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How Private Contractors Like Booz Allen Cost Taxpayers More

By Bryce Covert  

"How Private Contractors Like Booz Allen Cost Taxpayers More"

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Booz Allen facility in Maryland (Credit: Jeffrey MacMillan/Capital Business)

When the National Security Administration (NSA) leaker outed himself over the weekend, Edward Snowden revealed that he was most recently an employee of Booz Allen Hamilton, a private sector contractor that works with the federal government on a variety of projects, including national security. As the New York Times reported on Monday, the company has grown over the last decade in large part thanks to the expansion of these projects in the post-9/11 era, raking in $1.3 billion, or nearly a quarter of its total revenue, from government intelligence work in the most recent fiscal year.

Other companies like Lockheed Martin and the Computer Sciences Corporation also get paid well by the government for information gathering and analysis like the kind described in Snowden’s leak. The NSA used to work with a handful of firms but now works with hundreds. These companies were brought in during the post-9/11 intelligence boom to keep up with the expansion. But they cost much more than having government employees do the work themselves.

While the total budget for intelligence work is kept secret, as Hayes Brown wrote earlier on ThinkProgress, “For Fiscal Year 2014, the Obama administration requested $48.2 billion for the National Intelligence Program, encompassing ‘six Federal departments, the Central Intelligence Agency, and the Office of the Director of National Intelligence.’ Of that amount, according to a 2007 article, an amazing 70 percent goes towards private contractors.” That’s a lot of money.

Those high costs may be thanks to the higher cost of paying a contract employee over a federal worker. As Brown wrote:

Many former government employees make the switch into private contracting, which can serve to drive up the amount they wind up costing the American taxpayer. A 2007 report to the Senate Select Committee on Intelligence found that the average government employee working as an intelligence analyst cost $126,500, while the same work performed by a contractor would cost the government an average $250,000 including overhead.

The Office of the Director of National Intelligence reports that the government pays intelligence contractors 1.66 times what it costs to have the work done by federal employees. Yet it has outsourced 28 percent of the intelligence workforce.

In a testimony before the Senate Committee on Homeland Security, the Project on Government Oversight (POGO) similarly reported that outsourcing intelligence functions to private contractors costs taxpayers 83 percent more on average than having a federal employee do the work. While competition between contracts can allow the government to bargain for lower prices, POGO asked, “Is the government actually making contracting decisions based on cost-saving concerns?”

Overall, a 2011 report from POGO found that the federal government pays contractors 1.83 times what it pays federal employees for the same services and more than two times standard pay in the private sector.

Meanwhile, the reliance on these workers for government functions is growing. More than 530,000 defense contracting jobs are in Virginia, where most of the federal level workers are located. The POGO study reports that while the federal workforce has remained flat since 1999, the contractor workforce has shot up from 4.4 million then to 7.6 million in 2007, four times larger than the number of government employees.

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