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US Gov't Pays IT Contractors Twice As Much As Its Own IT Workers

Soulskill posted more than 2 years ago | from the on-the-inside-looking-out dept.

Government 382

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.'"

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382 comments

It's Called "Blame Pay" (4, Interesting)

WrongSizeGlass (838941) | more than 2 years ago | (#37494558)

Being able to point the finger of blame at an outside source has significant value.

Re:It's Called "Blame Pay" (1)

Anonymous Coward | more than 2 years ago | (#37494574)

It also doesn't hurt that outside contractors don't get nearly the same benefits or protections that government employees do.

Re:It's Called "Blame Pay" (1)

scumdamn (82357) | more than 2 years ago | (#37494706)

With twice the pay you can pay for your own benefits. They need to do a cost per employee study to see if cost savings really are being realized.

Re:It's Called "Blame Pay" (2)

lucm (889690) | more than 2 years ago | (#37494962)

> With twice the pay you can pay for your own benefits.

Not with the kind of healthcare, pension and other benefits available in the public sector. Many employees of the government have a guaranteed pension rate, something that a private contractor has no way to get.

Re:It's Called "Blame Pay" (0)

Anonymous Coward | more than 2 years ago | (#37494978)

You would be able to - but if you think about it for a minute and look at the first couple of sentences of the article you see the headline and summary are wrong again. They are not comparing the contractor's pay with the salary and burden of the internal employees. They are comparing the contractor billing rate. If you've ever contracted before (or hired contractors) you know that the contract company takes a good chunk. They contract person doesn't get all the money that the contract company gets paid.

Re:It's Called "Blame Pay" (2)

Skarecrow77 (1714214) | more than 2 years ago | (#37494994)

My brother works for an IT company contracted to the military. He does less than I do, and makes nearly 1.5x as much as a matter of -normal- pay. Every two years he gets sent out of country for 3 months, and he earns like 3x normal pay if it's a country with an active war.

His benefits are pretty decent, and he gets almost European levels of PTO.

I'm quite envious. I guess that's what a Top Secret SCI clearance will do for you.

Re:It's Called "Kickbacks" (1)

FriendlyLurker (50431) | more than 2 years ago | (#37494762)

Or that outside contracting companies are a nice source of kickbacks that could not be "handled" otherwise.

It's also called "circumventing red tape" (2)

dcavanaugh (248349) | more than 2 years ago | (#37495032)

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.

Re:It's Called "Blame Pay" (1)

hrvatska (790627) | more than 2 years ago | (#37494908)

It also doesn't hurt that outside contractors don't get nearly the same benefits or protections that government employees do.

What benefits and protections did you have in mind? I've been one of those government contractors, and my brother is a systems programmer for NOAA. We've compared pay and benefits. I make a good bit more than he does. We pay about the same amount for health insurance for comparable plans. We get about the same number of days off. He has more legal holidays but I get more vacation days that I can take when I want or take as half days. I get a better pension. Our 401k plans are comparable. I'm not sure who has better job security. We've got a backlog of work in my organization. He works in an organization whose budget the Republicans are trying to cut. Every time there's a threatened federal shutdown they have to prepare to mothball the facility's IT infrastructure. It gets stressful after while.

Re:It's Called "Blame Pay" (0)

Anonymous Coward | more than 2 years ago | (#37495112)

Um, I just went contractor to government (same exact job, same desk, just got in-sourced) and I can tell you I had much better medical/dental benefits and discretionary corporate spending perks (books/training/etc) as a contractor, not to mention pay (woohoo for the 2 year federal pay freeze...) About the only additional benefit I got (besides much more job security) is as prior military I paid back my military service into the gov't retirement program so I effectively have 7+ year gov't service now even though I converted only 2 months ago.

However, outsourcing for projects is beneficial in that when the project ends, you just close out the contract and then the contractor personnel are no longer your concern. If you instead hired 15 gov't IT employees for a program that then gets its funding cut or reaches a viable end of life, now you have 15 employees whom you can't just let go without a ton of headaches, or more commonly if you get a bad apple contractor employee who isn't making the grade, you tell your contractor company you don't want that person around anymore. As a gov't IT program manager now, this is a wonderful thing.

But now that I have access to budget data for contracts, yes we pay a shitload for some of these people. One reason why where I work that as contracts go up for renewal, we are slowly awarding positions to reputable smaller businesses that have less overhead and much more palatable GSA schedules (yet manage to pay their employees more than the 800lb gorillas).

Re:It's Called "Blame Pay" (1)

AliasMarlowe (1042386) | more than 2 years ago | (#37494692)

Being able to point the finger of blame at an outside source has significant value.

And this is the primary motivation behind employing contractors in many places.
A slightly different rationale applies to taking on consultants. Their job is to figure out what you want to do, and then provide "outside expert opinion" that this is, in fact, the best strategy. They take the blame like contractors, but pocket the money anyway.

Re:It's Called "Blame Pay" (2)

jellomizer (103300) | more than 2 years ago | (#37494930)

There is the fact you can politically blame them value.
There is the fact that they can dropped at any particular time value.
There is the fact that they don't need to pay for benefits value.
There is the fact they can be pushed to part time value.
There is the fact that they will keep your full time staff honest value.

Re:It's Called "Blame Pay" (1)

lucm (889690) | more than 2 years ago | (#37494972)

aka "outsourcing risk", which is a no-brainer especially in heavily unionized organizations

Re:It's Called "Blame Pay" (1)

Larryish (1215510) | more than 2 years ago | (#37495006)

Federal Government: The left hand doesn't know what the right hand is doing.

News at 11.

Re:It's Called "Blame Pay" (1)

MozeeToby (1163751) | more than 2 years ago | (#37495100)

You could argue that the public sector workers are accepting less pay in return for a more steady, in fact nearly guaranteed even in the long term, paycheck.

I also find it confusing: "[IT is] widely outsourced throughout the federal government because of the assumption that IT companies provide vastly superior skills and cost savings." Then they present their findings that contractors are paid more than public sector workers, then we get "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."

So, if they get paid more for the same work... except it isn't the same... the government believes they bring better skills and experience to the job and therefore pays them more.

Luckily... (3, Insightful)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#37494570)

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".

Re:Luckily... (0)

Anonymous Coward | more than 2 years ago | (#37494620)

And this only help prove their point!

See how much better these private concerns are at taking money away from the evil government, than government employees are.

Smarten up liberal freak dude!

Re:Luckily... (2, Insightful)

Anonymous Coward | more than 2 years ago | (#37494622)

Not the private sector. Government contracting is steeped in politics.

Re:Luckily... (1)

jellomizer (103300) | more than 2 years ago | (#37494968)

It is, but as a contractor you are able to break a lot of politics.

For one you are not part of the Bureaucratic System. So you can go talk to whatever level you need too, vs going up the chain. Secondly you are hired for performance, you can make those little mistakes that could hurt a full time employee.

Re:Luckily... (1)

idontgno (624372) | more than 2 years ago | (#37495096)

Not in all cases. Your contract may attach you to a specific spot in the org chart. You'll still be serving a particular bureaucratic master. You'll have to honor his ulterior motives and unstated plans, carry his water and fight his battles, or you'll discover you're more expendable than a "civil servant" with tenure and some collective bargaining leverage.

This is particularly the case of contractors hired by OMB Circular A-76 provisions, which are often executed as headcount-by-headcount replacement of salaried personnel with contractor equivalents.

Sorry. Not every contractor works on a "project" or in an "independent consultant" role. Some contractors are just cogs in the same old machine.

Re:Luckily... (0)

Anonymous Coward | more than 2 years ago | (#37495120)

Of course. I only meant to point out that the "private vs public sectors" meme isn't applicable here. This is all government work - public sector. The $$$ comes from the gov't too. Public sector efficiency is not part of this debate.

Not surprised (1)

GameboyRMH (1153867) | more than 2 years ago | (#37494572)

I know a foreign government that does the same, if it makes you Americans feel any better...

Well... Duh (0)

Anonymous Coward | more than 2 years ago | (#37494588)

This is obvious.

Really? (5, Insightful)

ccguy (1116865) | more than 2 years ago | (#37494592)

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? (5, Insightful)

GameboyRMH (1153867) | more than 2 years ago | (#37494724)

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.

Re:Really? (0)

Anonymous Coward | more than 2 years ago | (#37495040)

Now add in the hidden costs lifers like you forget about. Off the top of my head: paid vacation time, paid personal days, paid sick days,paid public holidays, pension contributions, medical coverage, dental coverage, employers' tax payments, and so on. The difference is considerably less now isn't it. But wait, there's more! A contractor can be dropped at almost no notice unless they have a damn fine lawyer and legal document that ensures they get paid, most employees (state dependent) have pretty solid ground to not get kicked out unless the position is being canceled.

Not all permanent staff are losers, but considering almost all contractors started out on payroll, you have to wonder why 99% of us look down on permy/lifers, and it's far more than your petty jealousies.

Re:Really? (0)

Anonymous Coward | more than 2 years ago | (#37495060)

My experience differs greatly from yours then. For one, I was a contractor in Iraq; I sure as hell didn't telecommute and I wasn't pampered. When were you in Iraq or Afghanistan? In the year I was there, I saw about 3000 military, about 500 contractors, and only about 10 civilian GSes. So, when were you there as a full time government worker?

Before anyone howls, "Greedy contractor!", I'll answer the question,"Was I well paid?" I made about $145K, worked a minimum of 60 hours a week (usually more and never less), and worked my ass off. I earned three certificates of appreciation and three challenge coins from various units.

Yes, there are a lot of contractors doing poor work; perhaps the contracting officers (usually civilian GSes) should put more effort into overseeing contracts and less into goofing off and saying how great they are.

Re:Really? (1)

ccguy (1116865) | more than 2 years ago | (#37495078)

Do you have any first-hand experience with this?

Plenty. In Spain, but I think it's safe to consider this a rather general thing.
And to be honest, with the amount of public workers around here (3 million, total population around 45), there just shouldn't be any contractors, well paid or not.

Re:Really? (1)

anjin-san 3 (983912) | more than 2 years ago | (#37494802)

twice the hours, triple the productivity

You have a citation for these claims? It's not mentioned anywhere in the article.

Re:Really? (1)

GameboyRMH (1153867) | more than 2 years ago | (#37494824)

Local Tea Party meetings, I'd guess.

Re:Really? (4, Informative)

segfaultcoredump (226031) | more than 2 years ago | (#37494876)

Sorry, I've worked both sides of this fence, and you should have stopped before you even typed the first word.

The contractors for the fed/military/etc do not work day to day, twice the hours or have triple the productivity.

They are given year+ long contracts, work the same hours, and have the same or less productivity. The perms face the exact same thing, their entire division can be wiped away with the stroke of a budgeting pen.

We are not talking about day labors here, all federal contracts are long and well defined. While your project may get canceled with the next _YEARLY_ budget, the odds of it suddenly going under are next to 0.

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. The "cost+" contracts that would let me work 80 hour weeks and have the contracting agency get paid for it are few and far in between. Most are fixed at the rates and the number of hours, it does them no good to have you work more than your scheduled rate.

The productivity thing is pure bullshit. I've seen incompetent admins on both sides, but most are on the contracting side because the contracting firm wants to keep a larger % of the cut to themselves, and thus toss inexperienced newbies into the slot in the hopes that nobody will notice. The real kicker is that as a contractor you have an incentive to not really fix things, but to just patch them. After all, why fix something once and for all when your job depends on the customer needing to have you around to constantly fix something?

Re:Really? (1)

Daniel Dvorkin (106857) | more than 2 years ago | (#37494896)

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?

You have no idea what you're talking about. None. Permanent federal and state employees invariably work harder, and produce more, for less money, than contractors brought in from a consulting firm whose CEO happens to be some senator's brother-in-law.

Re:Really? (0)

Anonymous Coward | more than 2 years ago | (#37495014)

Oh really?

I contract for a federal agency and they'd be lost without us.

In my experience, the public sector IT workers are completely inept and actually get paid the same as me.

I don't know how it makes any sense that a permanent federal/state employee would work harder than a contractor who can get fired easily for any number of reason.

If the government workers were doing my job, they'd need probably 4 people to replace what I do.

Interesting Table Flip (1)

mfh (56) | more than 2 years ago | (#37494598)

I was under the impression that you outsource to SAVE money. My perception is changed.

Re:Interesting Table Flip (1)

Anonymous Coward | more than 2 years ago | (#37494738)

Actually, the contractors are hired because the government employees, by and large, either are not capable or are not willing to do the work. As a matter of fact, after having 15 years of IT experience running the gamut of web development to systems and network engineering and seeing valuable and worthwhile employees... even though the government IT employees make half as much as the contractors, the government employees are paid twice as much as the skills and experience warrant.

The real cost savings.... fire the government employees that are not willing to assume responsibility and do even moderately difficult work.

That being said, this certainly does not apply to ALL government employees. I work with one and they lucked out, let me tell you. He is an EXCELLENT technician and works hard... the scary thing is... he didn't even interview for the position... he submitted his resume and after two months received an offer letter and started working the next week. From my experience, the federal IT workers are worthless five out six times.

Re:Interesting Table Flip (1)

bluefoxlucid (723572) | more than 2 years ago | (#37494800)

Federal benefits are also ass-expensive.

Re:Interesting Table Flip (0)

Anonymous Coward | more than 2 years ago | (#37494980)

except the report clearly shows that they aren't...aren't more expensive than private contractors anyway.

Re:Interesting Table Flip (1)

Jakester2K (612607) | more than 2 years ago | (#37494880)

The real cost savings.... fire the government employees that are not willing to assume responsibility and do even moderately difficult work.

Can we include Congresscritters in this plan?

Re:Interesting Table Flip (1)

AliasMarlowe (1042386) | more than 2 years ago | (#37494848)

I was under the impression that you outsource to SAVE money. My perception is changed.

Outsourcing reduces headcount. It does not necessarily reduce actual cost or improve quality or timeliness. Many of us could cite counterexamples, where outsourcing increased costs and/or reduced quality and/or led to delays. From the CEO's point of view (which comes largely from market silliness), the effect of outsourcing on total costs or achieved output is much less relevant than its impact on the fixed cost part of total costs, and supposedly[*] gives greater flexibility in dropping costs should business decline.

[*]Most of the smart subcontractors (and even many stupid or ineffectual ones) will insert contractual conditions which subvert this, in the interests of obtaining a guaranteed income.

Re:Interesting Table Flip (1)

SwedishPenguin (1035756) | more than 2 years ago | (#37494882)

Nope, you outsource to benefit your buddy's private sector company, who then takes the profits and invests them in the Cayman Islands (maybe giving you a small share in the process)..

Any surprise? (4, Insightful)

papasui (567265) | more than 2 years ago | (#37494600)

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.

Re:Any surprise? (3, Insightful)

narcolepticjim (310789) | more than 2 years ago | (#37494752)

The workers are often full-time employees of the contractor (e.g., General Dynamics IT). They get benefits along with their salary.

Re:Any surprise? (1)

shmlco (594907) | more than 2 years ago | (#37494946)

If they are in the employ of the contractor (General Dynamics IT), then even though the government might be paying them twice as much per hour, they're not getting paid twice as much per hour since General Dynamics IT is pocketing a significant percentage of the money.

In short, they could well be "paid" the same amount, or even less.

Parent is the most accurate reason here. (0)

Anonymous Coward | more than 2 years ago | (#37494874)

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.

Re:Any surprise? (5, Informative)

Lunix Nutcase (1092239) | more than 2 years ago | (#37494894)

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]

only twice as much? (4, Insightful)

Enry (630) | more than 2 years ago | (#37494602)

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.

Re:only twice as much? (1)

black soap (2201626) | more than 2 years ago | (#37494784)

2X is normal. If you are providing the office they work out of, and all equipment, it might go down a little, but paying 2X for outside consultants actually ends up about breaking even.

Now, if you are hiring an entire department of them, it might work out differently.

not apples to apples (1)

Casimireffect (234418) | more than 2 years ago | (#37494820)

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.

when oh when (0)

Anonymous Coward | more than 2 years ago | (#37494608)

when have consultants ever been cheaper than doing it in-house ?

Re:when oh when (1)

lwriemen (763666) | more than 2 years ago | (#37494852)

For the most part, often. According to the data Capers Jones has presented, contracted software work will be produced at about twice the rate of in-house work. It's not always true and it doesn't mean a company could run on only external workers. There is the domain knowledge aspect that pretty much requires in-house nurturing, otherwise the job could probably be handled by off the shelf software.

Worth every penny (5, Insightful)

GlobalEcho (26240) | more than 2 years ago | (#37494610)

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 work in the public sector. (2)

Tolkien (664315) | more than 2 years ago | (#37494612)

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?

Re:I don't work in the public sector. (4, Informative)

Hatta (162192) | more than 2 years ago | (#37494728)

POGO's report [pogo.org] is freely available on the web. If you actually look at their methodology, you'll see that they included benefits.

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 OPMâ(TM)s 36.25 percent benefit rate to federal employee salaries[67] and BLSâ(TM)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

Re:I don't work in the public sector. (1)

Anonymous Coward | more than 2 years ago | (#37494986)

Ha! I like the methodology disclaimer:

The most critical limitations are that:

1) the government’s coding, classification, and data collection systems are inconsistent and do not allow for reliable cost analyses[72];

2) government websites do not provide access to agency documents that detail cost estimates and the justifications for outsourcing decisions;

3) the government does not publish information on the number of actual contractor employees holding a specific occupational position under any given contract;

4) the government only lists the ceiling prices that it can be billed by contractors for the specific occupational positions—the government is at liberty to negotiate prices that are lower than those listed, but it does not publish those negotiated rates (however, based on POGO’s review of GSA contracts, and anecdotal evidence, the government tends to pay the listed billing rates rather than negotiating lower rates[73]);

5) government websites do not disclose what the expected cost savings for service contracts are, nor the actual savings (or lack of savings) that result from those contracts. These shortcomings prevent government officials, as well as the public, from accurately assessing outsourcing costs.

Re:I don't work in the public sector. (1)

DigiShaman (671371) | more than 2 years ago | (#37494806)

Your tax dollars at work baby!

US Govt doesn't know how to spend wisely?!! (1)

cod3r_ (2031620) | more than 2 years ago | (#37494630)

When did this happen?

Re:US Govt doesn't know how to spend wisely?!! (1)

Bob the Super Hamste (1152367) | more than 2 years ago | (#37494782)

What you thought bridges to no where and $50,000 water fountains [kare11.com] (bubblers for some of you) were good deals.


Yes I did actually notice your sarcasm.

I'm an independant contractor... (3, Informative)

Sooner Boomer (96864) | more than 2 years ago | (#37494634)

...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.

Re:I'm an independant contractor... (1)

Bob the Super Hamste (1152367) | more than 2 years ago | (#37494984)

And before some people claim BS on some of this there was a recent dust-up here in Minnesota over our current governor's executive order to allow in home private daycare workers to unionize [publicradio.org] . Now granted this won't exactly be a state mandate for benefits and other things it is a possible mandate for all daycare workers to be part of a union. I say possible as the executive order hasn't been issued and no one know what is in it so it may just republicans making hay.

I wonder (0)

Anonymous Coward | more than 2 years ago | (#37494644)

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... ;-)

More costs involved. (4, Insightful)

CapnStank (1283176) | more than 2 years ago | (#37494646)

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

Re:More costs involved. (0)

Anonymous Coward | more than 2 years ago | (#37494938)

It's also known as a capitation rate. The cost of a permie is not just their salary.

Re:More costs involved. (1)

RandCraw (1047302) | more than 2 years ago | (#37495130)

Lower cost? That's the very point that the OA disputes.

In fact, contractors who work on-site (as most do for the gov't), incur the same costs as gov't in-house staff do for facilities, admin costs, training, etc. In practice, the only savings due to outsourcing are health care and retirement, and outside of the military, these account for nowhere near 50% of an in-house gov't staff salary.

This fallacy is exactly what the gov't concluded in the OA.

I've worked as a contractor for several gov't customers. A case might be made that contractor skills are superior (doubtful) or that it's easier to replace incompetent contractors (true). Is that worth at least a 33% premium for the contractor? Maybe.

Re:More costs involved. (1)

Darkinspiration (901976) | more than 2 years ago | (#37495136)

Unless your contracted worker work on site for easy access and overview, Now you get to provide all the above plus Wage/Contract cost.

Duh (0)

Anonymous Coward | more than 2 years ago | (#37494664)

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.

$268,653 per year? (1)

ShavedOrangutan (1930630) | more than 2 years ago | (#37494666)

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.

Re:$268,653 per year? (0)

Anonymous Coward | more than 2 years ago | (#37494796)

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.

Actually, it largely depends WHERE in federal IT contracting you look. I recently worked in a DoD agency that employed SAP contractors, 3 digits an hour, not that the employee saw every nickel of that, but the contracting company received that hourly wage for the employee. And this wasn't a 3 months and your done project, try years....in length.

Re:$268,653 per year? (4, Informative)

Morty (32057) | more than 2 years ago | (#37494836)

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.

Re:$268,653 per year? (1)

byteherder (722785) | more than 2 years ago | (#37495044)

I know lots of people in federal IT contracting. NOBODY makes that kind of money. I call B.S. on this whole article.

You just don't know the right people. When I was working on a government contract, I was billed at $220/hr. Of course, I only got a fraction of that in salary. But still to the point, there are contractors and contracting companies billing the government at rates that would get them to $268,000/yr.

Consultant Rate != Employee Salary (1)

thesandbender (911391) | more than 2 years ago | (#37494678)

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.

Re:Consultant Rate != Employee Salary (2)

Lunix Nutcase (1092239) | more than 2 years ago | (#37494832)

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.

mea culpa (1)

thesandbender (911391) | more than 2 years ago | (#37495090)

That's what I get for not RTFA completely.

HA! (1)

Anonymous Coward | more than 2 years ago | (#37494680)

"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.

HA HA (0)

Anonymous Coward | more than 2 years ago | (#37494682)

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.

comparing apples to oranges (-1)

jklovanc (1603149) | more than 2 years ago | (#37494700)

The article compares the cost of a contractor to the wages paid to an employee. These are not the same thing. Here are some of the costs that employees incur that are not incurred by employing contractors;

Medical benefits.
Pensions/401K.
HR.
Training.
Insurance

Anyone in HR will tell you that the costs of an employee are much more than just their wages.

Re:comparing apples to oranges (1)

Lunix Nutcase (1092239) | more than 2 years ago | (#37494850)

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]

Of course (0)

_0xd0ad (1974778) | more than 2 years ago | (#37494704)

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).

They do include benefits (0)

Anonymous Coward | more than 2 years ago | (#37494708)

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.

in other news (1)

nimbius (983462) | more than 2 years ago | (#37494710)

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.

Re:in other news (1)

tftp (111690) | more than 2 years ago | (#37495018)

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.

I'm all for it. I don't need company-provided "health, dental and life" insurances; I reject them whenever I work as an employee; I can take care of my own needs myself, thank you very much.

Much the same as "benefits" are a delightful means of ensuring corporations never pay their employees what theyre really worth.

Every human, employee or a contractor, is always paid what he is worth in the given time and place, by definition. His compensation defines the worth. There is no other, divine measure of worth. If you are a genius, stop digging trenches and start working on a pocket teleportation device or on an LNR car. If you can't, you are in your rightful place already.

Spending someone else money... (0)

Anonymous Coward | more than 2 years ago | (#37494766)

In other news, people spending someone else money do not care about the cost of their expenditures. News at 11.

I'm certain .... (1)

PPH (736903) | more than 2 years ago | (#37494798)

... that the gov't could commission a study to nail this figure down.

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?

Smaller Government (1)

Bigbutt (65939) | more than 2 years ago | (#37494814)

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]

Not just cost (0)

Anonymous Coward | more than 2 years ago | (#37494854)

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.

How you define compensation (1)

fermion (181285) | more than 2 years ago | (#37494900)

The article seems to be changing terms. At first it talks about total compensation, which to some degree might be comparable. If the total compensation of a contractor is significantly greater than the total compensation of the fully funded employee, then that might be a problem. However later in the article it talks of pay of the contractor, pay of the federal employee, and salary of the private sector. This of course is silly. The cost of an employee is far greater than the salary. There is pension, health, workers comp, etc.

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.

Re:How you define compensation (2)

Lunix Nutcase (1092239) | more than 2 years ago | (#37494934)

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.

It's a huge waste (0)

Anonymous Coward | more than 2 years ago | (#37494950)

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.

Overhead (0)

Anonymous Coward | more than 2 years ago | (#37494960)

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).

Is this a good thing or a bad thing? (1)

boyfaceddog (788041) | more than 2 years ago | (#37494970)

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.

Pure bullshit (1)

MikeRT (947531) | more than 2 years ago | (#37494976)

In the information technology category, POGO found that the federal government is paying contractors to provide computer engineers an average of $268,653 per year. That's nearly twice the average $136,456 it pays its own computer engineers and nearly twice the average private sector salary of $131,415.

$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.

Near Impossible to Fire (1)

Koreantoast (527520) | more than 2 years ago | (#37494990)

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.

BENEFITS (0)

Anonymous Coward | more than 2 years ago | (#37494996)

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.

Just 2X ? (1)

mbone (558574) | more than 2 years ago | (#37494998)

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.)

I suspect this is a bogus statistic... (0)

Anonymous Coward | more than 2 years ago | (#37495046)

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!

how this is different from commercial IT (1)

david.emery (127135) | more than 2 years ago | (#37495048)

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.

Things have changed... (0)

Anonymous Coward | more than 2 years ago | (#37495050)

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".

A few thoughts... (1)

Registered Coward v2 (447531) | more than 2 years ago | (#37495064)

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.

Small $ to scale up and down at will (1)

ravenscar (1662985) | more than 2 years ago | (#37495082)

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...

Executive Summary (1)

ThatsNotPudding (1045640) | more than 2 years ago | (#37495106)

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.

Film at 11 (1)

Hognoxious (631665) | more than 2 years ago | (#37495122)

In other news, that steak dinner that cost me 20 bucks at a restaurant could have been made at home for a Lincoln.

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