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.'"

Comments

Really?

[ccguy]

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.

Re:Really?

[GameboyRMH]

Do you have any first-hand experience with this? Because I do, and in my experience the contractors are pampered telecommuters who only physically pop in a few times per week.

In fact we had a big issue a few years back where we had to replace a bunch of contractors with full-time government workers because they are that much more expensive and an accountability nightmare.

And since I've already stated where I work, I was one of the people who replaced a contractor. I take in somewhere between a third and a half of what the contractor did and you bet your ass I get more done as a full-time employee, even on just the 1 or 2 duties that the contractor had vs. the many more I also have now.

Worth every penny

[GlobalEcho]

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.

Re:Any surprise?

[Lunix Nutcase]

Actually they factored in the extra 40% cost of benefits on top of the government employees salaries and the private contractors were still 1.5-2 times more expensive. The people doing this study weren't so dumb as to not factor that in:

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]

Re:It's Called "Blame Pay"

[cayenne8]

Actually, it isn't that bad at all.

You get yourself in the door of a good Federal contract.....form a "S" corp and get on as a subcontractor. You bill out at anywhere from $65-$80/hr....and you're golden.

This will keep you comfortable in salary....it is enough to figure to take off about 3-4 weeks a year for vacation and sick leave. You get yourself set up with a high deductible medical insurance policy (like $1200) and you use this ONLY for emergencies (heart attack ,etc), and with this you are eligible to set up a HSA (Health Savings Account) where you can stick back over $3K a year pre-tax.

As a 1099 contractor, you can write off all kinds of things, even mileage driving to the site daily if you have to drive...lots of perfectly legal deductibles.

A nice thing with the "S" corp, is that it can also save you a good deal of money on employment taxes, (SS and medicare). Do get a CPA for advice on this, but you can do something like:

Say you pay yourself a salary or about $40K through the company. You bill for $100K for the year.

You only have to pay SS and medicare on that $40K, the rest of the $60K falls through on your personal taxes at the end of the year (dividends or whatever you want to call them from the company) and you only pay normal state and federal income taxes on that portion.

About the only PITA, is the paperwork you need to do. YOu can get a service to handle your payroll if you want, but these days with electronic access, you can easily set up with your state and the feds and pay your taxes quarterly on the income portion. Just document stuff well, and it actually is a pretty nice way to go.

The HSA is something I like, and wish was more easily available..not just with high deductible plans. This isn't like the FSA's you get through your normal W2 employer, it isn't a "use it or lose it" type thing...it keeps building and building. At retirement, you can convert this to retirement funds. You can also invest from this account if you so wish...

When I was doing this...I had no problem paying for my routine meds and Dr. visits with my HSA money. Often when I'd tell the Dr. that I'd be paying...they'd give me at least a 15% discount right off the bat...

Unfortunately, the Feds have more and more, bastardized the contractor paradigm. They deal more and more exclusively with only the LARGE contract houses...and is harder these days to get a 1099 gig...the big houses want you on as a W2 employee.....and then, you get the worst of both worlds as far as job security and pay go. Even that still isn't horribly bad, but you lose all the freedom (no more fscking having to 'earn' vacation and sick leave hours....and all the tax breaks.

More difficult to find...but not impossible.

If nothing else, if you can get in on a Federal contracting IT program as a W2...get in, get some experience and foot in the door and meet people. Makes it much easier on the next gig...to get them to let you sub contract to them and go the 1099 route.