Gov outsourcing is 1.8 times more expensive - US

A very apt topic given the impending Lieberal sale of the New South Wales electricity network. The same with the job search thing at Centrelink that David is using to look for work; the gov run one closed recently and was outsourced to a private job search company. David said the private people are very unprofessional in comparison, and they didn't even ring him to arrange an appt. He had to ring them to organise it. Bloody hopeless. He's on the Carers Payment now, but imagine on Newstart if he'd had to report to Centrelink and they asked him why he'd not been looking for work. He'd have to tell them the job search place didn't ring him to arrange the first appt with them. He's still using them to find something voluntarily, but he's not impressed.

Anyway a study done in the US, the Project on Government Oversight (POGO) has found that outsourcing gov services doesn't save money at all, and is on average 1.83 times more expensive than simply having gov employees do the work. The study is summarised thus:

Contrary to popular belief, many government services are not performed by federal employees, but by contractors. The government spends hundreds of billions of dollars annually on services—in fact, approximately one-quarter of all discretionary spending now goes to service contractors[209]—and POGO’s analysis found these contracts may be costing taxpayers, on average, 1.83 times more than if federal employees had done the work. In order to reduce those excessive costs, a government-wide system to conduct federal employee versus service contract cost analyses needs to be created. Instead of directly hiring service contractors without considering hiring federal employees—perhaps from a newly created pool of part-time or temporary federal employees—conducting cost reviews at the start of the process would allow the government to save billions of dollars annually. 

Federal agencies should move aggressively to limit or curtail service contracting, unless contractors can show that they both save taxpayer dollars and enhance performance as compared to when the work is performed by federal employees. In no event should agencies contract for work that is inherently governmental work, or closely associated with inherently governmental work, and agencies should curtail or eliminate the outsourcing of services that have been poorly performed by contractors—whether due to quality of the work or cost issues, including cost overruns. 

Based on POGO’s findings, we believe awarding government service contracts is nearly always more expensive than having such work performed by federal employees, even after accounting for the total cost to the government of federal employee fringe benefits and associated overhead costs. 

Under the current federal personnel and service contracting systems, waste to the tune billions of dollars a year will continue for the foreseeable future. The government’s failure to ameliorate its reliance on service contractors, its failure to base outsourcing actions on cost analyses, and its failure to review existing contracts for potential cost savings have serious budget consequences. - PDF