it’s correct, and it seems to be, small government is a very big expense.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email sdu01@mail.com.

From The Progressive Populist, October 15, 2011