Watchdog Says Outsourcing Increases Costs A watchdog group says service contractors are far more expensive than government employees. Industry organizations attacked the study as flawed and misleading. The Project on Government Oversight’s report, “Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors,” calculated that the government pays nearly five times as much for contract claims examiners as for federal employees doing the same work; three times as much for contract lawyers; and more than twice as much for accounting and auditing services performed by contractors. POGO compared average contractor billing rates posted in GSA schedules with federal employees’ annual compensation for comparable services. Its study covered 35 job classifications in more than 550 service activities. The investigators relied on average contractor billing rates because the government does not publish the actual billing rates for individual contracts. According to the study, federal employees cost more than contractors in only two of the 35 categories: groundskeepers and medical records technicians. POGO acknowledged several factors that may “limit the accuracy” of its findings. The investigators said federal agencies may negotiate lower rates than ones posted by contractors, but they said the government does not usually do that. POGO acknowledged that it cannot measure the full overhead costs for government employees in such areas as workspace rent, insurance, and administrative and IT support, because the data is not available. Overhead and support costs are factored into contractor billing rates. Critics in industry said POGO’s analysis is flawed and leads to false conclusions because it failed to account for the government’s full costs. They argued that contractors, unlike federal employees, can be hired for a single project and let go when the work is finished. Another recent analysis of the issue, published last spring by the Center for Strategic and International Studies, concluded that “it may often be impossible for even the most expert and objective observer to compare in-house and contractor costs with any useful degree of accuracy,” because of gaps in data. (SAA, 5/27) Last year Defense Secretary Robert Gates canceled DOD’s ambitious insourcing program, saying it had not achieved the anticipated savings by bringing work in-house.