Last week, I explored the question of whether federal contracting wastes tax dollars. But that post missed at least one key part of the equation -- the high costs of having no institutional memory.
A top government research scientist wrote me in response to the post to make this very good point:
Contractors make sense if one thinks the tasks of the present project will be nothing like the tasks of the previous one, or the next one. But many times the big cost of getting something done is coming up to speed on how one makes a bureaucracy work, or how one works within the regulatory and compliance environment. In that situation it makes sense to let the present task be done by people who have experience with previous tasks. And in some areas, such as engineering or procurement of complex systems, the greatest cost savings are in avoiding making the mistakes of the past. In those situations, in-house experts who carry on from one project to the next are extremely valuable. Simply counting how many man-months a project takes, at what employment cost, is not the right way to do the cost/benefit analysis for contractors versus permanent hires.
Just to be clear, this official wasn't writing to flatly argue that contracting out is always a bad idea. Rather, he was noting the complex trade-offs involved that make it hard to easily compare the costs and benefits of doing things in-house versus contracting.
Another important point he made relates to diversity. The federal government is mandated by law to seek a diverse pool of candidates for civil service positions and hire in a fair fashion. This mandate has been crucial, among other things, to helping build the African-American middle class in the D.C. area. But it can make it time consuming to fill positions.
Contractors are under no such mandate, and can immediately hire whatever qualified person walks through the door. This gives these contractors an advantage in being able to scale up projects quickly, but comes at a cost.