Contracting, a New Disease

This whole intelligence leak/mess with Booze Allen Hamilton employee and computer tech, Edward Snowden, has me all riled up… but not for the reason that seems to have everyone else all riled up. Sure we aren’t jumping up and down for joy at either the security leak or the fact that someone can read all your digital communications and listen in on your phone calls, pretty much at will. But what really got my goat was the fact that this little high school dropout was pulling down around $200,000 a year before he was fired. And since he worked for a private company that billed the government, clearly his employer added overhead and substantial mark-up to that salary… and taxpayers foot the bill. Outrageous!

Let’s start with how many folks are cleared by the government to have access to classified materials. “Snowden had ‘top-secret’ security clearance, which, somewhat stunningly, is something that more than 1.4 million people have, according to a 2012 report from the office of the Director of National Intelligence… According to the report, which scrutinized the approval of security clearances, more than 483,000 government contractors — like Snowden, who was a contractor for the NSA [National Security Agency] at Booz Allen Hamilton and at Dell — had ‘top secret’ clearance as of last October. On top of that, another 582,000 have ‘confidential’ or ‘secret’clearance.” BusinessInsider.com, June 10^th.

Valerie Plame, the CIA agent who was “outted” from leaks that apparently emanated from the Office of then-VP, Dick Cheney, reacted to the Snowden revelation, and “called for the resignation of Director of National Intelligence James Clapper, saying that ‘as a former intelligence officer’ she finds it ‘astounding’ that upwards of 60 to 70 percent of the United States’ intelligence budget is spent on private contractors.” Huffington Post, June 19^th. Not only is this use of for-profit contractors the most expensive way to go, but it places layers of outside managers between those inside our government responsible for state secrets and the private employees who work for these outside companies charged with implementing our policies.

We are suffering from a plague of very, very expensive contractors with very, very deep campaign-contributing pockets replacing much less expensive (even with pension benefits and fringes taken into account) government civil servants. The fact of the matter is that to keep the number of government employees looking “smaller” than perhaps a full service government might employ, and to fudge budgets into different categories from personnel into procurement, the federal government has outsourced everything from personal security for our diplomats to out-and-out military and intelligence functions to “contractors.” And they’re not all the dark glasses fellows with nasty weapons in their hands like the folks above. They fit across virtually every governmental operation.

What’s worse, using contractors often negates our policy intentions. For example, when we provide foreign aid but require the recipient nation to use major American contractors to do any relevant building or engage U.S. contractors to implement our “gifts,” the locals see people with profit incentives doing the work… not generous donors helping them through their particular pain. What they see is the U.S. government taking care of their own. We just use contractors way, way too much these days. How much? Valerie Plame provided the above numbers within our intelligence community, but across the board, the numbers are out of control.

Back in 2011, the Project on Government Oversight (“POGO”) looked at exactly how much contractors costs the feds and “analyzed the total compensation paid to federal and private sector employees, and annual billing rates for contractor employees across 35 occupational classifications covering over 550 service activities. Our findings were shocking—POGO estimates the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services. Specifically, POGO's study shows that the federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services.” The Economist, September 15, 2011.

“POGO’s study compared [these] federal job classifications... The occupations included everything from auditing and law enforcement to food inspection. The results surprised even POGO investigators, who for years had tracked a dramatic increase in the amount the government spends on contracts—from $200 billion in 2000 to well over $500 billion in 2011.

“In 33 of the 35 job classifications POGO looked at, the average contractor billing rate was significantly steeper than the average compensation for federal employees. The two jobs where it was more cost-effective to hire contractors were groundskeeper and medical records technician.  So when the White House needs its lawn mowed, it shouldn’t hire in-house. Still, in every other case, it was cheaper for the government do the job itself…

“In some occupations, the difference in price was so dramatic, any coupon-clipping soccer mom could easily have seen the government was getting ripped off. When the government hired a claims examiner for example, it paid the contractor nearly five times more than if it had gone with a federal employee… ‘This is absolutely something taxpayers should be worried about. The government needs to be very careful about outsourcing work, especially work that is inherently governmental. It also costs so much more to privately contract,’ says Janine Wedel, a professor at George Mason University who specializes in the privatization of public policy and corruption.” PogoBlog.com, September 13, 2011.

The Economist asks the obvious question: “HOW could it possibly cost more for a government agency to hire a private consulting company with its own headquarters, executives, support staff, shareholders and so forth to prepare a bid for a project, compete for the contract, execute the project, compile reams of data proving what a great job it did on the project, and then spend the next six months lobbying the government to do a follow-on project and hire it again, than it would for the government agency to just do the dang job itself?”

Is our noble Congress doing anything about this? Here’s one absurd effort, token and way out of line anyway, of an attempt to set a limit one category of contractors in the Senate version of the proposed immigration bill (a long way from passage): “The labor groups that represent federal workers have applauded the Senate’s approval this week of a proposal to cap pay for border-security contractors at the vice president’s salary, which is $230,700…The measure, introduced as an amendment to the comprehensive immigration bill, passed by a vote of 72-26. Twenty-one Republicans supported the proposal, while three Democrats — Sens. Tom Carper (Del.), Tim Kaine (Va.) and Mark Warner (Va.) — voted against it.” Washington Post, June 21st.  And the Senate believes that at that number, they are saving a pile for the American public?!

Yup, Americans are getting ripped off, because the press for smaller government has resulted in the expansion of using private contractors at vastly higher costs to pretend that we are contracting government. We spend hundreds of billions a year more than we need to in order to keep employees off the direct public payroll! And the fact that these contractors are rich, busting at the seams with cash, means that they can afford massive lobbying efforts and sizeable campaign contributions to the self-same Congress that approves their profligate procurement compensation. The system is unlikely to die as long as Congress folk have their hands out for the next election. If someone really wanted to save billions a year, counter-intuitively, we would have a lot more direct government employees and a whole lot fewer outside contractors.

I’m Peter Dekom, this notion of saving money by bringing these functions in-house just cannot work; it just makes too much common sense!