Federal agency insourcing: why government costs so much.

• Author: Goure, Daniel
• Position: VIEWPOINT

* Over the past two years, the Obama administration has constructed a maze of executive orders, directives, regulations and findings all for the purpose of reversing more than a decade of outsourcing government work to the private sector.

The policy is now insourcing, which is the replacement of private sector workers with government employees. The overall effect is that tens of thousands, maybe even hundreds of thousands, of jobs that were once in the private sector have migrated into the public domain with all the attendant disruption of ongoing work and additional costs.

In 2009, Secretary of Defense Robert Gates went well beyond the administration's campaign to protect work deemed inherently governmental when he announced a major policy shift that sought to reduce the department's reliance on private contractors and increase the number of government employees involved in oversight, management and planning of defense activities and procurement programs.

One stated objective of the secretary's program was to save money by shifting work done by the private sector into the public defense industrial base. Defense Department components used the secretary's directives on insourcing to bring work successfully performed by the private sector or by collaborative public-private teams back within the government.

Central to the logic that underpinned the Defense Department's insourcing campaign was the assertion that such work could be performed more cheaply by the public defense industrial base. Pentagon sources estimated an average savings of $44,000 a year for every contractor it replaces with full-time federal personnel. One government insourcing directive asserted that the public defense industrial base was 40 percent cheaper than the comparable private sector. Business case analyses conducted by the Defense Department on maintenance and support work appeared to confirm the assertion of a cost differential in favor of the public work force.

Yet, readily available public data strongly refutes assertions that the public sector work force is cheaper than its private sector counterparts. A study by the Cato Institute using federal government data concluded that in 2009, the average federal civilian wage was $81,258 per year, compared with $50,462 in the private sector. Using similar data, USA Today also reported a significant gap between public and private sector workers. Moreover, the gap between average federal salaries and those in the private...