The New York Times reports on a recent report from the Project on Government Oversight POGO) that finds that contracted out services tend to be more expensive than hiring staff. This matches up fairly well with what I know about the subject, but with a caveat. Staff is permanent and many government projects are temporary. Even more expensive contract workers are a better deal if the choice is between permanent and temporary employment. I haven't read the report, and may or may not get around to reading it. I'll wait for something more comprehensive to come out that is peer reviewed.
What I find interesting though is that the New York Times also mentioned Heritage for a contrasting view. I've blogged about Heritage before, I don't really respect them. They are an unabashed partisan shop out to find facts that fit their story rather than try to find the best explanation for the available evidence. Their goal is not to increase our understanding but to push the conversation in the direction their funders want it to go. While they probably do produce some worthwhile stuff, they get enough cash to afford it, it simply isn't worth the time investment to sort the wheat from the chaff. If you want more honest right wing work American Enterprise Institute is better. I've heard Peterson Institute as having some right wing, or at least big business, affiliation as well but have found their contributions to be of generally high quality. So it isn't really a partisan thing, though I prefer Brookings.
Now, I haven't heard of POGO before, they could be great. But I have to admit that simply contrasting them with Heritage makes me suspicious. This is the problem with the news media's tendency to balance things by simply presenting both sides, not all arguments are equal. Non-expert readers expect the media to do some of this sorting for them, few have read enough papers to judge quality on their own. While ideally the media wouldn't have to fulfill a filtering role, fact is, they do. Does the average reader have a sense of the relative quality of research done by Heritage, AEI, Peterson, Rand, Brookings, or POGO? I doubt it. Simply presenting and linking them just isn't enough.