Outsourcing - the greatest waste of money ever undertaken by the government

[Simple Simon]

OK, we all know that hiring externals is often more expensive than hiring permanent government workers - in the long run. However, the state don't save much even if the work load is intermittent, because they often hire people who - be necessity - do a worse job than a permanent employee would. So outsourcing is often at best cost-neutral.


Today, though, I heard of the most absurd nonsense I ever encountered with respect to outsourcing:

A friend of mine quit his job with the state, because they paid badly, refused to let him get better qualification, and did not create new jobs when the workload intensified.
They also shoved him from an interesting, stimulating job to a boring one despite guarantees that he would not be employed below his qualification level.
As a result of his quitting, they now need an external, and they have a general contract with a certain firm - where he now happens to be employed. So that firm is going to send him to the state for one year at ten times(!) the daily rate that he earned before. Granted, there's benefits etc, so they end up paying only 3 times as much as if they had given him a raise and he had stayed. Only three times!


morons

 

[Cutlass]

But getting private contractors to do the work always saves the government money....

 

[Patroklos]

OK, we all know that hiring externals is often more expensive than hiring permanent government workers - in the long run. However, the state don't save much even if the work load is intermittent, because they often hire people who - be necessity - do a worse job than a permanent employee would. So outsourcing is often at best cost-neutral.

False.

Case in point, when four of my Navy ratings are replaced with contractors in 2010 it will save my command 100K a year. Thats just salary, if you throw in benefits and required training it is easily up to 500K a year, and if you factor in that none of those contractors will ever draw retirement, it easily goes in to the multiple millions.

I am someone actaully dealing in the topic at hand, you are someone whining over anecdotal evidence that you have no way of confirming. You are wrong, get over it.

 

[Simple Simon]

False.

Case in point, when four of my Navy ratings are replaced with contractors in 2010 it will save my command 100K a year. Thats just salary, if you throw in benefits and required training it is easily up to 500K a year, and if you factor in that none of those contractors will ever draw retirement, it easily goes in to the multiple millions.

I am someone actaully dealing in the topic at hand, you are someone whining over anecdotal evidence that you have no way of confirming. You are wrong, get over it.

Why are you so aggressive? Are you planning on becoming one of the overpaid contractors?

FACT is that in the last ten years the Rechnungshof Baden-Württemberg, the authority that checks state spending in the state I know best, has found that in most cases, on paper the outsourcing saves money, but in retrospect it comes out at best even - and usually for a lower quality of work.

now maybe the Navy is a charlie-foxtrot, and wastes so much money that even outsourcing will help. But I'll leave you with one simple question:

Qualified people want to be paid at a level that befits their qualification. For externals, you also pay additional taxes and wages for their bosses. How then can you get equal quality for less money, unless you either underpay the externals or overpay your own people?

 

[Nylan]

Qualified people want to be paid at a level that befits their qualification. For externals, you also pay additional taxes and wages for their bosses. How then can you get equal quality for less money, unless you either underpay the externals or overpay your own people?

What do you call retirement, training, and benefits?

 

[Simple Simon]

What do you call retirement, training, and benefits?

Pay.

These are forms of payment. And the externals, the people working for the contractors, also want to be trained, want to get retirement pay, want to get benefits. That's why the daily rate for them is so much higher. In the end, however, you simply pay more people.

 

[Nylan]

These are forms of payment. And the externals, the people working for the contractors, also want to be trained, want to get retirement pay, want to get benefits

Hiring a trained person/organization is much cheaper than training them yourself.

That's why the daily rate for them is so much higher. In the end, however, you simply pay more people.

Have you done the math on this, or are you just blowing hot air?

 

[Patroklos]

Qualified people want to be paid at a level that befits their qualification. For externals, you also pay additional taxes and wages for their bosses. How then can you get equal quality for less money, unless you either underpay the externals or overpay your own people?

Example One: I need accounting work, but only so much. I can either pay an accountant year round to do non year round work, or I can pay an ousider twice the amount I would pay the year round guy but only for a quarter of the time.

Example Two: I need accounting work, but I am required to offer health and benefits plus retirement. Depending on the math, the total of that heath care/benfits/30+ years of retirement pay can easily be more than whatever percetage more in pay I would have to offer a contractor.

Example Three: I can fire a contractor whenever I want. NEVER UNDERESTIMATE THIS ONE!

Example Four: In Navy (and many government agencies) I am required to keep my personel proficient in all sorts of skills like shipboard firefighting, weapons qualifications, security clearances, etc. by virtue of them being in the military. They might not be using those skills at this moment, but at any time they may be required somewhere they do. So, while my SK1 is currently managing government credit card records, next year he might be running a fire team in a destoyer engine room. That training is very expensive, and a civilian contractor won't require any of it.

Example Five: If I get a crappy government employee assigned to me I am stuck with him unless he murders someone or rapes the mail clerk. If a contactor is subpar I just pull out the contract, point to the agreed upon level of service, and I get a new contractor (I do this all the time) or a free extention to the cotract until I get what the MOA states.

 

[Simple Simon]

Hiring a trained person/organization is much cheaper than training them yourself.

unless you require their services on a regular basis. We are here not talking about a few days, or even weeks.

Have you done the math on this, or are you just blowing hot air?

The responsible state authority has, and found the maths working out nicely for short time hire. But we are here talking a full year, and a general contract means they expect to do this often.


Patroklos: I am not talking about any of your scenarios. Read my example: it is long term, the pay is higher, and so is the qualification of the hired. Also, sub-par state employees can be moved to other jobs, too.

 

[Nylan]

A friend of mine quit his job with the state, because they paid badly, refused to let him get better qualification, and did not create new jobs when the workload intensified.
They also shoved him from an interesting, stimulating job to a boring one despite guarantees that he would not be employed below his qualification level.

Sounds like they could use a contractor

unless you require their services on a regular basis. We are here not talking about a few days, or even weeks.

The responsible state authority has, and found the maths working out nicely for short time hire. But we are here talking a full year, and a general contract means they expect to do this often.

So let's throw the numbers and evidence out the window because we've got a hunch, why don't we?

Patroklos: I am not talking about any of your scenarios. Read my example: it is long term, the pay is higher, and so is the qualification of the hired. Also, sub-par state employees can be moved to other jobs, too.

Even if you were right in this very narrow, specified case (which you aren't), making sweeping generalizations about outsourcing being the stupidest thing government could do with its money is a ridiculous leap.

 

[Nylan]

My post had twins.

 

[Simple Simon]

Nylan, the simple fact is that this authority has been criticized by the accounting control authority for wasting money by hiring contractors instead of creating jobs. And my friend is a nice case in point - they effectively pay HIM 20% more, plus pay a lot more for his firm, plus after that year they will still have need for a qualified person to dot he job.


I fully agree that short term work, for peak loads or for one-time issues, should be handed out to contractors. But I know for a fact that my employer pays more per year for building maintainance in a ten year contract then they used to pay for their own people. And the latter were around all the time, so when a toilet leaked or someone puked, we could call them right away. now, well....... my office is clean enough to work in, but only for two days a week. The rest of the time it is dusty and all that. And we pay more!


now please do explain how you can get more for less money in the long term by paying more people - unless you pay the actual workers less in effective life-term wage.

 

[Patroklos]

Patroklos: I am not talking about any of your scenarios. Read my example: it is long term, the pay is higher, and so is the qualification of the hired. Also, sub-par state employees can be moved to other jobs, too.

Then you are not talking about state outsourcing, but rather a meaningless manufactured subset created for your own ends.

Have you ever been the boss of a state employee? When you have, get back to me.

Nylan, the simple fact is that this authority has been criticized by the accounting control authority for wasting money by hiring contractors instead of creating jobs.

How does hiring contractors not create jobs? Apparently they not only create jobs, but high paying ones to boot!

And my friend is a nice case in point - they effectively pay HIM 20% more, plus pay a lot more for his firm, plus after that year they will still have need for a qualified person to dot he job.

1.) You seem to be under the impression that the government is paying your friends higher salary. They are not. They are paying the firm a fee, and the firm is paying your friend his salary. For all you know (and you don't) they are paying the firm half what they payed your firend before, and the difference for the company is being made up in some other portion of a multiple department spaning general contract. Hell, the company might be losing money, but that is irrelevant to the government.

2.) So what if they still have need for a qualified person, that would be the case regardless of whether the person filling the role was a government employee or contractor.

I fully agree that short term work, for peak loads or for one-time issues, should be handed out to contractors.

And how do you know that they are not getting all that, and that your friend is an anomalie in an overall contract saving the government millions? You don't.

now, well....... my office is clean enough to work in, but only for two days a week. The rest of the time it is dusty and all that. And we pay more!

Sounds like they need to fire you for being a slob.

now please do explain how you can get more for less money in the long term by paying more people - unless you pay the actual workers less in effective life-term wage.

I already did.

 

[Nylan]

Nylan, the simple fact is that this authority has been criticized by the accounting control authority for wasting money by hiring contractors instead of creating jobs. And my friend is a nice case in point - they effectively pay HIM 20% more, plus pay a lot more for his firm, plus after that year they will still have need for a qualified person to dot he job.


I fully agree that short term work, for peak loads or for one-time issues, should be handed out to contractors. But I know for a fact that my employer pays more per year for building maintainance in a ten year contract then they used to pay for their own people. And the latter were around all the time, so when a toilet leaked or someone puked, we could call them right away. now, well....... my office is clean enough to work in, but only for two days a week. The rest of the time it is dusty and all that. And we pay more!


now please do explain how you can get more for less money in the long term by paying more people - unless you pay the actual workers less in effective life-term wage.

So, in short, your problem is not with outsourcing at all. Your problem is with government organization. Your conclusion is flawed, as it is based on false premises. The problem you have has nothing to do with whether or not hiring contractors is a bad thing, and everything to do with government bureaucracy.

 

[Cutlass]

View attachment 201172 Contracting is always done well.

 

[Mountain-God]

You’re all right.

All the examples given showing how out-sourcing kicks ass are right on the money – likewise those which show it sucks ass.

Outsourcing can be either really good or really bad – the problem I would suggest, is people who have such a hard-on for it that they think it solves all problems.

There are so many cases where outsourcing looked like a good idea – such a good idea that engineering workshops were closed down, hundreds of people laid off – then all of a sudden the company needs them back and haha  has to hire everyone back at double wages.

There are other times where permanent in-house people are lazy ass and think they’re set for life – they might work slow, work stupid, and generally act as a lead weight – whereas someone outsourced has that element of fear – they have to work harder, because they have no guarantees.

It’s often a case where balance is best – and what’s good in one situation doesn’t work in another –biological principles which hold true in all aspects of life and business…

 

[El_Machinae]

I am someone actaully dealing in the topic at hand, you are someone whining over anecdotal evidence that you have no way of confirming. You are wrong, get over it.

I don't know if there's value in being condescending if you're going to forward personal anecdotal evidence. This is the internet, so it's got limited value as it stands.




Anyway, I've worked as a contractor for many, many years. I will have to say that a properly done bit of outsourcing can really add a lot of value for the cost. Obviously, as MountainGod said, it can be screwed up (I had one contract which continued to pay me whenever the the employer changed the job description, and their project manager was a power freak, so I got a LOT of paid work out of them), but it can also be done correctly as well.

 

[Cutlass]

The bottom line is that if you want outsourcing to work, you have to be very careful in your design of it. Know your exact costs, and the output from those costs. And then tell anyone that wants the contract that they must beat both those numbers every month, or they are out.









You'll get a lot fewer bids that way

 

[azzaman333]

You're confusing government inefficiency with outsourcing sucks.

 

[Patroklos]

I will also note that I have many times screwd over the contractors by exploiting loop holes THEY missed in contracts.

Warranties and service contracts are also the bain of contractors. I milk those things up to the minute they run out.