Hoodwinked on outsourcing

This administration is playing fast and loose with the lives of federal employees through its efforts to downsize government. It has undertaken this effort based on the assumption that outsourcing creates a more efficient and less expensive government. In fact, federal managers have no way of determining whether they could do outsourced work more efficiently in house, and statistics indicate that outsourcing costs more.

Since 1993, the executive branch civilian work force has been reduced by 317,877 through downsizing efforts. In the process, federal managers have seen their numbers thinned by 26 percent compared with 14.6 percent for the rest of the federal work force. That probably makes sense; the federal government often has been criticized for having too many chiefs.

But most of the downsizing has not been achieved by reducing the ratio of supervisors to workers. Most of it has been achieved by contracting out services previously performed by federal workers.

Some functions certainly can be performed more efficiently by the private sector, but even more outsourcing is on the way. The Defense Department plans to study 229,000 civilian employee positions for possible conversion to contractor performance by 2003.

According to Paul Light, director of the Center for Public Service at the Brookings Institution, federal expenditures on contracting for services created 4 million jobs in 1996. That is more than twice the number of executive branch civilians (1.9 million) employed by the government in 1996.

If these figures are correct, then not only is President Clinton playing politics at the expense of federal employees, but American taxpayers are being hoodwinked. The only legitimate reason for contracting out a government function is to save money. These numbers suggest that the opposite is happening.

There is no denying the fact that competition lowers costs, and competition between the private and the public sector can produce savings for taxpayers. The problem is that there is no reliable data to let us measure these savings.

"Under pressure to create a government that looks smaller and delivers at least as much of everything as the public wants, federal departments and agencies did what came naturally: They pushed jobs outward and downward into a vast shadow that is mostly outside the public's consciousness," Light said.

The Federal Managers Association reported that competition, not contractor performance, produces savings. The FMA said contractors submit unrealistically low bids and then increase prices after they win the competitions.

The General Accounting Office lent credence to the FMA's assertion. "Changes do occur in outsourcing contracts, sometimes fairly soon after contracts are awarded, which can reduce the magnitude of savings expected over time," a recent GAO report said.

Under contracting rules in OMB Circular A-76, a government function that remains in house as a result of competition with the private sector must be periodically audited to determine if the government remains the most cost-effective provider of service. But private contractors who compete successfully for government work are not subjected to similar scrutiny.

"Once work moves to the private sector, there is no way to know if Americans are still getting the best deal for their hard-earned tax dollars," the FMA said.

Although FMA officials may have their own agenda to promote, what they are saying is right on the money. They said Congress should close this loophole in contracting rules and provide a mechanism for automatically reviewing contracts that have exceeded their initial projected costs to determine if the work could be performed more efficiently in-house. I couldn't agree more.

DOD claims that it will save $11.2 billion between fiscal years 1997 and 2005 by allowing the private sector to compete for 229,000 civilian positions. DOD is so confident it will achieve these savings that it already has factored them into its budget.

I will bet you a cup of coffee that some contractor worked up those numbers for DOD.

--Bureaucratus is a retired federal employee who contributes regularly to Federal Computer Week.


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