>The cost of doing interviews to screen candidates is much lower than background checks.
I highly doubt that. An engineer-hour costs roughly $100. A background check probably costs roughly as much as a phone screen, and an order of a magnitude less than an on-site. It'd be pretty easy to do the background check step in between the phone screen and the on-site, and it wouldn't appreciably raise costs to the company.
A low level BG check costs that but that's probably just checking they are on the electoral register an don't have any outstanding judgements against them.
Also spending money externally appears to the company to cost much more than using internal resources
I highly doubt that. An engineer-hour costs roughly $100. A background check probably costs roughly as much as a phone screen, and an order of a magnitude less than an on-site. It'd be pretty easy to do the background check step in between the phone screen and the on-site, and it wouldn't appreciably raise costs to the company.