Slashdot Mirror
US Gov't Pays IT Contractors Twice As Much As Its Own IT Workers
bdcny7927 writes "The U.S. federal government pays outside IT contractors nearly twice as much for computer engineering services as it pays its own computer engineers, and 1.5 times more for IT management work, according to a non-profit watchdog group. 'The study points out that IT specifically "is widely outsourced throughout the federal government because of the assumption that IT companies provide vastly superior skills and cost savings." The Project on Government Oversight says its salary comparisons prove that those cost savings are not being realized. However, the comparisons do not address any cost savings that might be achieved through the skills, processes or systems that private IT services companies might deliver. The POGO researchers say that the federal government itself does not know how much money overall it saves or wastes with its sourcing decisions and has no system for doing so.'"
Being able to point the finger of blame at an outside source has significant value.
Conveniently, we have plenty of shrill talking heads telling us that the private sector is always more efficient. That should be a viable substitute for so called "empirical evidence".
I know a foreign government that does the same, if it makes you Americans feel any better...
"When information is power, privacy is freedom" - Jah-Wren Ryel
This is obvious.
People having life time jobs make less than people willing to work on a day-by-day basis, with twice the hours, triple the productivity, working in any location the job requires? Really?
I hope this is the first of a series of articles called 'real life eye openers'. To be distributed among public workers worldwide.
I was under the impression that you outsource to SAVE money. My perception is changed.
The dangers of knowledge trigger emotional distress in human beings.
Temporary workers always make more money per hour than those doing it full time, its the trade off for the convience of having an on demand workforce. It's also very misleading to go strictly off per hour wage when your not including the total compansation package into the mix. Full-time employees will get PTO, insurance, 401k/pensions, etc. That isn't a small chunk of change.
That actually isn't that bad, given that the cost of an employee is way more than what their salary is (sick time, vacation time, health insurance, retirement, other benefits, etc.) all add up.
I'd be more concerned if it was 5-6x as much. 2x is a relative steal.
At the same time, if the feds only need someone for a few months for a specific project, it's a lot cheaper to bring in a consultant for the time needed than hire someone and have them working for you way too long.
when have consultants ever been cheaper than doing it in-house ?
I am guessing that in about half these cases, at the individual level, the contractors are former government employees who weren't getting paid their fair market value by the public sector. Given that a good IT worker is worth about 5 times a medioce one and 20 times a bad one, they're probably a much better value, on average, than those "left behind". Consulting budgets and the like also let huge bureaucracies get necessary work done that is internally impossible because it is "not in the budget".
The other half these cases, I am also guessing, will prove to be unnecessary wastes of money even worse than typical government IT initiatives.
I don't make as much as a Highly Paid Consultant, either, but fuck off! This should be considered normal. Do you think the zillions of perks you get as an employee for the government (health insurance, unions, more holiday time, guaranteed pay raises) are free?
how is babby formed?
When did this happen?
...and I work for a state govt. I have to cover all my insurance costs, all the SS and other mandatory deductions, plus vacation and other paid time off. Some states are trying to mandate paid vacations and health insurance - even for baby sitters. This raises the costs considerably. PLUS - we are actually accountable: if we don't perform up to spec, we can lose money. A govt employee, esp. a federal employee has (in essence) a sinecure.
Chaos maximizes locally around me.
I'd be curious to know if the actual workers are getting that or if that's what the contracting company is getting for the workers.
Maybe I should read the article... ;-)
Cost to run in-house IT/etc.:
- Personel wage
- Facilities
- Administrative costs
- Training
- + others
Cost to pay contractors:
- Wage/Contract cost
Typically they're similar or the contract will come in lower. Wage is not the only variable in the entire equation
There are people who do not want "big government", i.e., government employing people. So since the Reagan administration, the way they got rid of big government was to hire contractors instead of government workers. It makes the government head count go down and costs go up, since contractors have additional overhead costs associated with them - their companies need to make money as well. Then throw in companies like Halliburton that get no competes because some of their employees got very very high ranking jobs in the 2nd Bush administration (can you say Mr. Vice president) and they could charge what they wanted.
I know lots of people in federal IT contracting. NOBODY makes that kind of money. I call B.S. on this whole article.
And the gov't employees make more, work less, and walk away with a pension.
Godaddy is a scam and a ripoff.
You can't just compare a consultants rate to an employees salary. The government is paying for the employee's health care, pension, etc. As an independent consultant I have to pay for all that out of my rate. Additionally I have to carry Errors & Omissions Insurance, General Liability, Workman's Comp and several other things that are just the cost of doing business. A one-to-one comparison is very misleading.
"IT companies provide vastly superior skills"
Anyone who has ever seen a contract change within a government contractor knows that is not true. I used to work for a major contractor in IT at a NASA center. The contract went though a change to a new contractor. What happens is that the existing contractor and other contractors bidding for the job all put in a bid claiming the talent of the people who already do the job. Yes, the company bidding on the work assumes that most of the workers currently doing the job can be rehired to do the job. So even when a new contractor wins the contract, the existing employees get to apply for the jobs they already have. The new contractor comes in with an attitude of "We're doing you a favor by letting you apply for / keep your job". And ultimately, about 90% of the employees stay the same. The brightest employees tend to say "Screw this" and leave soon, but the dead weight still stays around through each contract turnover.
Okay, hire more government employees, what is the back end cost? How many more people have to be hired to take care of the HR on those people? How many people to manage their benefits when they leave employment?
You go and buy you own health insurance. Oh, what, the government is going to supply that anyway.
An employee costs much more than just their salary (benefits, employer matching social security contributions, taxes, and retirement). That alone could probably make up the difference.
Also, a contractor works on an as-needed basis. If you don't have enough work for them or don't have enough money in the budget to pay them, you just don't hire them. An employee is much harder to get off the payroll (particularly a federal employee).
The article said they used the salary plus 'actual' benefits listed by the contractors, and therefore adjusted up the salary of the federal employees by +36.25% up to account for it. They got that number from the government's "Office of Personnel Management".
So in effect, the federal employees salary +36.25% is still a lot less than the listed (salary + benefits) for contracted employees.
Perhaps it is time to stop listening to the GOP insisting that we contract everything out and make government smaller. Instead, try to actually deal with more things in-house.
private corporations routinely pay IT contractors more than their own IT workers for the privilege of
being able to quickly hire and fire anyone they like without the cumbersome and frustrating effort of dealing with health, dental and life insurance as well as 401k and training/certification benefits. Thats right, the art of oursourcing is also a clever means of engineering around your inherent value as a human being. Much the same as "benefits" are a delightful means of ensuring corporations never pay their employees what theyre really worth. all glory to the invisible hand of the market.
Good people go to bed earlier.
Or that outside contracting companies are a nice source of kickbacks that could not be "handled" otherwise.
In other news, people spending someone else money do not care about the cost of their expenditures. News at 11.
The POGO researchers say that the federal government itself does not know how much money overall it saves or wastes with its sourcing decisions and has no system for doing so.
Any private IT consultants willing to take this task on for a truckload of cash?
Have gnu, will travel.
Actually it was at least initially part of the smaller government initiative back in the 90's. All the IT folks had to be contractors. No government IT folks. Our first couple of contracts were so badly written that servers didn't get updated. If a server broke, the government paid to replace it. But if it got old, the contractor pays for a replacement. So as long as we could keep it going, it wouldn't cost the contractor anything.
[John]
Shit better not happen!
Exactly. This survey seems to compare the rate that the government pays a contractor versus the salary that an employee makes. Those are not the same because all the benefits you mentioned, plus overhead. It costs a lot more than salary to run a business -- office space, power, HR, management, legal fees, accountants, etc. I guarantee the actual consultant isn't getting nearly all of the money that the gov't is paying the contractor for his services. However, when the government pays an employee a salary, by definition he gets all of that money.
No, actually they aren't. If you had bothered to read their methodology on their study you would know this:
Because the contractor billing rates published by GSA include not only salaries but also other costs including benefits contractors provide their employees,[66] POGO added OPM’s 36.25 percent benefit rate to federal employee salaries[67] and BLS’s 33.5 percent loading to private sector employee salaries to reflect the full fringe benefit package paid to full-time employees in service-providing organizations that employ 500 or more workers.[68] All supporting data for this study are found in Table 1 and Appendices B through D.[69]
The Federal Government uses IT contractors because the bureaucracy involved with procuring and implementing it through their own IT staff/channels is incredibly slow. IT contractors can complete the job in a third of the time. That's why (at least partly why) the federal government uses IT contractors.
Here are the typical scenarios:
Gov employee: competitive salary on the low side with awesome retirement, sick days, vacation days, health, dental, and vision insurance, and other great perks. And they work on average less than 40 hours per week.
Contractor: 50+ hours a week. No paid vacation or sick days. More than likely no insurance or pays through the nose for his own. No perks.
That's something the folks who compare gov salaries with private never do is compare the whole compensation package.
Even if the article is comparing total compensation to total compensation, which I doubt it is, there may be other cost involved. There have been times when I supplied my own equipment and I have charged beyond a normal hourly rate for the use of the equipment.
For contractors that are hired for short time, it is not uncommon in industry to pay them large amounts of money. For instance, I have seen many contractors come in for a few weeks a years being paid double what an equivalent worker would make. It is not cost effective to have such a person on payroll, but their specific skills are sometimes needed. Think of a plumber or electrician.
Which is not to say there is not waste. Just to say the article does not make a compelling case for waste, and certainly not a compelling case for 50% waste, which is what everyone wants to believe so that we have these historically low tax rates without negatively effecting economic growth.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
That's what they pay the consulting firm.. the actual pay of the guy doing the work is usually a third or less of the consulting fees.
So really, we are paying 2x to a guy who is taking home much less than what an in-house employee is getting. It's sheer madness to assume that you will get better quality work from a person that you are shafting on pay. Also, contracting companies tend ot have shitty or no benefits, and for most contract workers, the contracts are highly unstable and therefore attract less competent personnel who are unable to land salaried positions.
Furthermore, typical government contracts run several contractors deep. At the bottom of that tree, usually the firms are just interested in billing maximum hours and pleasing their immediate contractor above them rather than actually performing for the original client. Also, nepotism is standard practice in government contractors, they really favor people with military/government backgrounds, when there are others with better qualifications (i.e. you won't fit in if you have an actual college degree).
I've done contract work in government and private sector environments. Unless you're talking about short term projects, outsourcing day to day infrastructure is a huge waste of resources and guarantees that the company doing the work will only care about the letter of the contract, if that. You use contractors like this so that you have the luxury of firing them on demand, and also to hide them from your investors since they aren't technically employees.
I notice that many of these comments are decrying the study's failing to take into account non-salary costs, such as benefits.
If you actually RTFA, you'll see a reference to "total employee compensation", which should be your first hint that the study didn't actually do that. If you RTFS, under "Summary of Methodology", it explains that it added 36.25% to salaries to account for benefits. There's also a discussion of the ways different types of overhead cancel themselves out (e.g., for a government employee, you have to pay for that employee's management, but for a contractor, you have to pay someone to manage the outsourcing contract).
Let me try spinning this
GOVERNMENT IT WORKERS PAID LESS THAN SAME WORKERS IN PRIVATE SECTOR
Obama claims government tightening belt
PRIVATE SECTOR CONTRACTORS BILKING THE US
Senate hearings commence in two weeks
GOVERNMENT UNIONS KEEPING COSTS DOWN
Union leaders praised for austerity
GOVERNMENT UNION WORKERS FORCED TO WORK FOR LESS THAN PRIVATE SECTOR
Bill O'Reily attacks unions for not protecting worker's rights
Here's what I think the 'real' spin should be:
WORKERS AT DIFFERENT COMPANIES PAID DIFFERENTLY
Film at eleven.
Here will be an old abusing of God's patience and the king's English.
$268k is the combined invoice for the employee; $136k is the actual compensation of the GS14 or GS15 in question. Government contractor employees, unlike government employees, often work unpaid overtime for the government. That $268k may actually be 2500 hours instead of the 2080 hours normal to a 40 hour work week over a year.
There's a reason why they're paid more: contractors serve at the whim of the government and can be fired at anytime. While they may be paid more, they lack the job security and numerous benefits that Federal employees receive. They can jettisoned at any time at the government's pleasure. I would also add that Federal employees are near impossible to fire. The paperwork to get rid of an underperforming worker is so complex and onerous that many departments simply transfer them or "promote them out" to get rid of ineffective employees. In fact, I think it would be easier to simply dissolve an entire department than to fire an individual employee. As one friend joked, "You'd have to kill someone get fired, and even then, it would depend on the circumstances." So yes, you're paying a premium for disposable labor.
Contractors need to supply their own Health Insurance, Dental, Vision, Child Care, Travel Expenses, Petty Cash, etc etc etc... out of pocket, and they don't necessarily get to climb onto a large scale wholesale insurance bandwagon that gigantic organizations are privy to.
Of course they get paid more.
Most full time, salaried, regular employees are blind to those costs.
Not to mention, they do their own taxes raw, based on gross payments, which may add additional account hurtles to be cleared.
Granted, a contractor may not necessarily *USE* a portion of their pay for those purposes, not to mention that they may also be an employee (and not freelance/independant) of a gigantic consulting corporation which *DOES* have access to large organizational benefits plans, they may even evade taxes... but that's their business.
Such is el capitalismo.
I'm surprised it's only a factor of 2.
This has been a racket perpetrated since at least the Reagan administration, if not the beginning of time. Politicians make a big noise about how they are cutting government spending and gaining the efficiencies of the private market, by replacing civil servants with contractors. The contractors are much more expensive, which makes the companies hiring them a lot of money, some of which they use to lobby the politicians for more outsourcing. Politicians get campaign contributions, beltway bandits get rich, but somehow the government doesn't get more efficient.
(Yes, there is a little bit of truth in the quick hiring and firing abilities of private contractors. It is true that it is hard to fire people from the government - but you can RIF them, if their program goes away. In practice, however, people rarely get fired or let go from either side of the divide, at least at the professional level. They get transferred around, but rarely laid off, and almost never fired. And, note well, civil servants are forbidden to directly lobby for their programs; contractors aren't. It can make a difference, and it makes it hard to perform mass layoffs of contractors.)
The amount of administrative red tape to hire a "permanent" employee is immense. In government, this is tantamount to a lifetime offer of employment, so it is not to be undertaken lightly. Management needs to be sure there is a lifetime of work for the position and the candidate has to be a good long-term investment risk.
With a lot less red tape, it is possible to scrape some budget money together THIS YEAR to hire a contractor. And it's not all that hard to get this year's money carried over to next year. And if by some chance the budget is cut, there is no collective bargaining crisis to determine who bumps who and which unfortunate soul loses a game of musical chairs.
Hiring contractors is the workaround to almost any administrative obstacle. Government has MANY hiring policies (affirmative action for example). Outsourcers can do a better job of ignoring (or pretending to comply with) just about any HR policy mandate. Hypothetically, you can verbally tell an outsourcer that you want an attractive blonde woman for a certain job, and they will present a list of candidates, all of whom happen to be cute blondes. The only people who will even know about the opportunity are those who meet the undocumented pre-screening requirements. I'm exaggerating with the specifics of my example, but this kind of thing happens all the time.
Kickbacks are part of the game as well. The outsourcing machine has a lot of moving parts, lubricated with an abundance of grease.
Admittedly, I haven't read TFA...but does it seem possible that you would be able to staff all of those government jobs at an *actual* 1/2 pay?!?
More likely it is the billing rates for contractors comes to about twice as much as the hourly cost for a government employee.That makes this an apples-to-oranges comparison. Much of the cost of employing government workers is not considered in this mix. Also, the government doesn't have departments that are out to make a profit...if it wasn't for the profit, you wouldn't have very many people working on government projects. Doh!
i suspect the same set of concerns applies to a lot of outsourced commercial IT.
But there's a lot of contracting overhead between the agency and the actual guy/gal doing the work. Add to that the substantial overhead costs for compliance to all the Federal Acquisition Regulations (FARs). Within the Government, there are major problems attracting -and retaining- talent; the Government trains them and if they're good, they go get much better paying/much better working conditions jobs in industry. The truly bad employees do get weeded out. So what you're left with in the Government IT ranks is generally a lot of mediocre people for whom the job security of a Civil Service job is their primary benefit. And the Government fails to invest in training, etc. So their primary job skill is supervising contractors. I don't envy Govt IT workers, but I'm not sure under the current system they would be able to execute without substantial contractor support.
As one of these IT contractors in this current employment market, I can tell you that the fat cat IT consulting companies like IBM, EDS, Unisys, CSC, etc are low balling their current workers, often forcing pay cut after pay cut upon them - and at the same time demanding increases to their bill rates. These comanies don't even provide their own employees to these positions (unless they are foreign workers) their standard practice is to sub-contract these positions to temporary agencies that are all too willing to sign blanket contracts at fixed markups on direct labor with no benefits provided. As a result, these old time IT names are providing someone elses service and charging AT LEAST DOUBLE the cost. I don't see why they deserve more than the contractor gets paid in PURE PROFIT with no costs of their own. If the tax payers knew, there would be a revolt. We can only assume that since these corporations have NSA contracts, that any whistle blower will be quickly "disappeared".
I wonder if the salary comparisons were all in costs of the federal employee - which I doubt because then you're at at a GS11/12 step 5 or so position for the quoted numbers, assuming a 1.5x salary multiplier to account for benefits. A 14 step 9 in DC already makes 133K per the salary table - so an all in cost would be around 200K minimum.
What contractors bring is the ability to change the staffing levels quickly. Unlike federal employees, who after a year, are very hard to let go; a contractor can be terminated rather quickly for virtually any reason. So, the life cycle cost is probably much less than for an employee.
The contractor isn't getting all than money either - as much as 20 - 30% is going to the company he or she works for to cover costs and profit. I know a lot of contractors that would gladly convert to federal positions because of the security and benefits but can't - the positions just aren't there. Unless Congress approves and funds positions an agency can't hire someone - even if both sides would love to do that. So, hiring contractor is a way to get needed skills without having federal positions. It's not like government agencies have tons of funded vacant positions in IT that they can't fill.
My point is a simple salary comparison doesn't tell the whole story.
I'm a consultant - I convert gibberish into cash-flow.
Whoever wrote this article must not recall the major downsizing that occurred in many U.S. IT shops between 99-01. A large number of permanent employees were let go in that period. That resulted in a number of problems including decreased morale and the outflow of tons of knowledge - knowledge that had been built up in a single worker that management figured would never leave. Because of those problems, a number of changes were made. One of those changes was to keep, as permanent workers, a small set of skilled people that would necessary even in times when IT demand was limited. In times of increased demand, the shops would ramp up with temporary workers. While, this philosophy comes with its own set of problems, I largely agree with its intent and results.
The need for this is even greater in government shops. Remember, in many government sectors, when a person is permanent they really are permanent. There are contractural obligations that prevent the government from letting people under all but the most extremem circumstances. Downsizing permanent IT employees to cut $$ out of the budget just isn't possible. In today's world, where government needs to be able to scale up and down frequently, the best option is to do so with temporary employees.
Are temporary employees more expensive? Sure. You have to pay a premium to someone to have the luxury of letting them go at any time for any reason - especially when doing so isn't just a possiblity it's a guaranty. In addition, temporary employees often bring specific skills into the shop that you need for a limited time, but wouldn't want to maintain permanently. These skills cost $$.
The cost of IT outsourcing is likely the least of most government's problems...
That's what I get for not RTFA completely.
We don't have to pay for contractors' insurance and benefits (and probably neither do the contractors, who might farm out some work to their own contractors). At this rate, whether public or private, the retirement plans for *actual* workers look more and more like the Soylent Green screen play. Or maybe Mad Max.
In other news, that steak dinner that cost me 20 bucks at a restaurant could have been made at home for a Lincoln.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Since, the 'Pay' is only about half of a federal employees cost. So it's a wash, now bring in the fact that they likely only need the contractor for a limited time, and now its a good deal.
(If at first you don't succeed, do it different next time!)
1) The actual contractors don't make as much as Federal IT employees. The contracting companies take more than half of that 2x salary. If you've been a contractor for a long time you can end up around 50/50 with the contracting company.
2) The Federal Government does not pay for ... which can add up. Whether it adds up to the 2x cost or not an argument I'd be willing to bet on.
a) Contractor health benefits and life insurance
b) Contractor 401k matching
c) Pension (Federal Government pensions are now 1% for each year worked up to 20%, minimum 10 years).
d) Background checks, security clearance, and other HR hiring overhead.
3) A competent contractor CAN have a job for life. If the company he is working for loses the contract, the NEW company that won the contract will ALMOST ALWAYS hire him/her. This is to avoid restaffing delays and finding people that are qualified.
4) Federal IT employees do not have it better than private sector IT (with specific regards to software engineering and application development)
a) Federal Government salaries are on average ~$10-20k less than what you make in the private sector. Most software programmers are GS 11 IT Specialists (look up the pay scale). Obviously Top Secret clearance, working on missile technology guys will get payed more (~ GS 13-15).
b) Retirement benefits are 401k and pension up to 20%. So maybe this is slightly better than private sector.
c) Health benefits are comparatively worse, you have the same choices but the Federal Government pays less into it so you end up paying more than contractors or good private companies.
I worked in a government laboratory. As a rough approximation the direct cost of a person was about 1.33 times their salary. The "extra" third pays for things like retirement, leave, and health insurance. Remember most federal employees receive 10 days of holiday leave, 20 days of personal leave, and 13 days of sick leave. Assuming an employee uses 5 days of sick leave and carries the rest over, then he needs to be paid for the 35 days he is off out of the 260 (52 times 5) weekdays. We only billed our customers for the actual days worked. In addition a goverment employee uses people in the personnel office, payrole office, etc which adds to the cost. Note these are only for the person. We also added indirect charges for the facilty, security personal, utilities, upper management, secretaries, etc. These often would mean the billable cost of someone is close to 3X their salary.
Bottom line: one has to be careful when comparing costs of personnel.
perhaps if the government IT workers were capable of performing the work then the gov would not resort to outsourced labor in the first place.
Uh, no. They pay twice as much FOR their contract IT people. The extra goes to the contracting companies; the contractors get *paid* normally.
I'm shocked this is a story!
Permanent staff have a regular and reliable pay along with, in many cases, employee benefits such as pension schemes, share options, medical insurance, company cars, gym membership, the list goes on. Never mind job security...
As a contractor working in software development I've found myself having to fight to be paid for the work I've done, to the point I've had my own bill payments bouncing and the bank charging me when I've been paid two weeks late by a company that obviously has no respect for suppliers! I never know what will be around the corner in terms of work and how well it will fit with my current work load. Often people want systems that do everything at extremely low prices so many leads cannot feasibly be converted to be sales. I don't get any benefits apart from some clients paying my travel expenses when I do work on site, no company car, no shares, no pension etc!
Working for the government, I can honestly say that the average salary for an IT contractor is - at least - half again what a government civilian would make with the same skill set. And yes, this is before taking into account the overhead costs that we also pay for either indirectly via prenegotiated hourly rates (FFP-LOE contracts), or through directly attributable expenses (cost-plus contracts). In addition to paying for their salary, the government generally pays out enough to cover their administrative expenses, training expenses, and - again, depending on the type of contract - anything else that can be even remotely assigned to the completion of their work.
Of course, most of this is not 'malfeasance' or opportunity costs (i.e., labor flexibility). The government straight-jackets itself on what it can and cannot pay employees. Job positions (also known as billets) are directly allocated by congress. The grade of those billets (which corresponds to a predesignated salary guide) more or less equates to the funding plus up they receive for associated human capital expenses. If I'm only authorized to hire against a GS-13 billet (~$80K in DC) when the skill set I need to bring in requires ~$100K+ on the open market, I'm SOL. Since I agencies/departments generally have a lot more flexibility with executing against other sources of funding (i.e., the different colors of money), it becomes easier to give ~$175K+ to a services contractor to bring in the same person that I could have gotten for ~$100K+ as a direct hire.
A story on this point:
A friend of mine consults for DC public schools. Yes he does make quite a bit but it isn't actually a story about him, he at least delivers for his money.
So they want him to write a bigass database processing script. It will get fed data from a bunch of sources, including a web interface for users, and have to process it and store it in a Quickbase (Intuit's online database service). No problem, this is what he does best. So they've laid out for him what they require, he lays out for them what he'll require in terms of time and materials. Only material is a server. He tells them he'll need a simple Linux server, doesn't have to be all that powerful nor does it need to be dedicated, just some place the script and web server to live. He figures this is an easy request.
Turns out not. They don't do their own IT, they outsource it all. So they say they have to go get approval for the funds. This surprises him since they are paying him like 5 figures for all the development work, so what should a server matter? Well turns out the company they outsource IT to charges them $3000/month for a basic Linux VM. I'm talking like 20GB disk space, 1 virtual CPU, 1GB RAM.
He was just floored.
...in the study. I work in government IT, and figuring the cost of benefits is standard procedure when we're working up a budget, and trivially simple. Here's a link to the actual study
You're right about bringing in consultants for short-term projects, of course it makes more sense than hiring.
Never let a lack of data get in the way of a good rant.
Does this take into account that their IT employees also get benefits that their contractors don't? It's not clear if this is a comparison of total compensation vs the contractor's hourly/daily invoicing (which would be apples to apples), or if this is just employee salary vs the contractor's rate.
Is that SALARY or TOTAL COST?
I bet they're comparing contractor total cost to government employee salary.
Oh, look, there it is:
Another non-functioning site was "uncertainty.microsoft.com."
The purpose of that site was not known.
Conveniently, we have plenty of shrill talking heads telling us that the private sector is always more efficient. That should be a viable substitute for so called "empirical evidence".
Not really. The article admits that skill levels are not factored into the comparison. The article mentions that the outside contractors may possess superior skill levels and be better trained and that there may be savings related to having more capable people running and implementing a project. I'm not claiming this is necessarily the case, I'm just saying the it is premature to make claims as to whether money is being well spent or wasted. I know some very highly skilled people who work in a government IT job, however I've also met some that were more comparable to DMV workers.
Perhaps I missed it but its also not clear if the comparison is strictly based on wages vs hourly billing rates or whether other employee benefits are also factored in, social security contributions, insurance , vacation, retirement contributions (if not a full pension), etc.
In fact, if the government is paying $120k per year for 2080 manhours, the contractor is probably getting around half that. It's the company that's getting the other half for overhead including administration, facilities, recruiters, management personnel, office equipment, and anything else the company needs. My contractor colleagues are making roughly what I am.
Some local governments do this as a way to fit affirmative action regulations. The governments hire politically affiliated U.S. minorities to sit around and do nothing for little pay too fit the AA requirements. Although, there is a pool of highly educated and qualified U.S. minorities to fit the bill, they aren't nobodies and aren't hired. But the ones they do hire don't know how to or aren't allowed to do anything, because they might mess things up. So the government then hires a politically affiliated company owned by a white friend or some company they own stock in or both. The company hires people from overseas and pays them even less than the government pays the local minority employees even though they do the actual work. The overseas people are content because they usually get to stay out of the hell hole that they likely left and are scared to complain because then their visas will be taken away.
In the end it works because everyone's beliefs are affirmed. White people complaining about lazy minorities taking their jobs can point them out. Minorities complaining about not being able to find work because of the immigrants and racist Whites can point them out. Immigrants complaining to countrymen that everyone in the U.S. is stupid, greedy and exploitative can show it. Finally, everyone that is politically affiliated who thinks they are smarter than everyone can sit happy knowing that they are because they keep screwing all the idiots sitting around doing nothing but complaining and not seeing who and what the real problem is.
This number needs context.
When the government signs up with a contractor their are a number of things that affect price. Projects are typically short duration. They need highly specialized workers. They have strict timetables. The government isn't paying the workers directly, which also means they are not paying taxes, healthcare benefits, HR administrative costs, training, etc.,. (the contracting company pays for that.)
Since the contractor has to make a profit they bake the profit into the hourly wage. This means that while the contractor may charge $268k for a worker, the worker themselves make $130k plus benefits (say $160k total compensation) then there's training, recruitment, and other administrative costs. Anything left over is profit. The other thing that needs to be accounted for is if that $268k is for some standard timeframe e.g. 50 man weeks (8 hours a day, 5 days a week, 50 weeks a year). Contracted staff are more likely to work overtime out of both necessity (e.g. tight target dates) and compensation whereas employees are less inclined/pressured.
The other aspect to think about is how the worker is defined. Are the an employee of the contractor or are they a contractor themselves. If they are a contractor themselves they may take a larger chunk due to the insecurity of being a contractor. Contractors tend to get kicked off of jobs more easily as budgets become constrained. That risk means that contractors want to get paid more in order to weather gaps in getting paid.
My point in all this, is that it's not as simple as saying "Government worker gets paid X and contractor gets paid Y" if we don't normalize those values to actual take home pay and total compensation for a year. I don't doubt there are areas where we are getting gouged, but at the same time I don't want to demonize either the government or contractors as a whole. It goes both ways.
What I have seen myself is that in some cases in outsource/offshore models the contingent firm comes in with a very low bid claiming IT workers as low as $25/hr. Initially those can be their best workers, to prove how good and cheap they are. As the project progresses they swap those workers out for lower skilled/higher margin workers. Additionally they work in team leads, liaisons, and project managers at a higher rate. Some of the project managers can be billed at upwards of $240-270/hr. The argument being that it's not a big deal because you can spread the cost across the cheaper workers and balance things out. It's a bit of a shell game if a company doesn't watch what's happening very closely. If they don't watch it then the project can start to run into budget issues and the company may be trapped finishing out the project without a complete product or having to throw additional money at it by increasing head count to get the work done, switching firms late in the game, or shifting internal staff off of lower priority work to fill in gaps. I'd love to see that process put into easy sound bite statistic form.
The contracted employee gets much less than half of that amount. Overhead, G&A, and Fee are charged by the contractor to the government as a percent of the employee's billed rate, which of course isn't what he really takes home due to benefits/healthcare/etc.
The article is a fail troll attempt to stir up the "contractors make more than government people" argument.
I am a soldier currently deployed to Iraq in support of the current drawdown. I manage a videoteleconferencing suite that was supposed to be run by civilian contractors, but out of the two that worked the shop, one did his time and left on time, and the other got a better job and left early. We were sent a replacement. I had to train this person up, but then they were moved to another base to cover down on the contracting companies other commitments. My soldier and I now run the shop in place of the civilians that were there before. My soldier has learned faster and performed better than the civilian I trained and makes about 1/5th of the pay that contractor made and only gets to go home for 15 days once during the deployment. The contractor gets paid leave every three months and left us somewhat... disappointed when it came to performance. Soldiers can do what contractors can, and if left to focus on that job specifically, we may even outperform as we have invested a bit more into the outcome. Some contractors we really do need, but some are getting heavily overpaid for something a soldier could easily learn how to do. I think the system needs an overhaul.
Government or Private Sector contracting, it is all the same. A contractor is brought in to complete a specifc task and are kicked out when they are no longer needed. If you instead hired an employee, you would have to find them a new position once the project that you hired them for is complete. You might have to cross train them for a new position. Also, it is not easy to fire an employee unless they royally screw up and sometimes not even then. But with a contractor, you can get them replaced or just cancel the contract.
Another benifit of having contractors has to do with PR. When have you ever heard about a company or government agency get bad publicity for getting rid of a bunch of contractors? But if you have to layoff employees, it makes the news. Canceling/ending a contract just does not have the same negitive stigma that layoff do eventhough in the end, depending on the contracting company, the same number of people could be unemployeed.
I have spent some time working on government contracts where I was one of many contractors sitting at the client location full time. Part of the reason that particular agency used contractors was because their HR process was very difficult to deal with. It was very hard to hire new full time employees and it was almost impossible to fire anyone. The director knew he was paying more for the contractors, but he also knew he could quickly alter his workforce if his budget changed.
As far as costs go, the full time employees were probably paid 10-15% or so less than the contractors (in terms of what the contractors took home), but they had much better benefits (not to mention job security). Most of the contractors worked for consulting companies, and they were the ones raking in the cash, not the actual contractors. In fact the agency I worked for forced everyone to go through a middle-man company if you wanted to do any work for them. The middle-man took from 10 to 20% off the top just for time entry and billing.
Don't forget that many government agencies have no real incentive to save money. If an agency improves their efficiency and slashes the budget by 10 million dollars, it just means they get less money the next year. It is why you sometimes hear about agencies going crazy at the end of the fiscal year and using up their remaining budget to buy whatever they can, regardless of need, so they can show they spent their allocated monies.
I did work for a Dept of Energy facility for 1.5 years. According to the DOE pay grade scale and definitions, the work was Grade 13 or possibly Grade 14 work, meeting the definition of an experienced specialist. The pay I received was toward the low end of Grade 6 pay scale and was justified by the fact that I was a not a direct hire and therefore DOE pays grades did not apply.
So, while I agree that often time, contracts are awarded at grossly-inflated rates, government departments are use contracts to screw IT folks out of market-rate pay as well.
Me either. So much for accountability...
I've been working for the government pretty much since I joined the Marines in '91, and I can't name 1 government employee who was fired in that time. In fact, we had a male employee who physically assaulted one of the women in our office enough to put her in the hospital and him and jail, and when he returned they had to accommodate him with a work area because he had a restraining order!
No wonder the toilet seats costs so much, someone making double can't sit on a regular old toilet seat! They need something that will stimulate the mind/bunghole to keep them well paid and all internals functioning correctly!
I've been working in government contracting (state, local, DoD, and Fed) for 15+ years and in all of that time I've only maybe a total of twenty government people that were technically competent to do their job. Very, very few have bothered to update their skill sets (I get asked 'what's virtualization?' about once a week despite 95% of our servers being virtualized for over three years now) and are only still there thanks to union rules. Most will not work past 5pm regardless of what's going on. Don't get me wrong, the few government techs I have met that know what they're doing really know what they're doing, but they can't do it all and are usually passed over for promotion because they're that good.
To top it off about 80% of the contracting companies out there are unethical to say the least (case in point, CSC just laid off 167 people today due to the much ballyhoo'd ECSS program spiraling out of control, but costing the government a bajillion dollars despite not delivering anything that actually works). Most have 'buddies' and are part of The Good Ol' Boys Network© plus lobbyists that make sure the dollars keep flowing.
So you've got good and bad on both sides. The situation is the way it is because contractors are out to make a buck and the government is too lazy to do the work itself. It's an industry.
Isn't this standard? You pay contractors more than you pay your internal workers. You need to, because you don't pay for any of the contractor's benefits. And you don't pay any of the overhead of that contractor's employers. The number I've seen thrown around is the total cost of employing someone is twice their actual pay rate.
Lots of important details are left out of TFA:
I'm a cost accountant in my day job and a good cost analysis is not a simple salary comparison.
I was actually surprised as I was expecting to see the "$800 hammer" principal applied! It is still so refreshing to see data spun to meet the postulation. As many have inferred in their response - IT contractor terms vs. employement terms should have the prior greater by at least another point plus! Please forward the balance due - thank you very much!
>The POGO researchers say that the federal government itself does not know how much money overall it saves or wastes with its sourcing decisions and has no >system for doing so
We all knew this from the get go, there is absoluteley no way they will get /create the neccesary appplication or system to give them that data either, as it would be a little too detailed for the liking of that government. If you knew how much your government was wasting of your tax payer dollars when all they had to do was be a little smarter shopper, people would just stop paying their taxes.
I briefly worked IT for the federal government. Part of why they're willing to pay contractors more is that its actually possible to fire contractors. At least where I worked, firing any permanent employee, no matter how negligent they were, was a legal minefield. There were people that had done nothing but sit on their asses for a decade, but if they were fired they could sue for unjust termination on some bullshit ground. Contractors can be let go in an instant. Its worth it to the government to pay extra just so they don't end up with more dead weight.
Exactly. Paying contractors 1.5-2x the equivalent salaried staffer is probably breaking even or better for most organisations. The overheads of employing someone are far higher than most employees realise: providing a suitable place to work, all equipment and software required for the job, paid vacation and sick time, whatever pension/health cover/benefits go with the territory, training expenses, people to handle management and administrative overheads... A freelancer has to eat all of that before they even start making any useful money.
There are a lot of advantages to being a freelancer in IT, if you are willing and able to wear all the extra hats that go with it as well as getting the day job done. But when people have a dig at me because I get "tax breaks" here in the UK, I tend to laugh, and ask how they'd feel if they only got paid for 2/3 of their working hours, didn't get paid at all for any non-working hours, had to spend perhaps 20% of the income they do get on overheads of one kind or another, etc. Usually they've got bored and conceded defeat before I run out of things I have to do personally that their employer does for them. :-)
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
A long time ago I worked for the State of Oregon on a contract. I learned a number of important things.
1) Bringing in contractors is a way to get around hiring freezes and pay limitations.
2) The ones that performed the contracts were the ones that had political connections, not the ones that could best do the job.
3) Reorganization of departments was more about mammalian marking behavior than it was about saving money. Since every new director would do this, every time the administration changed, a reorg would happen. It would always cost more than it saved.
It is because of the cost cutting and penny pinching that they hire outside their departments in the first place. That comes out of a different part of the budget. The second is contracting companies who tell them they can save money outsourcing it to private enterprise because it is "more efficient". (Which anyone who has had to deal with outsourcing will tell you is a lie.)
I work as a government contractor, and I know that the government pays more to my company than I get paid (I'm guessing around 2x, maybe a little more). This accounts for benefits and vacation time and a good bit of it is money the government would have to shell out for me were I hired as a direct employee.
To anyone talking about productivity, I've seen both sides of the coin from both categories. I've seen government employees who sit on their ass 90% of the time and I've seen ones that pull their own weight and earn their salary. The same can be said for contractors.
I'm a Government GS-15 that supers a mixed team that I was moved into about 2 years ago. In general, the contractor workers are better qualified and have better skills than a government IT workers of roughly the same salary range. This is partly because the agency has repeatedly stripped the training budget and partly because the contractors tend to be more interested in keeping their skills up to date because they know they can be out of a job at almost anytime.. I've "fired" my share of contractors, for budget reasons, because they weren't team players or even once to break up a "click" that was ruining morale. I've never been able to fire a government IT worker, but I understand it isn't as hard as it once was. It also doesn't appear to account for government worker benefits; just looking at the numbers. That said, our contracting office is pushing use hard into using only contractors for actual work in order to push project risk off the government and onto the contractor. In their vision, the government worker is only providing oversight and perhaps project/program management. I personally, don't understand how the government worker (like myself) is suppose to have a firm grasp of the technology _and_ how the government works if we don't bring any IT's up from below. Hiring a senior private sector IT into a senior government IT position rarely works IMHO. They quickly become annoyed by the politics and BS and leave after 12-18 months.
Outsourcing was never really a bargain in and of itself.
It is the write-offs that make it work.
Most outsourcing head shops deliver dubious quality at best.
It is very easy for them to misrepresent the quality of the staff provided.
From a national perspective outsourcing is a very stupid thing to do.
When the job is outsourced away you take a tax paying, productive worker off the tax rolls and put them on the dole.
Any domestic workers in the same industry still holding on pay less taxes because the earn less because the unskilled head shop "talent" can be paid less and can be exploited.
IT contractors have a lot of over head and levels of companies that are some times very far from the job leading to people not knowing what is going on and makeing it hard to get stuff done at times or leading to people being on site with no work to do as other parts of the contract are at a different page.
Some contractors also rotate people in and out so you have lot's of people who don't know how the site they are on works and what needs they have.
They are better off going in house and maybe even having a Gov IT department that does IT work for all of GOV (other then small stuff that each department needs on there own).
Is there a web site, or publication that one could view? Let see for myself...
I believe typical professional service consultancies aim for billing rates that are 2.8 to 3.3 times the employees salary to run profit margins of roughly 15%. And I would bet any things that contractors are WAY more efficient than government employees, based on my experience.
Exactly. The contractor gets paid twice as much, not the employees. In fact, profit motivations of the contractor put pressure on them to pay their employees as little as possible, and since most contracts are written in such a way as to absolve the contractor of responsibility if projects fail, the easiest way to maximize profit is to hire unqualified staff.
This is my firsthand experience. I was government contractor for 10 years. They hired me because I wasn't very qualified to write software (this was on a mission-critical aviation logistics system), but, lucky them, I worked hard and became one of their star programmers. I was the second highest-paid person on staff with our contractor in an organization of over 100 people. I found out from a leaked document that my company was making $150k a year off me after paying my salary. Since most employees were making less than half my salary, the contractor was pulling in about $15 to $20 million a year on our contract since the only overhead they had was covering our health insurance and 401ks (offices, computers, furniture, and other supplies were all provided by the government). That's $15 to $20 million a year to serve as a Human Resource department for 100 employees.
When the contract came up for recompete, the contractor used extremely heavy-handed tactics to try and force me to sign an exclusivity agreement with them, which was pointless in a right to work state. I objected on the grounds that the company provided no added value to the contract and that the employees, most of whom were just warming chairs, would get picked up by whoever won the contract (saw this happen many times over the years). It was a principle thing and I didn't appreciate being bullied. When they continued to pressure me (a manager actually blocked the door to prevent me from leaving without signing the document), I produced the leaked document and told them I would quit without a 10% raise. They let me go without a second thought.
Since I left, the software project I had spent the previous three years working on has completely failed without there being anyone qualified to work on it, but the contractor doesn't care because they get paid no matter what and it's cheaper to hire people with zero programming experience and pay them diddlysquat to struggle through their job than it is to reduce your profits and hire people who are educated software development. I'm not bitter about being let go, but I am bitter about the project failure. I was really dedicated to my job and felt I was making a difference in the organization, but the contractor, who honestly didn't really know anything about my job or the project I was working on (Government employees managed me directly), could only see the dollar signs.
I assure you, this is not about placing "blame." This is all about giving government employees the ability to put checkmarks next to items on their todo list. The department where I worked hired a contractor to build a LIMS for them so they could claim progress on a project the higher-ups were demanding. The government manager who started the project took credit for making progress on it after he got promoted elsewhere, the contractor got $15 million for producing a single webpage with a a phone number field that auto-focused to the next input after you filled it in, and the new government manager killed the project and took credit for eliminating waste.
"You need to go get rid of 250,000 contractors in the Defense Department, where you can really pick up some small change." ~ Former Republican Senator Alan Simpson, February 16, 2011 on balancing the budget (source)
"The problem with Socialism is Socialism, the problem with Capitalism is Capitalists," as William F. Buckley once said. Government contracting combines the worst elements of socialism and capitalism.
i ~ Celebrating Science, Cyberspace, Speculation
Why hasn't anyone asked about benefits yet?
I have read every single comment on this board, and no one seems to be asking about if they factored in benefits or not.
I will take this to assume they have not, and merit my above average cleverness for the discovery. I hereby declare, by right of my ideology, that this article is fraudulent.
The fundamental issue is that the government typically doesn't pay a good differential for IT skills. Government salary scales don't respond to the market value of the skill sets- they are more based on age. Your typical GS-13 is going to get paid about the same, regardless of what their area of expertise is. Good government IT workers choose to be contractors where they can get paid for the value of their skills. Worse ones stick around.
First people here are surprised that (in the US) personal information is purchased when a corporation is purchased, then they're surprised that the government pays outsiders more than insiders. Neither of these things are new - these issues have been around for longer than I've been alive. I get that not everyone is from the US, but those people from around here should already know these things...
Don't forget that contract workers have to pay for their own social security (Self Employment Tax) and a host of other benifits. When you take all of these things together, you will discover that the pay gap is much smaller.
Make the process of requirements & biding 100% open & accessible to public scrutiny for a defined time period.
Hold any party accountable (public or private) for not delivering agreed upon results.
End of story
I work as a web developer, although I studied another field. I just finished applying for two government jobs, the Foreign Service and the CIA. In the case of the foreign service, I also took their candidate's test, which is supervised but on line.
The web apps that they have for this are really, really horrid. Pages in the FSOT take 20-30 seconds just to load (which is a problem when taking a test that gives you 45 seconds per question). The FSOT registration form asks for your search history; you get exactly 15 "jobs" fields to fill in, and you can tell just by looking at the way the html is copy pasted that the underlying DB table is not normalized at all, it just has 15 columns in it for each job. For the CIA jobs site, about 1/3 of the saves never commit to the DB, you have to start the step over. It took me four hours to get five smallish documents uploaded.
These are among the best government agencies. Yet if I were to present an app that even remotely resembled their recruitment websites at my private-sector job, I would just get fired, and they would never see production. I consider myself a mediocre web developer, yet these sites make me cringe.
So, I think that there might be something to this idea that the private sector is more efficient. I think it probably has more to do with a lack of accountability within the US government than an inherent law of economics (the FSOT site is contracted out, for example), but it is enough of a correlation that I think these talking heads might just be worth a listen. Based on my anecdotal experiences, then, I am going to have to demand that _you_ back your claim up with empirical evidence rather than the talking heads.
Has no one else had an issue with them calling IT and Computer Engineering the same thing?? As an engineer who actually designs computers (as in at the digital logic level, not just picking components) I find this quite insulting.
When i deployed to Iraq, the contractors there made 140K a year. Being military i make less than 40 to do the same work for the entire year. Something tells me we need to trim the fat starting with contractors that make retarded amounts of money....
It's common for IT contractors to be twice what an employee would.
contractors get no paid holidays, don't get paid for public holidays, don't get sick leave, don't get any employee benefits and the employer doesn't have to abide by any employment laws like giving excessive notice for termination/redundancy payouts or even providing a reason as to why they don't want you coming back the next day.
That's why I'm a contractor enjoying my 6 figure salaries
First, it would be increasing the "size" of government, even if it lowered its "cost" and the R's still wouldn't let that happen. Second, they tend to be liberals...
That is all.
"As a fed contractor, I never put in more than 40 hours a week. That is what we had in the budget, and to do more than that would have resulted in issues."
There was also a strict 40-hour limit for me as a direct federal employee (summer internship; I was classified as GS).
Moreover, they were also strict about it being 8 hours a day, 5 days a week. This meant that I couldn't work longer when I was having a good day & work less when I was having a bad day, which would have gotten more out of the same 40 hours.
I listen to both RIAA and non-RIAA stuff if I like the music, tangential business/politics nonwithstanding.
I do know know one poor asshole whose bill rate was $150/hr; but the poor bastard was taking home about 1/4 that. He boss was telling him that his bill rate was $75/hr but later the client later told him, yes the government client, told him it was actually $150/hr.
Back in 1965-66 a consultant talked with some college students, including me, about consulting. One thing he mentioned was a rule of thumb for computing a consulting rate.
For a middle-to-long-term consult the rule of thumb was one percent of an annual salary per day. This comes out to the billing rate being 2.5x the salary-only cost (assuming a 40 hour work week).
The multiplier covers a lot of stuff. Notable items include: The work done by the consulting firm (including sales, billing, carrying receivables, government forms, and non-billable consultant time) and their profit margin. Benefits for the consultant - both ordinary benefits such as medical and the company's part of social security and replacement of retention benefits such as bonuses and stock options. Paying the consultant enough that he can absorb "dead spots" between contracts, risk of them being long, and other fallout from the company's lack of interest in retaining him past a project's end. And a premium for the actual work because he's expected to be more expert in the field than those who take salaried positions rather than risk and succeed in the consulting market.
Many of these costs have equivalents that actually are paid for salaried personnel, but don't show up in the salary itself. For instance: Recruiting costs correspond to the consulting firm sales costs PLUS possibly the firm's recruiting costs to get the consultant onboard in the first place, but because consultants are onboard for less time the sales costs occur more often.
Right now consulting prices are depressed, due to a flood of laid-off hi-tech workers taking consulting positions at low rates as a stop-loss. But it looks to me like the government is still getting a bargain.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
This would be true if the majority of IT workers were government employees. Thus far I haven't found many except a few stuffed in DC cubicles taking vitamin D supplements.
Most of government IT workers are contractors. Didn't you see Eisenhower's farewell address? He wasn't making that shit up. Vannevar Bush, the organizer of the Manhattan Project- among other things- created Raytheon. High technology and government drones on the dole don't mix. It's all contractor based now.
Oh, and you also get paid more because the benefits suck balls. If you get any benefits to begin with, that is.
Typically organizations will bring in a consultant when they have a short-term problem that they want to solve, or just need extra hands for a big project. Now even though they're paying their contractors "twice" what they pay their employees, they are only getting money. Working as a contractor means you don't get health insurance plans, retirement, etc. Additionally, you're only bringing these folks in for (hopefully) a limited period of time, after which time they move on. So really in the end, it's pretty close to being the same money-wise. Maybe this "watchdog" group should watch something meaningful. Everyone knows contractors make a bunch of money, but there's more to it than just the money.
that the government is being compared against.
It certainly isn't private enterprise.
I know that the uproar is all about this waste (and it is) being paid for by JQ's taxes...but JQ pays for the waste in industry through higher prices.
I know goods and services are voluntary, taxes are not, all that... but seriously, I am looking for the human enterprise that is efficient (or even equitable) and I am not coming up with much.
I am very small, utmostly microscopic.
Government IT contract workers make obscene money. I've seen horribly unqualified people taking network/system admin jobs in the middle east for $90k, $150k, $250k for a 9-12 month contract. The first $70k(ish?) is tax free. Its insane. Most of them sit in little NOCs and watch lights blink all day.
Once you pay contractor, there is no unknown deferred liabilities that would likely double or triple FTE cost if accounted for.
1) Clearances: Lack of properly cleared people inflates contractor salaries more than gov't employees. The discrepency is due to in large part to higher turnover for contractors.
2) Comparison to Commercial Rates: Since I do IT contracting for bother Federal and Commercial clients, I can tell you the rates the Government gets are actually slightly better than commecial rates. I noticed that comparison was left out in the article (not sure about the study - tbh I didn't read it)
3) From tfa: "The researchers point out that its government salary data does not incorporate overhead costs—management and administration, supplies, facilities—that private outsourcing firms may factor into their billing rates. " . May factor? They always factor in. The indirect support costs have to be paid somehow: HR, Legal, Buisness Development, Management, etc, etc. What do they think, that Tinkerbell pays for those costs with magic fairy dust?
4) There is a certain "fustration overhead" in dealing with the derth of techncial leadership in the Federal Government. There are plenty of managers of technical workers (notice I didn't say technical managers), but very very very few technical leaders. I would suggest you would find more cost savings in trying to sovle that problem. Like was pointed out earlier: there's a large discrepency in ability with IT workers and given the current pay system in the federal government (that doesn't reallow for the flexibility equried), you're not likely to be able to hire/retain the best people.
I worked for a huge arm of the government (rhymes with "USDA") as a contractor, and it was fairly tedious. I was an FTE with a company that billed me out at over twice what they paid me, making a salary. I had benefits, etc., so it wasn't a bad deal, pay-wise. I know I made more than the "lifers" on the government side, but certainly not twice as much.
It is EXTREMELY expensive to do work for the Federal Government - first, most these high-paying jobs require a security clearance, which costs (depending on the level of clearance) ~$25,000 to get, and $15,000 per year to maintain. Then, when you are flying for a government project, you ALWAYS have to purchase fully refundable tickets, which means you pay 2x-4x the price you pay anywhere else - because the project you're working on will ALWAYS get rescheduled at the last moment.
Government is hopelessly dysfunctional, every project takes 2-10x longer than it should... yet if it weren't for the contractors, nothing would get done. At least a contractor can leave agency A, and go to agency B while A tries to figure out what the heck is going on.
Joel
Good security is based upon reality and common sense. Common sense is a function of having common knowledge.
I just retired from nearly 30 years at Treasury. I can't count the number of employees I've seen fired.
Perhaps a dozen were led out in handcuffs for violating disclosure or other laws.
I've seen behavior infractions (fisticuffs, actually) result in a "both of you go home and we'll sort it out later", with the conclusion that one voluntarily resigned and the other was fired.
My agency was the IRS and IRS employees get ZERO slack on filing their tax returns late; 100s of employees have been fired for that reason since the Revenue Reconciliation act of 1998.
I've seen student aides arrested and fired for stealing.
I've seen at least a half-dozen fired for fully-documented poor job performance, a process that takes time, to be sure, but can be done.
I've seen two fired for downloading porn. I saw one (a Special Agent, no less, who apparently thought his off-network investigative workstation was immune to audit) who was allowed to resign before he was arrested two weeks later for spending all day at work and leaving his computer running all night downloading kiddie porn.
Hell, I even saw a *Division Chief* fired and criminally prosecuted for falsifying less than $1000 in relocation expenses on a travel voucher!
Yes, tenured civilians in government service get fired. Maybe they don't put as much emphasis on personal accountability at whatever agencies you worked for, but I know that at the IRS, employees got fired.
As an aside, relative to a circumstance in the GP post - I've known 7 employees who got caught having sex at work. 2 got fired. 2 got a 3-day suspension with loss of pay. But 3 got kicked upstairs/promoted out of the place. (The number is odd because one of the caught employees was screwing a contract security guard. She got promoted; he got fired.) I never really understood the rules surrounding that particular infraction.
another thing you have to keep in mind (mostly for an it consulting firm) is the other costs for people other than the contractor... account rep (sales person), project manager, as well as other office people (logistics/admin assistants/etc) + overhead costs, benefits for the individual contractor (already mentioned, of course) and others at the company who aren't on-site doing the actual work.
I'm a member of the military and I work IT. In my unit we have about fourteen people working full time on IT issues, and I would guess three of those individuals (including myself) are highly skilled. Another three are or are capable of becoming well skilled. Another four are hard workers but probably won't ever fully grasp the concepts they're being asked to learn. Most of the rest are worthless and shouldn't be assigned to this career field but will probably be allowed to serve as long as they desire. One or two of those will be kicked out. In the military we get who we get and we have to work with them. The hope with getting a contractor is that they will come to you already possessing the necessary skills and if they don't they can be easily dismissed. We don't have to waste time and energy training them. Unfortunately, that doesn't always happen. We have a contractor currently assigned to us who is neither skilled nor hard working, yet somehow we're stuck with him. The company that provided him hired the person who would accept the lowest salary. The government is paying the same rate regardless of the person's skill
And where do those fudge factors come from? They look awfully made up to me.
Ever tried to get a job with the Federal Government?
Bunch of good ol boys and gals with a few boot camp based certifications.
Sorry guys that don't make the IT department run smooth. Same as passing the exam in college but no applying the material.
Contractors are generally underpaid compared to Federal employees. How many contractors you see driving Mercedes, BMW 7 series?
A few are lucky to drive a Honda.
Getting tired of these watch dog groups. I mean where did you get your data, IRAQ?
Contractors can be useful in some situations. For example if an agency is upgrading a database system, they need people to migrate the data, test the new system and train the db admins and users. For a six month project additional costs of using contract labour is justifier. If we limit contractors to one year with a given agency they will be used on these kinds of projects and not just be overpaid perma-temps.
I am one of those contracted engineers, and I work with the "government civilian engineers" who couldn't actually engineer anything if they were required to and had step by step instructions. In my daily job I do the work of four+ "civilians." The real waste here is the fact that the government cannot fire dead-weight civilians, as that would actually solve the problem, then they wouldn't need to bring in outside contractors to get the work done.
If the government could simply fire civilians, contractors wouldn't be needed. We exist because the work still needs to get done, and since it takes 2 years to fire somebody and the guy sitting in the chair right now will retire in two years, they'd rather let him do absolutely nothing for the next two years than try to fight the unions and get any real work out of him.
Consultants also don't get benefits, pensions, etc. and also are paid via 1099s which exempts the employer from having to pay a significant number of taxes paid on behalf of permanent workers. Consultants are ALWAYS paid more than a permanent worker because they do not receive any of these types of benefits and have no guarantee that they'll have work tomorrow.
Most businesses go out of business in the first two years. Eventually, most businesses go out of business period.
From a statistical point of view, comparing the costs in general of doing something that will eventually end (private industry) vs doing something that isn't supposed to end (government) seems like comparing Apples and Oracles.
Horse-squeeze. I've been a fed contractor for years under various 8a contracts. The bids for these 5 year or less contracts are always low-balled which precludes any double salary compensation. Large, well known software anddevelopment hardware vendors, like IBM, HP, Microsoft, Arcsight, CA, etc., provide contractors on a continual basis across multiple short term contracts in support of hardware/software purchased (lasting for years), at inflated rates of $150-$300 an hour. Many of them not expert at all but learning the vendor biz. My bill rate is less than half the low end on that scale. If you want to fix the problem, stop the vendor raping of tax dollars and govt execs who run things by trade mag instead of solid analysis.
2X the internal staff costs. Why not. As an outside vendor, I have to pay group insurance, pension benefits, and a whole slew of fees, in addition to the work of book-keeping and our admin salaries. If we make 10%-15%, per placement, we are doing well. We make some growth with volume, but then we have to pay for extra courses to keep our employees from jumping ship.
Leslie Satenstein Montreal Quebec Canada
Argument for Federal IT:
Although contractors cost much more per hour, the contractor takes home less then the federal employee does. The reminder of the cost goes to contractor overhead such as: managers, accountants, marketing staff, the prime contractors cut etc. Now add additional COR staff to monitor the contract and contract company. Now add in different contract companies each to trying to take positions and monies from the other companies.
I.T. Contracts spending more time sucking up then working, they know that most contractors are the same and the only thing that keeps them employed on their job is if their "federal likes them."
Cleared Jobs, this a personal pet peeve. The federal government spends millions on clearing workers for specific jobs. Once these people get cleared they move to a private sector contract job in the SAME government agency at an shocking cost to the tax payer.
Argument for Contractor IT:
In reality you can not fire a Federal Employee, it takes up to two years between documentation, counseling, etc and is far easier to promote them or transfer them. The are cases of federal employees just not showing up to work or only being at work 4 hours a day while putting in 8 hours on their time sheets. I have actually been told on a site "I am a Federal Employee you can not make me work." Between telecommuting, Alternate Work Schedule, Federal Holidays, Sick, office parties, mandatory training, etc, the hours of available labor are lower.
Once the union gets involved you can not move, transfer or otherwise change the work schedule of a Federal employee without an act of congress.
Finally:
The system is so badly broken, there is no way to fix it. You first need to remove all job protection from federal employment. Then forbid the use of contractors. This will never happen.
While it's all good fun to compare one employee's wages directly against a contractor's wages -- usually with the contractor making more money -- it neglects many important factors related to the total cost of a direct employee versus a contractor. To wit:
- The cost of a direct employee (usually) includes all sorts of benefits like healthcare and dental insurance, participation in a voluntary retirement program (i.e. 401k), none of which is (typically) offered to a contractor.
- There is an administrative cost associated with every direct employee, such as payroll processing, HR, etc. Contractors bear these costs themselves.
- Contractors (typically) do not get paid time off for sick leave, vacation, etc. except perhaps for major holidays.
- Liability brought on by contractors is generally assumed by the contractor and/or the firm that supplied the contractors to the employer, thus relieving the employer of costs associated with protecting against said liabilities.
When it's all said and done, the typical cost of a direct employee is usually somewhere between 1.3 and 1.5 times that of his/her direct wages. So if you see a contractor making 1.5 times that which is paid a direct employee working the same position, understand that the contractor is *not* making out like a bandit. He's paid more because he's getting less of other intangibles. Or, if you want to look at it from the other side of the argument, the direct employee is getting more benefits in lieu of wages.
I've worked both as a contractor and as a direct employee throughout my career. The money works out about the same once you account for the variations outlined above.
Having worked on both sides in Australia, I found that its usually a case of those that can, contract; those who cant go full time. Sure the contracting space has its share of oxygen thieves but IMO that is a more systemic IT issue with people following the money, yet having no passion.
I find contracting more rewarding both financially and mentally. The wide range of projects keep the work interesting and the skills up to date. I am still coming across projects where the tech lead full timer wanted to teach me about this new "jquery" tool he just found (thats the library itself, not a plugin)........ its sad.
So the first two points are out. The other three are still valid and there are probably more factors than that. Wages and benefits are still just paid directly to the employee. The company incurs other costs per employee.
I wonder how much of that is paid to the contractor...and does the payment for the local employee include their matching 401K if any, contributions to health care, and any insurance the company needs for it's employees? Contractors are also very easy to let go/bring in when you have an unsure workload level with no long term obligation.
... the government can fire contracted IT workers, as well as get people with more up-to-date skills then their own workers, which are leaving in droves for the contractor positions since they see their skill-sets atrophying as well as see the skills they have under-utilized. As a former government IT worker who jumped to the contractor realm, I can say that I have more up to date skills now than I did. And those skills are much more effectively utilized. On paper it looks like it costs more, but in reality when in Government, most of what I wrote was never deployed because of political in-fighting and maneuvering for more power. As a contractor, they came to us because they couldn't get it done internally, and they pay for it. Of course, we actually deliver products that work, and then we move on to another area for another job. In the government, you can't do that - you are stuck in one area even if they don't need your skills. You sit and twiddle your thumbs, or take training courses. The government is penny-wise and pound foolish wasting hundreds of millions of dollars on programs that are doomed because they do not listen to their own people. But when they are paying me $1000/hour and I tell them the same thing their own people tell them, they listen.
That is why, as a contractor I say the government can never do anything right, or well... It takes independent contractors to do that since they are held accountable - the government IT workers aren't.
2x the cost of an employee sounds about right.
Load factor on that employee is about 2 anyhow, more if you include ineffeciencies (idle time between projects).
It's a wash.
"Reality is that which, when you stop believing in it, doesn't go away." - Philip K. Dick
When you don't have to pay for benefits such as insurance, or retirement which often amount to as much as 50% of the base pay (sometimes even more), it's very easy to pay contract workers more than your own workers as far as the "up front, take home pay" goes.
The day after I retired I could have gone back to work "in my old office" doing the very same thing as I did before retirement at considerably more take home pay than I had been getting. However they would not have been paying for insurance, toward retirement, or matching funds. They could have given me a 40 to 50% raise and still come out ahead.
There are IT jobs in the armed services as well. I used to to be one of those guys. It was disgusting how much more the contractor IT guys in Iraq got paid compared to everything we made in a year out there (including hazard pay, etc).
I only know what I see. This is what I see. The 2 full time .gov techs assigned for my equipment. One came from building maintenance and the was a ward clerk.
Here is a list of schools the goverment sent them to get proficent in their craft.
Here is a list of qualification certificates, and certificates of completion + university or community college courses completed.
If you didnt see any thing, thats exactly right.
BTW the female is a GS 11 and the male is a WG7
Yes experience and education was a requirment for promotion, but somehow in their cases it wasnt required. The male has been an employee for 20+ years and the female fot 12 years. BTW the female told me that Open VMS is not UNIX, its just an application that runs on a Microsoft Server!
I find this surprising. While I never have worked for the US government, from my experience it is much much more than that.
All consultants/contractors see government as a feedbag and will rip them off as much as possible. Its a big payday. This is hardly limited to IT workers, though they probably make up a large percentage of the total.