Federal Contractors Are $600 Screwdrivers

ideonexus writes "Last month an article appeared on Slashdot about how the government pays IT contractors twice what it pays its own workers. Missing from the article was how much the IT contractor pays its own workers. After working for a federal contractor for 10 years, a document accidentally leaked to employees by the contractor illustrated the incredible disparity between what the contractor was paying us and what they were charging the government. Like most contracts according to the GAO, the government provided our offices, utilities, computers, and training, leaving our salaries as the only overhead to the IT contractor, giving them an incredible incentive to keep them as low as possible to maximize profits. When the top 100 defense contractors cost taxpayers $306 billion, eliminating the federal contractor middle-man seems like an obvious place to start the austerity measures."

Comments

Confused Mishmash

[MozeeToby]

This summary is a confused mishmash of thoughts. First they talk about how the government pays for offices, utilities, computers, and training then they bring up defense contractors, who aren't the kind of contractors that the earlier statement is talking about (I assure you that defense contractors pay for their own overhead costs). Secondly, in what world does a company having many significant expenses mean that they don't try to optimize the largest one? Companies minimize costs and maximize revenues wherever possible, it is the one thing that they are good at (and why capitalism comes as close to working as it does). Removing some expenses doesn't especially encourage companies to reduce costs in other areas, just like increasing costs doesn't encourage them to gouge their customers, if they could get away with gouging their customers (or employees for that matter) they'd already be doing it.

Re:They're impossible to fire

[Richard_at_work]

Do people really have that much of an issue with their own negotiation? I've worked in some very big companies, I've never been part of a collective bargaining group - and I've also never had problems negotiating my own compensation (and I hate talking money with anyone). Its not that hard to do, and its not hard for the company to accommodate individual bargaining either.

Is US employment culture that different to British employment culture?

Duh?

[COMON$]

Only 2x? that is actually pretty good (cheap). The margins there have to be pretty tight. I am a pretty well paid IT worker at around $37 an hour (80K a year). When I contract it is for $125 an hour, $100 on the low end. The overhead on taxes and administrative costs is so friggin high that we break even on the $100/hr jobs.

What you get with contractors is freedom from salaries, benefits, leave, and liability. Depends on what you are wanting. As someone who has worked for the state, I can say the contractors we hired were worth 3-4 internal employees. The contractors have incentive, the in-house never did, they got paid the same no matter how hard they worked, just as long as they kept that seat warm between 8-5.

Summary is moronic

[MikeRT]

When the top 100 Defense Contractors cost taxpayers $306 billion, eliminating the Federal Contractor middle-man seems like an obvious place to start the austerity measures."

And unless you want to establish a Soviet-syle Department of War Production, you'll have a lot of that no matter what. Most of that $306B is spent on acquisition of military hardware that costs an incredible sum of money because it is all custom-built for a single, specialized market. There is no "adjacent market" for a F22 or nuclear air craft carrier ($5B+/ship).

Obviously, there is room to get rid of a lot of that, but the most effective process would be the following which neither liberals nor conservatives would tolerate:

1. Make civilian employment at-will (liberals: booooo)
2. Fire the dead weight left and right (liberals: boooo)
3. Change the law so that government agencies can legally poach government contractors as new employees (conservatives: booo) even if there were pre-existing non-poaching agreements.
4. Liberalize the procurement regulations so that federal managers can hire 1099s on a no-bid basis for temporary work with the caveat that the federal manager can be fired on a performance basis if their contractor cannot or did not do the work (both: boooo)

Re:Summary is moronic

[garyebickford]

You just reminded me of a guy I met on a plane a long time ago. He was a welder for a company that did nuke maintenance in Washington state on the nuclear subs as part of their periodic refit (the subs, as most military ships, have to be torn down quite a ways every so many years and have everything fixed and updated, including the nuclear power plants). He had to have some kind of high security clearance, and was a very high end welder so his pay rate was pretty high; then working on nuclear equipment involved a substantial pay differential. Safety rules and work rules meant that his work day was as follows: 1.5 hours going through several levels of decontamination and clothing changes; 1 hour of actual welding; 1.5 hours coming back out of the decon cycle, 1 hour lunch, 1.5 hours of decon to go back in, 1 hour of work, 1.5 hours of decon. The contractor was required to have the lunch break by state and federal law, and there is no way to eat lunch inside a nuclear hazmat suit. And federal work rules did not allow working more than eight hours. So he spent six hours per day changing clothes and two hours per day working, getting paid for eight, at (IIRC) triple time for nuke+hazard duty. I don't know that there's any other way to do this, but it's expensive. If they went to a 12 hour day then they could get four more hours of actual work, tripling actual work hours per day, but that was impossible. It was kind of frustrating all round for the contractor, the employee (the guy I talked to) and the military folks but nothing could be done. It's been a long time so I might have some details wrong but that's the gist.

As for your numbered points, some good, some interesting, ideas but never gonna happen.

Re:They're impossible to fire

[0123456]

The 19th Century thinking here is remarkable. It makes me wonder who are the conservatives.

The 'progressives' are the modern conservatives, because they're trying to maintain an industrial-era ideology in an increasingly post-industrial society. The 'conservatives' are trying to build a society that works when most people aren't 'working for the man' in a factory twelve hours a day.

Re:Um....

[bleh-of-the-huns]

Actually, not really. While there is plenty of bullshit, the government requires a certain portion of the work to go to small businesses. So there is a good chance that a small business will get the work.

However, the small businesses that do get the work, tend to be partnered with larger firms, who end up doing all the paperwork to help the small business win the contract. I know, I work for one of those monstrous companies and we partner with, and supply the paper framework all the time.

Re:They're impossible to fire

[hipp5]

If a lower end worker wants to "negotiate", but there are 12 people behind him in line for the job, then why should that employee have any leverage? That's capitalism. Supply and demand works for labor, too. If somebody thinks they're worth $15/hour, but there's a line of people willing to work for $12/hour, shouldn't the employer just hire the $12/hour employee?

That's all fine and good until every company decides to hire the cheapest workers. Then the wages of the whole working population crash to sweatshop levels and we're back to working conditions in the 1800s. The "market" doesn't work here because working is not a choice. When all employers drop their wages to $0.50/hr your choice is between $0.50/hr and not working at all. Workers can't "vote with their feet" in this case.

Re:They're impossible to fire

[daem0n1x]

Well, if unions in the USA are as powerful as The Incredible Hulk, they must be doing a really sloppy job. After all, you're among the countries with the highest income inequality among developed nations. And it keeps rising.

I suspect this anti-union rhetoric that floods Slashdot all the time is more a product of decades of brainwashing from the part of the corporate media propaganda machine.

In my country (Portugal), unions are pretty weak. That's one of the reasons (but not the only, mind you) we have incredibly shitty pay compared to countries where unions are powerful like Germany and France. And it hasn't helped us at all to have weak unions. Our productivity is still very low, although we work more hours than the other Europeans. Our country is bankrupt. And our managing class is one of the most illiterate, lazy, loutish and well-paid in Europe.