Outsourcing Pays Big to Private Companies While Americans Suffer

Remember how outsourcing was shoved down the throats of the American people by claiming it would save money and was more efficient?  Guess what, not only is costing more, the services now provided are dismal failures.  A new report, Out of Control describes the abysmal state and consequences of outsourcing public services.  Not only did America lose these jobs in many cases, taxpayers have lined the pockets of private enterprises while receiving less and paying more.

The report goes through a litany of examples to show privatization of public services leaves little accountability and opens avenues to skirt public disclosure  This is in addition to charging more for receiving less.  Through contract law, many local and State governments cannot even fire these private enterprises and must guarantee payment even when the contracted services are negligent or non-existent.

Probably the most egregious report example is the systemic endorsement of child abuse by using a for profit, private contractor for foster homes.  Notice in the below description nothing happened to investigate or cancel the privatization contract until the business failed to file financial forms.  Meanwhile a host of kids are emotionally scarred for life.

Los Angeles County continued to annually renew a foster care services contract with an outfit called Wings of Refuge. Despite the aspirational name, multiple reports surfaced of children placed in homes where they experienced severe abuse, including cases in which children were beaten and locked in their rooms for days. For years Los Angeles County’s Department of Children and Family Services renewed the company’s $3 million annual contract, making it one of the largest private foster care providers in the county, responsible for thousands of vulnerable children. The county only canceled its contract after the contractor failed to file required financial forms for three years, had accumulated $458,000 in delinquent payroll taxes and was more than $2 million dollars in debt, according to licensing records. Los Angeles County admits that foster care contractors are only audited once a decade and audits can take years to complete, and carry little or no punishment.

Generally speaking, it seems the most incompetent and inefficient software development companies are the ones who obtain government contracts.  We have never seen such absurdities.  Over and over again projects cost millions, take years and result in nothing.  This is when there are hundreds of thousands capable U.S. technical workers who are out of a job available for work.  There is no doubt U.S. workers could create the same desired functionality in a few months time with a price tag much less than what is being paid.  Yet these American workers are not hired, instead these businesses most often import foreign workers and offshore outsource.  The report gives one example of a software contract ripoff, but there are many others, including the infamous Obamacare website and exchange system.

The report mentions a project to computerize New York City workers' time cards.  It took the city 11 years to do anything about this massive contract rip-off.  The original contract by itself is an obscene amount.  For one system, $63 million was awarded.  One could easily create 10 start-ups and 10 computerized time sheet software packages in a year for that large of a contract sum.  Not only did New York City award this absurd original amount of money, they keep paying and paying while no such software package materialized and the contract billings eventually exceeded $700 million!

In 1998, New York City contracted with a private company on a project called CityTime, an effort to save money by consolidating and automating records of the time clocked by city workers. The CityTime project was originally supposed to cost $63 million. But after 12 years and many missed deadlines, the project remained unfinished and cost taxpayers more than $700 million — a 1,000% increase from the original contract amount.

There are also the denial of services through private contracts.  Kansas privatized Medicaid.  These contractors are in turn denying services to the severely disabled, whose very life depends on receiving care.  Some Medicaid beneficiaries need ventilators, and are unable to physically respond if a breathing tube falls out of place or the ventilator fails.  Through their private Medicaid contractors, Kansas is reducing the hours assistance to the severely disabled can be available to 40 hours a week.  This means if something goes wrong with the breathing system during the other 80 hours, that Kansas Medicaid recipient has about 3 minutes to live.  Kansas privatized their state Medicaid and the result is probably killing off a few recipients.  Nice budget reduction strategy huh?

Indiana killed off a few residents too, thanks to their private contract with IBM to manage social services.  After a nun suffering from cancer was denied benefits, Indiana tried to cancel the contract with IBM.  Enter contract law.  Indiana cannot dump IBM for they signed a contract and trying to get out of it has resulted in an ongoing lengthy legal battle.  Meanwhile Indiana residents still suffer at the hands of IBM.

These same contractors obtaining overpriced contracts through privatization pay their workers little.  There are now two contract workers per federal employee and that ratio is getting worse.  Look at this statistic from the report.  Privatization of government is creating a nation of wage slaves.

Of the 5.4 million people working for federal service contractors in 2008,an estimated 80% earned less than the living wage for their city or region.

There are a host of other safety issues resulting from outsourcing government services.  There is increased violence and lax security at for profit prisons.  Toll road privatization resulted in these new for profit owners refusing to close roads during state emergencies and even charging taxpayers for the privilege of area evacuation during a disaster.  Many privatized prisons also have prisoner quotas.  In other words, to be profitable, a steady stream of criminals is required and the prison contract terms incentivize keeping people locked up.

The outsourcing of government to private, for profit businesses is so bad, it costs as much as $763,029 per contract worker.  Beltway Bandits are raping and pillaging the government and all through privatization, not a weapon drawn.  DoD contractors cost three times as much as a federal civilian employee, yet Congress enacts hiring freezes and sequestration layoffs while passing a budget that leaves the unemployed destitute and gives the DoD $632.8 billion.

The In the Public Interest report has a flurry of policy recommendations to stop these for profit businesses turning a buck by inflicting pain and suffering on America.  They recommend transparency, accountability, annual contract reviews, contract termination and recourse clauses, wage and benefit requirements for contract workers and mandatory contract bidding for the job by existing public workers.  The problem is corruption is so systemic, we don't see this mess getting cleaned up anytime soon.  Until cronyism is defeated and government stops being a conduit for corporate agendas, how to obtain the power to stop all of this is anyone's guess.  At least some groups are exposing what's really going on.  Your tax dollars are being used to line the pockets of big business and once again the citizens and residents of governments are getting the shaft.