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If the contractors are earning well and shows the less to the Government, then I would appreciate President's decision to make cut off at least 10 percent of all spending.

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Mr. Hale’s suggestion that DoD needs to assess the cost associated with contractors is logical and is a process that should be ongoing. However, the question of whether contractors are more expensive than federal personnel is not nearly as simple as many believe nor is it the only basis on which such decisions should be made. Too often such comparisons fail to account for all relevant costs; moreover, the question of level of skills and capabilities (otherwise known in acquisition circles and law as “best overall value”) is also highly relevant.

First, in many areas where outsourcing has occurred, contractors replace military personnel in order to free up needed troops for their primary missions. According to the Congressional Budget Office, which conducted a major review of the role and costs of contractors in Iraq, even private security personnel—widely agreed to be among the more expensive of contractor personnel—cost no more than soldiers, when all costs are included.

Second, most analyses of the costs of contractor and government personnel have been based on an “apples to oranges” comparison, in which the total billed cost of contractors is compared to only the immediate salary and benefit costs of equivalent government personnel. While using the billed cost as a baseline is appropriate, since it is the cost the government pays, it is entirely inappropriate to exclude from that comparison the long term, often lifetime, benefits (health, retirement, etc.) provided to federal personnel. Likewise, it is also inappropriate to exclude overhead costs (office space, equipment, support, etc.) that is common to both industry and government (and which is a significant portion of a “billed cost” but rarely, if ever, included in government “in-house” analyses). These are all real costs paid with our tax dollars. 

Further, the federal employee unions have long maintained, and correctly so, that there is a “pay gap” between private sector employees and federal employees performing similar work. This gap is particularly evident in the professional and technical fields. As such, perhaps the principal question we should be asking is not whether contractors are “too expensive” (and thus, work should be in-sourced) but, rather, why the government continues to lag in pay and benefits for the very types of technically skilled workers it needs? After all, those skills are in generally short supply across the economy, even in the current economic climate. This is one of the principal reasons the government today has so many positions open, particularly those involving high end professional and technical skills. And it is time to recognize that the government, like its contractors, is competing for those skills in a dynamic and highly competitive global marketplace.

For one to really understand the relative costs of contractors to federal employees and use that information as a tool for making decisions as to who should perform the work, the American taxpayer deserves to know the analyses are based on an equivalent set of factors. Ironically, current “in-sourcing” authority provided under the recent Omnibus Appropriations bill requires no such analysis at all; it simply allows the government to in-source currently contracted work without benefit of any real cost or performance assessments. Shouldn’t we demand that it cut both ways?

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