Business

What's behind the US government's massive spending on temp workers

Posted August 2, 2019 6:11 a.m. EDT

— In most ways, Christine Happel is doing what she imagined she'd be able to do with a PhD in molecular biology: Working at the National Institutes of Health, helping run a multi-million dollar program aimed at translating research on extracellular RNA into actual treatments for ailments ranging from bone marrow disorders to Alzheimer's.

But Happel doesn't technically work for the NIH. Rather, she works for Kelly Services, one of the largest providers of temporary staff in the country. Even though she's doing a job with no end date, all her emails say "CONTRACTOR," she has separate benefits, and all her work has to be signed off on by someone who's actually employed by the federal agency.

"I'd certainly rather be an NIH employee," said Happel. "However, I understand the situation and went into it aware of the pluses and minuses — so it is what it is."

The NIH has dramatically increased its spending on staffing services over the past 10 years, from $1 million in 2008 to $95 million in 2018, according to an analysis of USASpending.gov data conducted by the National Employment Law Project. And NIH is not the only agency that has done so.

The US government's spending on temporary workers more than quintupled from $323 million to $1.7 billion over the same period, at agencies ranging from Customs and the Border Patrol to the State Department. It's accelerated in the two years since President Donald Trump took office, spurred on by hiring freezes and pay freezes that force agencies to contract out in order to fulfill their missions.

The federal government has long been a prolific contractor, buying billions of dollars of goods and services from private companies every year, especially since the political tide turned against expanding the federal workforce starting in the 1980s.

But the use of staffing companies, which provide people who often work right alongside federal employees doing similar jobs, has grown especially quickly over the past decade while the number of direct employees has risen only 1.2%. Experts say it's a symptom of both an aversion to expanding official government payrolls and an inflexible civil service system that pushes agencies to outsource, even when hiring people directly might be cheaper.

The average federal employee has worked for the government for 13.5 years, according to the Office of Personnel Management, creating institutional knowledge that's hard to replace in people who leave every few weeks or few months. Using temporary workers can also corrode the middle class: Data from the Bureau of Labor Statistics show that workers employed through staffing agencies across the public and private sectors are paid less and are less likely to have employer-sponsored health insurance and retirement plans than traditional employees.

David Weil, dean of the Heller School of Social Policy and Management at Brandeis University, has long studied the various ways in which employers outsource work to reduce costs and liability. Within government especially, Weil is concerned about temporary workers replacing the kinds of steady, secure professionals who could build a career and a life.

"That was historically a very good job that gave people a pathway to middle class opportunities," Weil said. "It's those kinds of jobs that have been outsourced that I find disturbing and help explain widening inequality."

The doctor is in, the doctor is out

Although temporary staffing has proliferated across the government, the increase has been largest in the health care field.

Veterans Affairs, for example, spent $453 million on temporary help services in 2018, up from $55.4 million in 2008, according to NELP's analysis. The VA's website details which positions are filled by staffing agencies, from nurse practitioners to neurologists, but other information is sparse.

Dan Caldwell is the executive director of the nonprofit advocacy group Concerned Veterans for America, and says the rise in contracted workers may stem from the rush to remedy the wait list scandal of 2014, in which veterans died before they could get care because staffing was so thin. As America's biggest wars recede into history, the population of veterans is expected to shrink, so it's not clear how big the VA needs to be going forward.

"With a lot of questions unanswered about what types of services it's going to need to provide, it makes sense that the VA use more temporary staff in the interim," Caldwell said. "However, it's important that they do it wisely, and they aren't just hiring contractors in the same way that they've created these positions that they can't fill and probably don't need."

For its part, the VA denied that spending on temporary staffing contracts had increased. "VA privatization is a myth that has been thoroughly debunked," spokesman Randal Noller wrote in an email. "VA is seeing more patients than ever before, has more employees than ever before and its budget is bigger than ever before."

However, the VA did not respond to CNN Business' request for a more detailed explanation of how it arrived at that conclusion. The researchers from NELP, Chris Schwartz and Laura Padin, say they pulled a 56,808-record dataset using a code for temporary help services from USASpending.gov, the federal government's official contracting database. They spent hours cleaning up any inconsistencies, and took care to avoid double counting.

Paul Light, a contracting expert and professor of public service at New York University who was not involved in the analysis, reviewed NELP's methodology at CNN Business' request and said it was correct — and that the problem was how much about the contracted workforce remains a mystery to both outside researchers and the government itself.

"We don't have the information to make sure the right person is in the right job at the right price for the maximum performance," Light said. "We know nothing about these contractors, especially in the temp agencies. They come and go, come and go. I think that speaks to a blind spot, especially in a department like VA."

There's evidence, however, that high turnover in medical profession isn't great for patient care. A National Academies report from 2004 found that nurses working at a site for only a few weeks or months at a time weren't as familiar with the hospital's procedures, equipment and personnel, leading to higher rates of error and threatening patient safety.

That may be especially true at the Indian Health Service, which increased spending on temporary staffing from $7.9 million in 2008 to $200 million in 2018, according to NELP's analysis. The agency, which serves 2.2 million American Indian and Alaska Native people, already has tremendous difficulty attracting nurses and doctors to work in remote locations. Vacancy rates across the IHS' 12 regions average 22% and as of last November topped 30% in Nashville and Bemidji, Minnesota.

A spokesman for the IHS said given the agency's limited ability to offer competitive compensation, they've used staffing agencies to fill the gaps.

"Use of contracted health care providers is one way IHS works to ensure access to comprehensive, quality health care for American Indians and Alaska Natives," the agency said in a statement. "In recent years, improving access and quality of health care has been a top priority for the agency, requiring additional investments in staffing."

A Government Accountability Office report about IHS from 2018 found that staffing services can be more expensive and provide inferior care.

"They have filled some holes, but it's so shortsighted," said Dr. Gerald Hill, a four-time president of the Association of American Indian Physicians and cofounder of the World Class Native American Research Center of Excellence at the University of Minnesota. Hill says IHS has lacked the funding necessary to recruit and train people willing to stay for the long term — ideally Native people themselves — and that temporary staff lack the cultural context that they need to work with Native patients.

"They come in, they don't understand trauma-informed care, they don't understand the history of Native people and their interaction with the healthcare system," Hill said. "If you're churning through doctors, they don't have the trust. Continuity is very important."

Staffing as a workaround

There are certainly reasonable uses for staffing agencies. The Office of Personnel Management considers seasonal jobs and those for which a specialist is required on a time-limited project to be justifiable reasons for the government to use temporary workers.

But lawmakers and unions have long objected that federal agencies were instead using staffing agencies to replace unionized employees, keeping people as "perma-temps" without the benefits or rights that come with being on a government payroll. There is still no official count of people retained working for the federal government through staffing agencies, and the Office of Personnel Management did not respond to a request for comment from CNN Business.

The rise in staffing is also indicative of larger dysfunction, wherein a drive to reduce federal head counts and surround the recruiting process with lots of rules makes direct hiring more difficult.

"What I think is really problematic is the decisions about where you go to get work done are not made because of economic efficiency or programmatic effectiveness, but because they're workarounds," said Max Stier, executive director of the Partnership for Public Service, a think tank that studies the federal workforce.

The GS scale that governs federal pay rates, for example, is sometimes not competitive with the private sector, prompting agencies to contract out jobs in order to convince people to come work for them. "I see lots of times where contracting is the only way to get around an onerous hiring process," Stier said.

Another workaround: At the NIH, the federal agency charged with funding and conducting basic research aimed at curing diseases, centers like the one where Happel works are often capped in the number of people they can employ. But they still need more resources in order to fulfill their research agenda, the agency said in a statement.

"NIH might choose to award contracts rather than hire federal employees when job duties are more temporary or sporadic, or, when a specific skill set is required," a spokeswoman said. "For example, many of the medical researchers and scientists provided under a contract are only needed for a specific length of time until the research problem under study has been addressed."

Kelly Services recruits the specialized scientific staff that NIH needs. Even if the contracted worker costs the government more per hour than hiring someone directly, Kelly says that the government saves money over the long term because it doesn't have to keep paying a salary and benefits to people once their projects end.

Working on contract can be a long-term prospect, however, since Kelly tries to "recycle" staff into new projects. Some people have been with the company for 10 years doing various types of research at NIH, according to Bob Williams, who leads Kelly Services' government division.

"Temporary is probably a misnomer in our case," Williams said, noting that Kelly's been getting more and more federal business in recent years. "We are seeing an increase, and I think that's probably attributed to the government's desire to reduce its footprint."

From Christine Happel's perspective, the program at NIH she's been working on for the last five months is exciting enough to make it worthwhile for her to continue working as a contractor. She even turned down an employee job at another institute, because she preferred the subject matter at her current gig, and thinks it could bolster her chances at a direct-hire position down the line.

"That is the ultimate goal," Happel said. "Most people view it as a sort of transition step."

— CNN's Julie In contributed reporting to this story.