It has been widely reported government contractors often charge absurd rates, especially in the mystery shrouded world of military contractors. This is a clear failure of the private sector to efficiently take over government functions, and we should reverse the policies that allowed and encouraged the waste, policies that were often the product of lobbying by the organizations that would be receiving the contracts.

The New York Times reported in 2011:

WASHINGTON — Despite a widespread belief that contracting out services to the private sector saves the federal government money, a new study suggests just the opposite — that the government actually pays more when it farms out work.

The study found that in 33 of 35 occupations, the government actually paid billions of dollars more to hire contractors than it would have cost government employees to perform comparable services. On average, the study found that contractors charged the federal government more than twice the amount it pays federal workers.

Newsweek reported in December 2013:

Last year, contractors were allowed to charge the government as much as $763,029 per worker. Under the new budget deal, there was a small effort to reform this spendthrift system. The top contractor salary that can be charged to taxpayers is expected to fall to $487,000, a bit more than President Obama’s $400,000 salary.

The same article also outlined the unfair treatment nonprofit contractors get compared to for profit contractors:

For-profit contractors charge not just for salaries, but also for management pay and perks - like corporate golf outings and executive retreats - as well as the cost of renting space or operating buildings the contractors own, plus any other overhead. In a congressional hearing in March Senator Claire McCaskill, D-Missouri, revealed that of the $31.5 billion in invoices contractors submitted to the U.S. Army, $16.6 billion was for overhead.

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A study by the investigative arm of Congress, the Government Accountability Office, found that many nonprofit contractors get between nothing and 3 percent of a contract to cover overhead, a sum the office said was woefully inadequate. Urban Institute studies show that overhead costs for nonprofit human services agencies typically run about 17 percent.