NCPA - National Center for Policy Analysis


January 13, 2005

The White House estimates that the government could save about $7 billion annually if more federal services were outsourced to private companies, says Investor's Business Daily (IBD).

Federal employee unions are opposed to outsourcing, because federal employees tend to receive above-average wages and better retirement benefits than their private sector counterparts. According to the Office of Management and Budget, however, civil servants who compete against the private sector find ways to reduce costs and become more efficient:

  • Last year, civil servants who competed against the private sector won 89 percent of competitions, resulting in more efficient operations from federal employees and about $1.1 billion savings to taxpayers.
  • Three agencies, the IRS, Forest Service and Department of Energy were opened up to private sector competition; federal employees won all contracts and became more efficient in the process.
  • One agency, the General Services Administration, awarded 147 jobs to the private sector, resulting in $14 million in savings.

Furthermore, federal law would still protect certain jobs that fall within "inherently governmental functions," such as law enforcement.

While outsourcing may reduce years of expertise, the private sector will find ways to innovate, streamlining bureaucracy and reducing costs. Government and taxpayers will benefit, says IBD.

Source: Editorial, "Outsourcing Government," Investor's Business Daily, January 4, 2005; and "Competitive Sourcing," Office of Federal Procurement Policy.


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