Obama's Hidden War on Competition Costs Taxpayers

Monday, 21 Jun 2010 09:52 AM

By Ronald Kessler

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Ignored by the mainstream media, President Obama has been changing government rules to prevent agencies from using private firms in order to reduce costs. Typically, that raises costs to taxpayers by as much as 30 percent.

The effort to stifle competition and require that unionized government employees perform work that private companies did previously began just after Obama took office. It is a new phenomenon called “in-sourcing.”

“What that means is they are actually canceling contracts with private companies, including small businesses, and moving the work back in-house and having government employees do the work,” John M. Palatiello, president of the Business Coalition for Fair Competition, tells Newsmax.

“They are then offering jobs to the former employees of the private company to make them federal employees, and they are offering them a higher wage and benefit package than they were getting in the private sector,” says Palatiello, whose organization of trade associations and businesses seeks to make it easier for free enterprise to perform government tasks.

Understandably, the Office of Management and Budget is not asking government agencies to report back on how much more it is costing to have government employees perform tasks like printing or software development. But when such functions are bid out to the private sector, these companies generally perform the work for 30 percent less than it was costing the government to do.

“When an activity is competed, there’s generally a 30 percent saving regardless of whether it stays in-house or goes to contract, just by injecting competition into the process,” Palatiello notes.

Decisions to cancel contracts and bring the work in-house are being made arbitrarily, Palatiello says. “There’s no demonstration that it’s being brought in-house because they have determined that the government can do it cheaper than the private sector or better than the private sector.”

What is happening, says Palatiello, is that, “if the Defense Department has a contract with somebody to do a newsletter, the Defense Department is canceling that contract, saying we’re going to publish that newsletter in-house, and there’s no competition. So there’s no cost comparison. It’s just an arbitrary decision.”

In addition to this rule change, another switch proposed a month ago would redefine basic government tasks like building construction as “inherently governmental.” That means these functions will never be offered to private industry.

In justification, the Obama administration has claimed that functions such as writing software or constructing buildings must be done by the government because private contractors could introduce bugging devices into buildings or anomalies into software to sabotage it.

As evidenced by the case of FBI agent Robert Hanssen, spies can infiltrate the government as easily as they can private industry. Agencies such as the FBI and the CIA have long used private contractors for construction and writing software under supervision of those agencies.

When the government becomes involved in construction, costs have been known to escalate by as much as 100 percent, Palatiello says.

“Having the government involved in these functions is ridiculous,” Palatiello says. “The government has no capability, not only for the construction, but they have no expertise or capability in the architecture or engineering and design of a building.”

Although the government is not keeping statistics on the effect of the rule changes, Palatiello says he knows of a number of businesses whose contracts have been canceled so the work could be handed over to government employees.

“I know a small business man up in Peekskill, New York, who is a food service catering company,” he says. “And he had a contract pulled from him and brought in-house. I know of mapping firms that have had contracts with the government where they have been canceled and brought in-house.”

It comes down to a hidden effort to expand the government and “placate unionized government employees at the expense of taxpayers, who are paying for the substantially increased costs,” Palatiello says.

Ronald Kessler is chief Washington correspondent of Newsmax.com. View his previous reports and get his dispatches sent to you free via e-mail. Go here now.

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