A new report from the Project on Government Oversight has found that "...in 33 of 35 occupations, the government actually paid billions of dollars more to hire contractors than it would have cost government employees to perform comparable services." It shouldn't surprise anyone that this directly contradicts conventional wisdom perpetrated by Republicans and even many Democrats.
In her excellent book Shadow Elite author Janine Wedel explained in detail how we've come to this point, and it's not a pretty story. Wedel explains that the theory of competition for federal contracts is a complete chimera and that federal outsourcing merely replaces a semi-transparent and accountable federal workforce with an opaque and unaccountable private monopoly workforce.
First, for many federal contracts there is no competition. Oftentimes there isn't even a bidding process anymore. Secondly, the companies that obtain federal contracts many times don't even use their resources that serve the private market to service the federal government. Instead, they setup separate divisions of their companies to deal exclusively with Washington so that any supposed efficiencies derived from private enterprise are obviated.
While partisan Democrats may latch onto this study to show the hypocrisy and error of Republicans in pushing the privatization of public services, it was a Democratic president and vice president who put the policy on steroids. Bill Clinton and Al Gore's program of "re-inventing" government radically shrank government payrolls while expanding spending and reducing both the transparency and oversight of federal government work.
Wedel explains in her book that Clinton and Gore radically changed the structure of federal contracting. Prior to the the Clinton Administration federal agencies that outsourced contracts had to post the desired work, take bids, and award a contract. Federal employees then monitored the work and evaluated it after the contract was finished.
Clinton/Gore changed the process to one of a company being "pre-approved" for government contracting. The result was that agencies now can contract directly with an outsourcing firm for work with a pre-approved contractor. Contracts are still required to be posted and bid on, but in reality it doesn't happen much of the time. Instead federal employees use personal contacts with private companies to hire them for work. Often times the requirements for the work are not publicly posted before, during, or even after the work is done. And because Clinton/Gore fired so many federal workers the institutional memory is so destroyed that no one is left to either monitor or evaluate the work, sometimes resulting in separate divisions of the same private company being hired to do the work, oversee it, and evaluate it. Is it any wonder that oursourcing federal work now costs twice as much as doing it in house? The only surprise is that it took so long to prove it.