But-but-but, Markets! Choice! Pampered Government workers!Since the 1990s, the outsourcing of what were once considered to be public services has grown exponentially, while the size of the federal workforce has fallen significantly. The rationale for these deep reductions in the public sector is that private companies are more efficient. The privatizers claim that they can render the same services as civil servants for less, even after making a profit.
In theory, these contractors are supposed to save taxpayer money, as efficient, bottom-line-oriented corporate behemoths. In reality, they end up costing twice as much as civil servants, according to research by Professor Paul C. Light of New York University and others has shown. Defense contractors like Boeing and Northrop Grumman cost almost three times as much.
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The contractor's people don't get all that money, the contractor takes maybe half for its execs and shareholders. eg, $140/hr contractor's person pockets maybe $70/hour. And of course the contractor's employees retirement fund is almost certainly underfunded as execs and shareholders pocket instead the companies' contribs to the employee's pension.
Outsourcing govt functions is nothing but redistribution, loved by conservatives, from taxpayers to the wealthy.
When Outsourcing Public Services to Private Companies Goes Wrong
But whether they like it or not, Virginia taxpayers are stuck with the toll reimbursement deal for the next four decades, or until the firms post $100 million profit, according to In The Public Interest (ITPI), a policy group that examines government contracting. Voters can't vote the consortium of private companies out of public service if carpooling becomes popular.
The Virginia carpooling toll deal is just one example on a list of "failures" that illustrate the problems that can arise when cash-strapped governments outsource public services to private companies that put profit before the public interest, according to a recent ITPI report.
Perhaps the most alarming outsourcing nightmare is the CityTime scandal in New York City. In 1998, the New York City contracted Science Applications International Corporation to modernize the payroll system that tracks the hours clocked by city workers. The project, known as CityTime, initially was projected to cost $63 million. But by 2010, the city had spent $700 million on the project.
ITPI's recent report, "Out of Control: The Coast-to-Coast Failures of Outsourcing Public Services to For-Profit Corporations," details outsourcing failures that undermine transparency, accountability, "shared prosperity" and compe ion in the sphere of public services. Here are some highlights:
- In 2006, Indiana signed a lucrative contract with IBM to manage the state's food stamp and Medicaid eligibility screenings. Thousands of low-income and elderly residents were dropped from the public service systems erroneously, including an Evansville man who died of heart problems in 2009, more than a year after being denied Medicaid benefits. His wife told Indiana lawmakers that he was denied Medicaid after repeatedly mailing in information requested by IBM. In another story that received media hype, a nun fighting cancer lost benefits after failing to call an eligibility hotline while being treated for congestive heart failure in the hospital. She tried several times to reschedule without success. In 2009, Indiana tried to end its working relationship with IBM amid the controversy, but a costly court battle over the contract continues today.
- An estimated 80 percent of the 5.4 million people working for federal contractors in 2008 earned less than a living wage for their city or region. Low-wage workers often rely on public assistance such as food stamps to make ends meet.
- A consortium of private companies holds a 99-year contract over a toll road in Denver. In 2008, the consortium objected to planned improvements for a free local road near the parkway, arguing that the contract prevents the city from maintaining roads that "might hurt the parkway financially" by providing an alternative route around the tolls.
- As Truthout has pointed out in the past, private jail and prison contracts often include "occupancy quotas" that require state and local governments to maintain high occupancy levels in facilities or pay fees for empty beds. A recent report by ITPI found that 65 percent of for-profit state and local prison contracts include such quotas. Such contracts run counter to many states' goals of reducing prison population and increasing inmate rehabilitation.
http://truth-out.org/news/item/20546...ies-goes-wrong
Uh, private companies pay contractors and consultants more than their regular employees, too.
What is that doing? looking at hourly wages vs paying a contract per employee?
Contracts are more efficient in that they come and go. Employees have costs that are not seen like their benefits, that are paid later like retirement, but up front to contractors. Contractors like Grumman also have R&D expenses not seen in federal worker salaries.
Dude put down the pipe.
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