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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.'"
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".
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.
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.
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.
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
I've been working less than 1.5 year as an employee for a government agency. Then I left, but that short employment time granted me a 320$ monthly payment for 20 years after I reach 65 y/o. It's not that much because it is an amount in today's money, but it was just 1.5 years. In that same time to get the same pension as a private contractor I would need to save close to 1000$ a month, and it would also require Mr Market to give me a steady 8-9% return each year until I retire.
As a government employee I also had all kinds of health benefits, paid gym membership, many discounts on hotels, plane tickets and car rental, lower premium on house and car insurance, and more vacation that I needed; I also got a tax break because of the pension fund, and more tax breaks if I decided to apply for an optional group IRA, where the government would put money if I declined the gym membership. And no paperwork, I just had to sign on the dotted lines when they hired me.
As a contractor I now make more than twice the salary, I can put all kinds of stuff on my tax and shuffle things around to save a buck here and there, I can takes months of vacation whenever I want, but there is just no way that in the long run I'll have a better pension.
lucm, indeed.
And it really doesn't hurt that an outside contracting firm can make a fat campaign contribution.
Funny, but it's actually pretty hard to find an example where the outsourcing or privatization of any government service actually turned out to be more efficient and less expensive than just having the government do the job.
And, as Chile learned, that goes double for privatized social security. The administrative costs went from about 2% when the government ran their social security to almost 20% when it was privatized. They are now trying to end privatization of social security in Chile and put it back in the government's hands for just that reason. Yet, it doesn't stop a certain group of candidates who were debating last night to win the nomination for the US presidency from holding up Chile's privatized social security as a success story.
You are welcome on my lawn.