Senate hearing looks at contractor costs to government

In a Senate hearing last week titled “Contractors: How Much Are They Costing the Government?” Senator Claire McCaskill, D-Mo., chairwoman of the Senate Subcommittee on Contracting Oversight, noted that federal agencies are increasingly relying on contractors to perform services. “Contractors now perform many of the duties whichmost Americans would assume are done by government employees, from managing and overseeing contracts and programs to developing policies and writing regulations. Contractors sit side by side with federal employees and perform many of the same tasks.”

The senator noted that spending on service contractors has outpaced spending on federal employees. She said that the cost of service contracts has increased by 79 percent over the last 10 years, from $181 billion to $324 billion, while in the same time period, spending on federal employees has increased by 34 percent, from $170 billion to $229 billion.

Senator McCaskill said that federal agencies have relied on assumptions and flawed studies to determine whether it is cheaper to use contractors rather than federal employees. “Without good data about the costs of using contractors instead of federal employees, the government simply doesn’t have the information it needs to make smart choices whether it might be cheaper for federal employees to do it instead,” said the Senator.

The Washington-based Project on Government Oversight (POGO) turned in an analysis to McCaskill’s panel that was based on its own study of federal hiring of contractors. POGO’s study shows that the federal government approves service contract billing rates that, on average, pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than two times the full compensation paid in the private sector for comparable services. POGO is a nonpartisan independent watchdog that champions good government reforms.

In response to Sen. McCaskill’s invitation, the Washington-based Coalition for Government Procurement submitted written testimony for the hearing. In its testimony, the coalition highlighted issues in which the government can better control the cost of contracting and improve cost-analysis when making sourcing determinations. In a press release announcing its testimony to the subcommittee, the coalition said it “understands that mission-driven sourcing decisions and improved cost analysis ultimately lead to better value for the government, industry and the American taxpayer.”

The statement said “the coalition considers it a privilege to assist the subcommittee in the effort to advance the functioning of government contracts.” Regarding sourcing decisions, Roger Waldron, president of the coalition said, “An agency must understand its unique mission requirements and strategically determine which factors are important in meeting that mission. In other words, sourcing decisions are mission-driven.”

Asserting that improved requirements development is at the root of controlling the costs of contracting, Waldron said in the statement that “Clear, well-crafted requirements lead to robust vendor competition, high-quality proposals, low costs and high value to the government.” Among other recommendations, the coalition urged agencies to increase the use of business case analysis and establish sound statements of work and program management certifications while avoiding contract duplication.

In the conclusion to its testimony, the coalition said it “believes that thoughtful business case analysis that weighs each agency’s unique mission requirements when sourcing decisions are made is crucial to better accounting for and analyzing the costs associated with the use of contractors versus federal employees. We also urge the government to enhance its requirements development process to ensure increased competition and therefore lower costs.”

The coalition said it believes that the objectives can be achieved by:

1. Establishing a performance and financial business case analysis framework.

2. Establishing program management certification requirements.

3. Setting clear statements of work with measurable outcomes.

4. Evaluating contract awards based on best value solutions that meet well- developed technical requirements.

5. Avoiding contract duplication by using Federal Supply Schedules per FAR 8.002 and requiring contracting officers to document why existing contract vehicles do not meet an agency’s needs before establishing new contracts.

The coalition represents the well being of government contractors whose contracts are administered by GSA, regardless of the industry or size of the company. It has more than 300 member companies. The coalition represents 70 percent of all commercial services and products sold to the federal government each year.