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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.'"
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".
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.
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?
...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.
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
Yes, you can't which is why they factored in benefits and everything else into the salaries they quote for government workers.
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]
You aren't being as clever as you think you are.
It's not about what the people make, it's about what the people cost. Remember that when the government hires a contractor, there is usually a contracting company. The company gets a lot more money per employee than the employee sees. Some of that is fair per-employee costs such as payroll taxes and employer-funded health care. Some of that is overhead -- the company's HR, payroll, accounting, contract offices, and profits come out of charging more per-employee.
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]
Straight from the study where they outline their methodology. So even with a 36.25% benefit rate added to their salaries these contractors were still nearly 2 times more expensive.
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.
...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.
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
Sure I knew people who were discharged, but in my 20 years of federal service, 8 as a Marine and another 12 as a DOD contractor, I haven't known a single civilian government employee who's been fired. I have known of at least 2 who weren't allowed to have computers though because they were found downloading porn at work. The agency had to make "accommodations" for their "illness".
Oh, and I call BS on your same day dismissal. Didn't happen. Maybe a student aid, a summer hire, or possibly a CO-OP employee, but not a tenured gov't employee.
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.