Outsourcing Government Functions
There is a story in the Washington Post regarding a move by the US Defense Agency to hire private contractors to gather and analyze intelligence data. While that all kinds of issues about privacy and security, there was one point at the bottom of the article that really caught my eye, (and why is it that the important information always seems o be at the end of articles?)
The committee questioned the additional costs involved in using contractors, citing an estimate that a government civilian employee costs on average $126,500 a year, while the annual cost of a core contractor, including overhead and benefits, is $250,000.
Many companies that provide contract workers to the CIA and Pentagon intelligence agencies are headed by former employees of those agencies. For example, Abraxas, which is run by a former CIA case officer, has hired -- and then contracted out to the government -- more than 100 former intelligence employees over the past six years.
This doesn't surprise me in the least. It is pretty much a running joke that the way to real wealth is to quit your government job and get hired back as a consultant to do the same thing.
One of the main arguments for outsourcing or privatizing government services is the contention that the private sector can do the job more efficiently and therefore cheaper. The truth is usually neither, and even if the first turn out to be true in some cases, it only means a greater profit margin for the companies, not cheaper costs for customers.
Hiring an outside contractor to do work is always going to be more expensive than finding an employee that can do the same task. That said, there is an argument to be made for hiring contractors to do work. The key is in ensuring that the work is of a temporary nature. If a position requiring considerable expertise is unfilled, hiring a contractor to fill in while a candidate is found can be beneficial.
The other use is usually for short-term projects that it wouldn't make sense to hire a full-time employee for. This is more common and also more problematic if the situation isn't closely watched. Some consultants have a tendency to use the knowledge gained while working on the project they were hired for to find or create more work for themselves and therefore keep the gravy train going. IT contracts tend to be notorious for this, in no small part because the knowledge base for such work is quite limited and because once you've installed a custom program, the only people who can service it are usually the people who did the installation.
Basic rule of thumb for this is: Hire employees to do the work in house for all but the most transitory of tasks. It will save you , and the taxpayer, money.
