Contracting, A Dangerous Disease

Think about it. How many government “contractors” have been involved in security leaks (a la Edward Snowden), international incidents (Blackwater, Benghazi), failed system design (Affordable Care website), and even murder (the September 2013 killing of 12 Navy Yard workers)? Background checks are required, but when people with serious patterns of arrest and mental illness get access to sensitive materials or are allowed to carry and use weapons in the furtherance of their duties, with contractors having their own subcontractors and layers of employees, the risks to a top-heavy system are overwhelming.

The problem is that as budget pressures force downsizing, it looks good to show how many civil servants or federal uniformed services personnel you have removed from the federal payroll. Pension obligations and health benefits are no longer a federal line item in budget negotiations as well. But if you want to provide the same services or your higher-ups think they must provide the same services, hiring “contractors” comes from an entirely different budget category – much easier to hide – than seemingly bloated federal payrolls.

We’ve outsourced clear government functions, like guarding U.S. embassies even in the most critical of situations, to subcontractors all over the world. A British security film failed our diplomats in Benghazi, but there are U.S. diplomatic installations all over the world with what has to be, at best, questionable outsourced security. I’m a U.S. Foreign Service brat. The Marines that assumed that guard function in my youth have been substantially replaced by “contractors.” “[S]ome [diplomatic security] firms recruit employees in Africa, South Asia and Latin America, sometimes from war-torn nations with high levels of poverty, such as Namibia, Uganda, Mozambique and Burundi, to protect our embassies. That wouldn’t be a problem if the companies could ensure the qualifications, training and backgrounds of those hired — but they haven’t shown they can.” New York Times, October 3^rd.

It’s not like the writing is only recently on the wall. This is not a new problem, just a problem that no one seems to want to solve. “Earlier this year, the State Department’s inspector general released an internal audit of security contracts at United States Embassies. Of the six examined — chosen because of a mixture of terrorism threat and location — none had fully met the terms for screening private contractors, placing ‘embassies and personnel at risk,’ the audit found. As The Washington Post reported, ‘Chief diplomatic security officers at five of the six were said to have performed ‘inadequate oversight’ of local guard vetting.’ Yet we rely on such contractors to provide the first line of defense against an attack…

“On Aug. 31, 2011, after three years of study, the Commission on Wartime Contracting in Iraq and Afghanistan, appointed by Congress, exposed, in its final report, unnerving facts about ‘overreliance’ on contractors. In noting the difficulties of vetting and overseeing Afghan security guards, for example, it told the story of guards huddling in their beds while insurgents attacked the combat outpost they were hired to guard. ‘Delay and denial are not good options,’ the commission found. ‘There will be a next contingency, whether the crisis takes the form of overseas hostilities or domestic response to a national emergency like a mass-casualty terror attack or natural disaster.’” NY Times. But nothing has changed.

But are we even saving money for our beleaguered taxpayers or just shifting money around? What are the criterial that government agencies required to follow in selecting outsource vendors? The Government Accountability Office looked into the requirements (which are pretty much what they were in 1994), and the “GAO found that: (1) the Office of Management and Budget's (OMB) Circular A-76 requires agencies to conduct cost comparisons in determining whether to contract for commercial activities but does not require such cost comparisons for advisory and assistance services; (2) its review of nine cost-comparison studies for advisory and assistance services indicates that such comparisons can be useful when they include analysis of the cost elements that A-76 requires; (3) some studies limited their methodologies to comparing direct agency labor costs with contract labor costs; (4) only one of the nine studies considered such noncost factors as quality of service, timeliness of service, federal employee availability, variable work requirements, or whether services were short- or long-term; and (5) the proposed OMB expansion of its A-76 guidance to include advisory and assistance services is in accord with National Performance Review suggestions that individual agencies compete with other agencies and private companies to provide support services, agencies have the flexibility to obtain services from the best possible source, and agencies emphasize operation cost ceilings rather than personnel ceilings in making contracting decisions.” GAO website. But are they cheaper than using federal employees directly? Hmmm?

With numbers of contractors trending upwards, tempered by the Sequester, “service contract spending exceeds the amount of federal contract spending on goods. In fiscal year 2012, the federal government spent over $307 billion on services, nearly 60 percent of the $517 billion awarded for all federal contracts. The Government Accountability Office (GAO) reported that in fiscal year 2011, nearly 80 percent of all civilian agency contract spending was for services—services such as professional management and information technology support.” Project on Government Oversight (POGO), April 13, 2013.

The above POGO report summarized an earlier study (the 2011 Bad Business report) they had conducted that truly has not been addressed to this very day: “POGO’s study analyzed the total compensation paid to federal and private sector employees and the annual billing rates for contractor employees across 35 occupational classifications covering more than 550 service activities. POGO found that the government pays billions of dollars more annually to hire contractors than it would cost to hire federal employees to perform comparable services. “Specifically, 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 (including benefits), and more than 2 times the total compensation paid in the private sector for comparable services.

 “POGO’s Bad Business report also found:

“Federal employees were less expensive than contractors in 33 of the 35 occupational classifications POGO reviewed;

“In one instance, contractor billing rates were nearly 5 times more than the full compensation paid to federal employees performing comparable services; and 

“Private sector compensation was lower than contractor billing rates in all 35 occupational classifications we reviewed.

“Most importantly, our study found that the federal government has failed to determine how much money it saves or wastes by outsourcing, in-sourcing, or retaining services, and has no comprehensive system for doing so.” Nothing has changed. We just cannot afford to let the supertanker of government operations continue to drift, without seeming focus or direction, towards the rocky shoals of expensive, unproductive, and wasteful insolvency.

I’m Peter Dekom, and we face mid-term elections, I bet that our gridlocked government will continue to fail to deal with what matters and how it matters.