Monday, May 19, 2008

Government Outsourcing Not Always the Answer

It hardly seems controversial to claim that the government isn't always the most efficient provider of services. And, you've probably heard plenty of calls for the government to outsource more of its work (perhaps even a few on this blog). But, outsourcing doesn't always work out so great.

A recent article in The Washington Post describes how the IRS has outsourced the collection of unpaid tax accounts to three private agencies. The program has been far from successful with the private companies collecting amounts rougly half of what it has cost to implement the program.


  1. There seems to be at least one missing data point: The cost of the internal IRS collections program that preceded the new program.

    If the IRS collected owed funds at a cheaper rate than the new program, then we have a better idea of how effective and efficient the new process truly is. Just because it doesn't pay for itself is not the end all measure for the program.

  2. Not to defend the IRS...
    But it looks like the article is comparing the IRS internal start-up costs to the first year net revenue they received. Given that they are only outsourcing $1 billion of unpaid claims out of $300+ billion, they may have huge economies of scale if they expanded the program.
    There is not enough information in the article to make an informed conclusion and it clearly seems to be putting "negative spin" on the program without revealing many facts.