Outsourcing & privatizing our way to the bottom

By Lee Russ

Friday, March 24, 2006 at 05:08 PM

Readers of WTW know that while members of this community are not fans of outsourcing and privatizing, our current federal government and its business community supporters just love it, whether the subject be tax collection, research & development, veterans' health care, or other essential services.  And the effects have been devastating.

But it ain't over, and the beat has not gone down tempo yet at all.

Recent examples:

--a growing trend at the Pentagon to contract out intelligence jobs that were formerly done primarily by service personnel and civil service employees

--outsourcing the writing of medical publications (but "good" news: in-house "contract" writers were as good as in-house "employees")

--The U.S. Forest Service is studying how to contract out more than two-thirds of its total workforce by 2009

--the General Services Administration is testing outsourcing of its online contract broker site

--"generic" outsourcing of entire business lines may be giving way to the more strategic discipline of BPO (business process outsourcing), which "breaks out specific chunks of the business and sends them elsewhere, to a specialized vendor who handles the software, the management, and even the staff required to keep the processes moving"

--cost pressures are leading major businesses to "outsource" worker health care and similar benefits to the government ("Under pressure from foreign competitors with lower labor costs, big companies have become more willing to pare away workers' health care and pensions, abandoning an informal social contract that existed for much of the 20th century.")

One fairly recent phenomenon that you may have missed is "job competitions."  An employer does an in-house study of the cost to have a certain job done by in-house employees and by some outside firm.  If the in-house employees are cheaper, they "win" the right to continue working.  If the outside firm is cheaper, the in-house folks become unemployment statistics.

This seems a lot like the old "whipsaw" phenomenon in which large employers would pit one union against another, or one plant against another.  And, sure enough:

In numerous cases, the in-house team has reduced staffing and revamped operations in order to win.

The job competition phenomenon has hit the National Instituttes of Health, the pharmaceutical industry medical writing jobs, and government health care facilities like Walter Reed hospital.

Although federal employees are said to have been winning about 90 percent of job competitions, just winning doesn't necessarily mean you've actually won.  For example, at Walter Reed:

After a competition between federal employees and contractors to do the work, the Army awarded a contract in September 2004 to the federal employees. But the Army Audit Agency questioned the integrity of the employee team's proposal, prompting the Army to reverse the contract decision. The Army later decided the job should go to the private-sector bidder, IAP Worldwide Services, a PSC (Professional Services Council) member.

So the employer can cut your wages or kill your job, or you, the vestigal employee can cut your own wages or kill your own job, and winning isn't winning any more, and the lucky new employee can look forward to a life of higher stress, lower wages, lower benefits, and a lower quality of life.

"Have a nice day and thank you for your former service."