BUSINESS
09/14/2011 01:00 pm ET Updated Nov 14, 2011

Federal Workers Cheaper Than Private Contractors, Study Finds

The federal government could save billions of dollars by doing more work in-house instead of outsourcing to private contractors, a new study shows.

The Project On Government Oversight found that the federal government pays private contractors on average 1.83 times more than it pays its own employees for the same work, according to the group's study released yesterday. In 12 out of the 35 occupations categories POGO analyzed, the federal government paid private contractors more than double the rate of federal government employees for the same services.

The study indicates that a widely held view -- that privatizing government services would make them cheaper -- may be wrong. Despite the POGO study findings, Republican candidates for president are touting the notion that the government spends too much money staffing its own ranks as they campaign for their party's nomination for president.

Marick Masters, a professor at Wayne State University in Detroit, said that while the study doesn't compare the overhead and material costs of government projects to those of private contractors, it indicates that the government could be spending too much of private sector contracts.

"We want to take a good careful look at the real cost of contracting these services and whether we're getting as much out of it as possible," he said.

One way of doing this, POGO suggests, is for Congress to make the pricing process for awarding federal contracts more transparent, among other recommendations.

"The federal government is not doing a good job of obtaining genuine market prices, and therefore the savings often promised in connection with outsourcing services are not being realized," the report said.

Though the study finds that the government spends more overall on private contractors than on government workers federal government employees make 5 percent more per year on average than a private sector worker performing a similar services, according to an ABC News report. This may be because government workers are more likely to have benefit plans. About 20 percent of private sector workers have pension plans, compared to 79 percent of public sector workers, according to the ABC report.

The POGO report stands in contrast to a study published in 2010 by conservative think tank The Heritage Foundation, which advocated hiring more private contractors because government workers earn more than private sector workers performing the same services, even when accounting for skills differences.

Even with debate on the issue still brewing, Republican presidential candidates are advocating on the campaign trail to shift more government work to the private sector. Former Massachusetts Governor Mitt Romney, one of the front-runners for the Republican nomination, said there are "too many" workers in the federal government's ranks during a New Hampshire campaign stop last month, according to Think Progress.

"Federal employees, we’ve got too many of them, and they’re paid too much," he said. "In many cases, they do a good job, we respect the work that they do, it’s important work that they do. We just have too many."

Texas Governor Rick Perry, another Republican frontrunner, has said repeatedly that he believes the government isn't a place for job creation, even as he grew added state government workers during his tenure as governor, according to an ABC News report.

Republicans aren't the only ones wary of the cost of government workers. President Barack Obama enacted a two-year freeze on the salaries of government workers in November that could harm "the government’s ability to hire and retain federal employees and thus increase the need for contractors," according to the POGO report.