[Futurework] Outsourcing Government Jobs

[Sally Lerner]

*From The Jobs Letter

BUSH PLANS UNPRECEDENTED CHANGE TO GOVERNMENT JOBS
* In America, President George W. Bush has announced unprecedented plans to shift almost half of government jobs to outside contractors. Bush argues that this large-scale privatisation will reduce government costs and improve services, and lead "a market-based government unafraid of competition, innovation, and choice."

Business leaders say the new initiative will revitalize the entire "outsourcing industry", which has been hit over the past year by sluggish growth and overcapacity. Peter Bendor-Samuel, CEO of the Everest consulting group in Dallas: "The scale of this is beyond anything that's been contemplated before ... this is a quantum leap forward in the size of the outsourcing market."

* US labour groups are upset by the plans and Bobby Harnage, the president of the American Federation of Government Employees, says Bush has "declared all-out war on federal employees." He says the initiative will strip government workers of civil service protections.

Harnage sees the new policy as a major expansion of a trend that has been taking place in US government at all levels for the last two decades. State and local governments as well as Washington have been hiring private companies to pick up trash, run prisons, collect traffic tickets and do much of the other mundane business of government. He argues that federal employees have almost always had more expertise and experience than outside contractors did in the jobs that are put up for bid. And there have been many cases in which private contractors either drove up the costs to the government or failed to do the job well.

* President Bush's administration is vague about how much money this initiative might save. The President's Budget puts the savings in the order of 20% and other officials say 30% - enough to save many billions of dollars a year in a $2 trillion Federal Budget. But Paul C. Light, an expert on the federal bureaucracy at New York University, says that firm evidence of savings in the long run is sketchy, in part because private contractors sometimes won the business with low bids and then pushed their prices up after the government work force has been disbanded.

Other US academics point out that while there can be some real short-term gains from privatisation, research shows that this is usually only true for relatively simple goods and services. Professor Robert Jensen, from the University of Texas, says that the savings do not hold true in the majority of cases. Jensen: "Often short-term savings evaporate quickly once competitors drop out. Contractors who underbid to win a contract are free to raise rates later, often leaving governments with little choice but to accept. For complex contracts, oversight costs are high, or inadequate oversight leads to corruption. State and local experience suggests that in services such as vehicle and highway maintenance, privatisation may end up costing taxpayers more..."
Source - New York Times 15 November 2002 "Government Plan May Make Private Up to 850,000 Jobs" by Richard Stevenson; Philadelphia Inquirer 24 November 2002 "President Bush plans an unprecedented shift" by Prof. Robert Jensen of University of Texas at Austin; USA Today 25 November 2002 "White House plan could give boost to outsourcing" by Stephanie Armour and Del Jones


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