October 15, 2003
Enid Doggett
(202) 639-6422
Adele Stan

New Report Casts Doubt On Administration's Claims Of Taxpayer Savings From Contracting Out

WASHINGTON, DC— AFGE president John Gage today praised a new Economic Policy Institute (EPI) report challenging the Bush Administration’s claims that that contracting out government work saves taxpayer money. Gage said the report indicates that the administration has no real proof that private companies do a better job than federal workers.

The Office of Management and Budget (OMB) claimed that contracting out government work provided substantial savings, citing studies from the Center for Naval Analysis, the RAND Corporation, and one funded by the IBM Endowment for the Business of Government. The EPI report, “Show Me the Money,” by EPI economist Max Sawicky, shows that the administration’s cost-savings claims for its privatization plan are unfounded.

“Taxpayers are fortunate that EPI has turned a critical eye to the issue of federal privatization,” said Gage. “For far too long, OMB’s spurious claims of savings from its wholesale privatization effort have gone unexamined,” he added.

Gage further noted that millions of taxpayer dollars are being spent to determine whether government work should be done by a private company.

The EPI report, “Show Me the Money” cites examples of OMB misuse of research, for example:

? Data are based on reports from sources that have a vested interest in the outcome – private companies that have received money under government contracts, and that stand to gain more if privatization expands. At the same time, data that would help assess the actual public cost and/or savings are scarce.

? The cost data cited come from a small number of case studies. Together with the methods used to evaluate these data, the small sample of studies precludes the determination of valid conclusions.

? The issues of productivity and quality are addressed inadequately or not at all, making it impossible to determine whether taxpayers are indeed getting what they pay for.

“AFGE has established that OMB is forcing agencies to conduct reviews for privatization for work that really should be done by government workers who are accountable to the public, not to stockholders,” Gage said.

Find “Show Me the Money” at

The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 600,000 workers in the federal government and the government of the District of Columbia.

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