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Federal Contractors Are $600 Screwdrivers

samzenpus posted more than 2 years ago | from the cost-of-doing-business dept.

Government 593

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."

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Tax evasion (-1)

Anonymous Coward | more than 2 years ago | (#37895402)

It's simple really. Start a corporation. Charge the government whatever you can get. Pay yourself a one dollar as salary. Take the rest as capital gains on the corp. Instant 17% tax break. You schmucks who work for someone else are the only one's paying taxes. That's why these companies pay so little to the help. The "help" owns the company in a lot of cases.

Re:Tax evasion (2)

gumbi west (610122) | more than 2 years ago | (#37895436)

YANATL (you are not a tax lawyer).

You also have to pay the corporate income tax on the cap. gains. But, IANATL

Re:Tax evasion (0)

Anonymous Coward | more than 2 years ago | (#37895516)

YANATL (you are not a tax lawyer).

Yea, but he's seen like, every episode of Law & Order, that's practically the same thing. Right?

Re:Tax evasion (1)

MacDork (560499) | more than 2 years ago | (#37895552)

YANATL (you are not a tax lawyer).

TYCO (Thank You Captain Obvious)

You also have to pay the corporate income tax on the cap. gains.

Haha, like GE? [nj.com]

Re:Tax evasion (1)

dmomo (256005) | more than 2 years ago | (#37895746)

You do know you cannot pay yourself a $1 salary, right? It doesn't work that way.

Re:Tax evasion (2)

interval1066 (668936) | more than 2 years ago | (#37895918)

Yes you can. Its done all the time, for a variety of reasons. Usually the CEO takes a $1 salary becuase the company is struggling, but there's no law that says they have to be paid market value.

Re:Tax evasion (0)

Moryath (553296) | more than 2 years ago | (#37895818)

The moment you do this, you lose the right to claim insurance benefits and other benefits of working at the job. You have to pay it all yourself. You also forfeit the ability to take any paid leave/sick time, the ability to participate in contribution-matching towards retirement funds, and a host of other benefits (though granted, with the Republicans in charge, those benefits are getting cut by greedy legislators every day).

Individual insurance is a BITCH to get. Something like 20% of all claims are rejected, with another 40% "quietly rejected" by the agent who tells you "I'll just shred this so there's no record, because other companies can use our rejection as a reason to reject your application."

On top of that, if you have ANY health condition whatsoever, good luck finding insurance to cover it without an incredibly long wait period or incredibly high monthly costs and deductibles.

Got a heart condition? Family history of any form of neurological disorder, even Alzheimer's? How about a grandparent or two who's a diabetic? Hell, even a family history of asthma can hurt you if you're trying to get your kid insured.

Oh, and good luck EVER finding dental insurance that isn't from an employer.

There's a reason most people don't go the way you suggest - if you ever get hurt or sick, it's fucking suicide.

Re:Tax evasion (1)

HornWumpus (783565) | more than 2 years ago | (#37895924)

You can get group health insurance from professional organizations like IEEE. Requires 1 year of membership before you are eligible so think ahead.

It's not like employers are the only people who can define a group.

FIRST (-1)

Anonymous Coward | more than 2 years ago | (#37895414)

FIRST

Re:FIRST (-1)

Anonymous Coward | more than 2 years ago | (#37895510)

nope.avi

Um.... (1)

Red_Chaos1 (95148) | more than 2 years ago | (#37895416)

...haven't we pretty much known this for some time now?

Re:Um.... (4, Informative)

MacGyver2210 (1053110) | more than 2 years ago | (#37895738)

"You don't actually think they spend $20,000.00 on a hammer, $30,000.00 on a toilet seat do you?" - Independence Day, 1996

Pay scale is to blame (5, Informative)

Anonymous Coward | more than 2 years ago | (#37895794)

Been working Federal IT at various agencies for 20 years and the story is the same today as it was twenty years ago. You can't reach high quality/niche programmers on the Federal pay scale in the DC area. Scoff if you want, but we just had a top notch contractor successfully apply and get an offer for Federal work, only to turn down $137K plus bens. Great candidate, couldn't reach his rate. I've seen this time and time again.

That same contractor bills out near $300K per annum.

The system is skewed towards the contracting companies. Keeping Federal IT pay rates down below the industry average for our area guarantees big pay days for the contracting companies. These companies were supposed to be a panacea for the inefficient Federal worker. All that they have become is YAFE (yet another Federal entitlement).

And yes, some of the contractors have been in the same position for DECADES. Same lifetime entitlement.

Re:Pay scale is to blame (1)

elucido (870205) | more than 2 years ago | (#37895934)

Been working Federal IT at various agencies for 20 years and the story is the same today as it was twenty years ago. You can't reach high quality/niche programmers on the Federal pay scale in the DC area. Scoff if you want, but we just had a top notch contractor successfully apply and get an offer for Federal work, only to turn down $137K plus bens. Great candidate, couldn't reach his rate. I've seen this time and time again.

That same contractor bills out near $300K per annum.

The system is skewed towards the contracting companies. Keeping Federal IT pay rates down below the industry average for our area guarantees big pay days for the contracting companies. These companies were supposed to be a panacea for the inefficient Federal worker. All that they have become is YAFE (yet another Federal entitlement).

And yes, some of the contractors have been in the same position for DECADES. Same lifetime entitlement.

Where do you get the idea that a contractor is entitled? When the project is over the contractor is out of a job. So the overall cost of the contractor isn't as much as the employee who can't be fired and who gets all sorts of benefits.

Re:Um.... (2)

serviscope_minor (664417) | more than 2 years ago | (#37895906)

..haven't we pretty much known this for some time now?

Yes. It's also obvious. You'd have to be an insane contractor with no business sense to work for less, as well.

That factor of 2 has to cover pension, retirement, health insurance, gaps in employment due to being a contractor rather than a regular employee and other costs.

Not only that, but contractors are much lower risk (much easier to not renew the contract than to fire an employee) to the employer.

Re:Um.... (3, Informative)

Chapter80 (926879) | more than 2 years ago | (#37895966)

As a small businessperson, I can tell you that the overwhelming amount of bullshit required to bid on government contracts (especially Federal government contracts), combined with a low probability of successful bids, means that it's imperative that you inflate the bids to cover costs, or avoid bidding on them.

Want to cut the price? Cut out the red tape.

They're impossible to fire (1, Interesting)

bluefoxlucid (723572) | more than 2 years ago | (#37895424)

Labor unions have had policies put in place by which government employees are impossible to fire if you don't fire them within one year. Administration is way easier with contractors, whereas the unions have made employee management a nightmare. Dude here punched his boss in the face and they were unable to fire him, so transferred him to another department instead, same pay grade, no demotion.

Re:They're impossible to fire (2, Insightful)

hjf (703092) | more than 2 years ago | (#37895472)

So the answer is outlawing unions and having all workers negotiate their own contract terms?

Sure, that worked really good for the industrial revolution. Welcome to your 112 hour work week, don't like it? Fuck off, there's a line of people behind you waiting for a job.

Re:They're impossible to fire (5, Insightful)

tnk1 (899206) | more than 2 years ago | (#37895542)

And yet, there has to be a middle ground. If you give the employer too much power, they take complete advantage of it. If you give the Unions too much power, you can't keep people accountable even for basic tasks and efficiency.

We have to stop saying that any limits on union power mean a return to sweatshops, because that's just as wrong as saying that returning to no unions will fix all of our economic problems.

Re:They're impossible to fire (-1, Offtopic)

hjf (703092) | more than 2 years ago | (#37895624)

!!!! SARCASM BEGINS HERE !!!!
Are you crazy???? Limiting unions means giving MORE POWER to the government, and that only leads to one result: COMMUNISM.
!!!! SARCASM ENDS HERE !!!!

Sorry about the big bad sarcasm tags. Some folks here are real idiots and can't see it.

Re:They're impossible to fire (2, Interesting)

Richard_at_work (517087) | more than 2 years ago | (#37895570)

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?

Re:They're impossible to fire (5, Insightful)

dr_dank (472072) | more than 2 years ago | (#37895684)

Unless you're a rockstar, compensation is usually a "take it or leave it" proposition. Especially so in an economy where people are desperate for jobs and will take anything to put food on the table.

Re:They're impossible to fire (0)

Richard_at_work (517087) | more than 2 years ago | (#37895976)

Really? I'm not a rockstar (never have been, never will be) and yet none of the positions I have held over the past 15 years (and thats going from my first real employment as a 17 year old in the grocery sales business, to my latest position as CTO) have involved zero negotiation compensation packages - when I was a butchery assistant with a national chain, I still had the opportunity to reject the company standard 3% raise, and on several occasions my boss agreed with me and gave me an extra raise. Every position since then has been the same - the company makes an offer, I can counter - and on more occasions than not my counter offer has been accepted in some form or other.

Its not hard to do, even in the current climate.

Re:They're impossible to fire (5, Informative)

hjf (703092) | more than 2 years ago | (#37895708)

Not every kind of worker is the same. You're an educated person, but a miner, truck driver, or some other low-end worker usually can't negotiate any kind of benefits or anything. Either because no one will hear them, for fear of being fired (or flagged...), or simply because they're too... "uneducated" to know what their rights are.

A company is always bigger than a single person. And a company can afford a lawyer (or an army of them) to screw you, while you usually don't have resources to do that. That's why unions exist.

But unions need regulations, just like companies need regulations. What folks here don't seem to understand is that any "unregulated" area WILL get exploited, and the bigger guy always wins. That's the danger, not "government intrusion".

Re:They're impossible to fire (2)

DogDude (805747) | more than 2 years ago | (#37896016)

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?

Re:They're impossible to fire (1, Insightful)

khallow (566160) | more than 2 years ago | (#37895628)

Sure, that worked really good for the industrial revolution. Welcome to your 112 hour work week, don't like it? Fuck off, there's a line of people behind you waiting for a job.

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

Re:They're impossible to fire (2, Interesting)

0123456 (636235) | more than 2 years ago | (#37895938)

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:They're impossible to fire (1)

cayenne8 (626475) | more than 2 years ago | (#37895776)

So the answer is outlawing unions and having all workers negotiate their own contract terms?

Actually...that works for me....

That's the thing with govt/DoD contracting. Yes, at first you likely will not make a ton of money on that first gig. But you get your foot in the door...meet people, network. From there on, you can negotiate your bill rate much better. Especially if the govt people know you on a project, they will pressure the contractor to hire you, and you can therefore negotiate your rate better. Eventually, the best thing..is to incorporate yourself (I enjoy the "S" corp route for tax benefits aplenty)..and try to get on as a sub or sub to a sub...

You do have to know what they are billing you at. But once you do, if you're pretty good..not that hard if subb'ing to get $65/hr or more, which is decent money....especially with all the tax breaks, and I found that paying my own medical (high deductible ins) combined with socking the max $$ away into a HSA (Health Savings Account, not a use it or lose it thing like FSA) pre-tax, and everything I could write off...and save money not having to pay 100% of my bill rate for SS and medicare would set me pretty far ahead on true earned money.

The trouble is....the govt and the big contracting houses have really bastardized the whole set up. It is more and more difficult to get in as a 1099 contractor or sub....the govt more and more only wants to deal with a few big boys...which then hire people as W2 employees....and there you get the worst of both worlds....you lose the perks of being an indie contractor (tax breaks, not having to 'earn' hours for vacation time), all the while also losing job stability that an employee usually has.

It is difficult, but like I said..not impossible to get out of that trap.

I do with the govt would take the effort to work more with the contractors on an individual basis...and they would save a good bit of $$ that way.

However, even with how it is today...once you know the ropes, it isn't a bad deal. And you can get in on some LONG term contracts that give as much stability as a W2 job out in the private sector...you just have to know what your doing, and having people skills to network doesn't hurt at all either.

Nice straw man you got there (0)

sjbe (173966) | more than 2 years ago | (#37895810)

So the answer is outlawing unions and having all workers negotiate their own contract terms?

Depends on the situation. Sometimes yes, sometimes no. There is no one size fits all answer. Unions have their place but they aren't the answer to everything.

Sure, that worked really good for the industrial revolution. Welcome to your 112 hour work week, don't like it? Fuck off, there's a line of people behind you waiting for a job.

Nice straw man. That's not really an issue in the current world.

Re:Nice straw man you got there (1)

interval1066 (668936) | more than 2 years ago | (#37896006)

Unions in many cases have outlived their usefulness even to their own rank and file and have actually become the monsters. Take for example the on-going teacher's fiasco. The state-run schools are turning out idiots who aren't prepared for real jobs, instead learning about Stacy and her two Mommies, and how whales should be enabled to vote or whatever crazy-assed crap. Meanwhile Asia is kicking our asses in business. Something's got to give, and it looks like tenured professorship and the teachers union to me.

Re:They're impossible to fire (5, Insightful)

Anonymous Coward | more than 2 years ago | (#37895480)

In what world are outsourced IT workers in unions? Talk about putting the blinders on and diverting the issue. This was supposed to be that privatized haven the fiscal right is asking for, turns out the reality is just as crappy as what they complain about.

Re:They're impossible to fire (1)

bluefoxlucid (723572) | more than 2 years ago | (#37895528)

Outsourced IT workers are not employees, they are contractors. Employees are direct hire. I'm not on government payroll.

Re:They're impossible to fire (0)

Anonymous Coward | more than 2 years ago | (#37895730)

He means that the non-outsourced non-contract employees are unions, and so hard to fire, that a contract one is "easier". But that "ease" doesn't seem to take wasting taxpayer money into account.

Re:They're impossible to fire (1)

elucido (870205) | more than 2 years ago | (#37895890)

He means that the non-outsourced non-contract employees are unions, and so hard to fire, that a contract one is "easier". But that "ease" doesn't seem to take wasting taxpayer money into account.

It's much more cost effective to get rid of all the benefits that government employees have considering that contractors receive no benefits and do exactly the same work. Those benefits are a waste of money right?

Re:They're impossible to fire (0)

Anonymous Coward | more than 2 years ago | (#37895598)

that aint what this article is aboot

Re:They're impossible to fire (1)

ghjm (8918) | more than 2 years ago | (#37895606)

You could just tell these people to stay at home and keep drawing a paycheck, and still only wind up costing the taxpayer maybe 5% of what federal contractor profits now cost us.

Re:They're impossible to fire (1)

Sancho (17056) | more than 2 years ago | (#37895892)

That works great until word gets out that you can get a paid vacation by punching your boss in the face.

Re:They're impossible to fire (1)

jgtg32a (1173373) | more than 2 years ago | (#37895644)

Why didn't they have him thrown in jail, or would he still pull a paycheck and it would be better to get some work out of him?

Re:They're impossible to fire (4, Insightful)

gumbi west (610122) | more than 2 years ago | (#37895648)

Not true. I worked for the USG for a few years and in that time my boss fired 2 of the 15 people reporting to him (fired, not laid off).

The real issue is that people think that and then never check how the process works.

Re:They're impossible to fire (1)

DNS-and-BIND (461968) | more than 2 years ago | (#37895836)

Please tell details, I'm curious to know. How did the boss fire these people, exactly? Were they people of color? If so, how did the firing go without unanswerable questions of race? As we all know, the Federal Government isn't just a governing body, part of its responsibility is to give jobs to the less-advantaged. Taking away such a job from a minority could only be accomplished under the severest of circumstances. Tell us, how did it happen?

Re:They're impossible to fire (4, Insightful)

dominion (3153) | more than 2 years ago | (#37895668)

Dude here punched his boss in the face and they were unable to fire him

Something tells me there's more to this story...

Misleading, contractors buy health insurance (2)

elucido (870205) | more than 2 years ago | (#37895712)

And when they talk about how much Federal employees make vs Contractors they never factor in that a Contractor doesn't get any benefits, any life insurance, any health insurance, or anything. The Contractor has to buy his or her own and receives none of the fancy government benefits. In reality the government employee might get less in take home pay, but they get way more in benefits.

Re:Misleading, contractors buy health insurance (0)

Anonymous Coward | more than 2 years ago | (#37895994)

Usually, the contractors are employees of another company like SAIC or BAE. These are billion dollar companies with very generous benefits.

I'm not sure that's the problem....

Re:They're impossible to fire (0)

Anonymous Coward | more than 2 years ago | (#37895756)

The whole story is a little worker bee programmer that wants a juicy government job plus bennies and thinks ppl are stupid enough to believe his doctored calculation that it would somehow be cheaper that way. The government could also just not overpay its contractors. But saving government money is a smokescreen; programmer boy just wants a bigger piece for himself.

If that guy had been a contractor (1)

Quila (201335) | more than 2 years ago | (#37895814)

He wouldn't have set foot on that government installation again. It is insanely easy for government to get an under-performing contractor kicked off the job.

Now if the guy was actually good and he got kicked off only because an irrational government employee was having a bad day, then a good contracting company will find him work elsewhere or roll him onto a different contract and keep him on the payroll until that can be done. Bad employees are just dropped, not worth the trouble.

This ability to provide a cushion is one reason for the company overhead in many cases. IIRC, EDS was very good at taking care of its people. Other companies, however, drop employees the second they can't bill their hours directly to a contract.

Re:They're impossible to fire (1)

rish87 (2460742) | more than 2 years ago | (#37895874)

Contractors != Government employees. Completely different.

Re:They're impossible to fire (4, Insightful)

erroneus (253617) | more than 2 years ago | (#37895952)

I'm sorry, but I just have to call BS on that claim. A guy gets punched in the face by a contractor, you call the police, not HR. You call management to get them banned from the building. If the contract says "you have to keep him paid until it is resolved" then fine. But just moving the offender to another department doesn't hold water even in fantasy land.

You'll have to cite references before I begin to believe that.

Re:They're impossible to fire (2)

bjourne (1034822) | more than 2 years ago | (#37896022)

Don't make shit up. There is no place in the world where actually violent, criminal employees are any hard to get rid of.

hate answers in 3...2... (1)

hjf (703092) | more than 2 years ago | (#37895426)

Nice article, how long until some CNN/Fox News/ random-astroturf-blog starts explaining why it's GOOD for economy that so much money is "spent" in middlemen? Sure, they get rich, but if we cut them off, the financial system will fall apart, and communism will win!

blah blah blah OBAMA blah blah.

Re:hate answers in 3...2... (1)

DNS-and-BIND (461968) | more than 2 years ago | (#37895910)

Curious that your reply to "too much money being spent in government deserve to be fired" is an immediate strawman to "hate". Please explain. Cite examples.

Fear the flat tax. (0, Informative)

Anonymous Coward | more than 2 years ago | (#37895438)

The Flat Tax proposal is nothing but a very poorly disguised tax break for the wealthy. Unfortunately, many otherwise reasonable people will be snookered by the misinformation being promulgated by the Koch brothers, and vote for it. This would be a mistake. When I was young, I didn't believe that money could buy political power. Now, I'm seeing it firsthand.

Fear a tax system no one comprehends. (1)

clay_shooter (1680300) | more than 2 years ago | (#37895722)

Exempt food and medical. That would reduce the percentage impact on the poor. Put a flat tax on everything else including services. Then at least everyone would have confidence that "the others" weren't able to lawyer their way out of their fair share.

Re:Fear a tax system no one comprehends. (1)

cayenne8 (626475) | more than 2 years ago | (#37895882)

Exempt food and medical. That would reduce the percentage impact on the poor. Put a flat tax on everything else including services. Then at least everyone would have confidence that "the others" weren't able to lawyer their way out of their fair share.

That and also...frankly, I have NO problem with having everyone, start paying at least some Federal tax.

When I hear about people paying 0% federal tax and it seems to be almost half the populace of the US adults...I get furious.

I don't care if it is a reduced amount if you are poverty...but everyone should have 'some' skin in the game. I don't believe in deductions that allow you to pay nothing. If you have kids, they cost us..so, be prepared to pay for them. A single person should not be forced to basically subsidize your reproductive choices by having to pay more tax and you getting a deduction.

To keep things from being too regressive, sure, exempt basics in life for everyone...food, etc. But other than that...everyone should pay some share of it...no free loaders.

What about the Government Unions / Payroll Taxes? (3, Insightful)

brunes69 (86786) | more than 2 years ago | (#37895442)

The salary is just one factor of the cost of employment.

If the government hired all of these sub-contractors as employees, then they would all be members of various federal unions, and the government would then be on the hook for all those unions' juice benefit plans and pensions. Also they would be paying payroll tax for them all (yes the government has to pay tax too).

If all these costs were accounted for then the supposed gap would be much narrower or potentially even non-existent.

Re:What about the Government Unions / Payroll Taxe (0)

Anonymous Coward | more than 2 years ago | (#37895590)

Remember 6th grade math class? Show your work.

Re:What about the Government Unions / Payroll Taxe (0)

Anonymous Coward | more than 2 years ago | (#37895622)

You're a tool. Union benefits are paid for BY THE EMPLOYEE. Pensions and benefits are cheap too. And don't give me that "private sector folks don't get benefits" bullcrap. I'm a professional and I know for a fact that other professionals do better in benefits on the outside in private sector. Compared to the average Walmart drone, yes you get better bennies, but look at the comparison.

Re:What about the Government Unions / Payroll Taxe (2, Informative)

Anonymous Coward | more than 2 years ago | (#37895926)

By using contractors the government is converting all the various costs (salary, benefits, tax costs, personnel management, leave, pension etc...) into an up-front payment. Much easier to manage year to year.

Re:What about the Government Unions / Payroll Taxe (1)

Anonymous Coward | more than 2 years ago | (#37895662)

Yeah, damn unions getting pensions for their members. It should be criminal!

Re:What about the Government Unions / Payroll Taxe (1)

gumbi west (610122) | more than 2 years ago | (#37895680)

The expense ratio for federal workers is 22% on top of salary. This will not get you there.

Re:What about the Government Unions / Payroll Taxe (1)

elucido (870205) | more than 2 years ago | (#37895732)

The salary is just one factor of the cost of employment.

If the government hired all of these sub-contractors as employees, then they would all be members of various federal unions, and the government would then be on the hook for all those unions' juice benefit plans and pensions. Also they would be paying payroll tax for them all (yes the government has to pay tax too).

If all these costs were accounted for then the supposed gap would be much narrower or potentially even non-existent.

Contractors are actually CHEAPER.

Re:What about the Government Unions / Payroll Taxe (1)

ClintJCL (264898) | more than 2 years ago | (#37895768)

No way do those benefits add up to a doubling or tripling of expenditures. Show us the numbers.

Re:What about the Government Unions / Payroll Taxe (4, Informative)

Anonymous Coward | more than 2 years ago | (#37895806)

I run a small business where we have contractors. I have been a government contractor in the past, but my company hasn't done any government work since we got started a year ago. Our employees know their billing rates vs what they're actually paid and haven't complained.

Our top rate is $120/hr, which would work out to be 240k/year if the person worked 40 hrs a week for 50 weeks (2 weeks pto) .. 2000 hrs.

But, we don't always have our contractors out full time. Sometimes they're on the bench (working on internal projects).. We have to cover that cost, or we have to lay them off. Essentially we're building up a bank account so that we can afford to keep employees that aren't working for the client at the moment. That plus the other overheads we have really eat into the company profit.

So.. even if we're paying $110k/year to the guy we're billing at $120/hr, it can be a close thing.

Re:What about the Government Unions / Payroll Taxe (4, Informative)

hrvatska (790627) | more than 2 years ago | (#37895812)

What benefits do unionized federal employees received that non-unionized do not? Most federal employees are not in unions. Federal employees can not be compelled to join a union. Federal unions can’t advocate striking or actually go on strike. According to the U.S. Federal Code, federal employees are not allowed to strike. It is deemed an unfair labor practice which can result in the employment termination and the revoking of the union’s status as a recognized labor organization. Recall how all the air traffic controllers were summarily fired and replaced thirty years ago.

Re:What about the Government Unions / Payroll Taxe (5, Informative)

MacGyver2210 (1053110) | more than 2 years ago | (#37895856)

And you're basing this on what evidence? I see no figures on this.

The fact is, people are pocketing a significant portion of government contract payments, and it's not the people doing the actual work. It's the guy in the suit who "manages" the teams, and says "You let ME worry about that" to everything while driving a fucking $200,000 Mercedes.

The unions and payroll have absolutely nothing to do with the inflated cost of government contracting, they're just an easy target recently vilified by the far right and other class-warfare commencing scumbag motherfuckers. So go join your party on the right, tea bagger.

For what it's worth, most union dues/benefits are paid for by the employee themselves through dues and fees. It is a rare occurrence that an employer takes care of all the costs.

Pensions are a stupid employment incentive all around, but it's not the unions' faults. Keep paying people's salary even after they retire? Yeah, that's a marvelous idea for the bottom line.

Philip Morris Co (0)

what2123 (1116571) | more than 2 years ago | (#37895446)

Maybe someone else on here can help me understand why the government apparently paid out $460MM to a tobacco company? Perhaps this was all for helping government workers quit the habit or payouts for the healthcare costs? In any case, wouldn't this be off the bill for B-2-G contracts?

How else is the government supposed to make money? (2)

nido (102070) | more than 2 years ago | (#37895466)

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.

Instead of borrowing $306 billion from Wall Street and giving it to defense contractors (owned by Wall Street), the government could create the same $306 billion and give all 300 million of us $1002 apiece.

This would be something like Cook's A Bailout for the People [wordpress.com] .

Working towards small government ;) (4, Informative)

TheLink (130905) | more than 2 years ago | (#37895474)

Every time a worker leaves the Federal Payroll to become a private-sector Federal Contractor, the President and Congress can claim to be reducing the size of government. They publicize the fact that âoe1990 total government employment⦠was 5.23 million,â which fell to âoe2.84 million in 2009.â

There you go, here's what happens when you voters keep asking for small government. That's why I've said time and time again, the problem is not quantity. It's quality. It's not the quantity of Government that matters so much as the quality.

You can have these jokers reducing the size of Government to near zero, but if everything is done by such contractors, it makes no difference or it's even worse.

Private Corporations don't even have to pretend to listen to the voters. The Government does, hence this "small government initiative".

Corruption.... (0)

Anonymous Coward | more than 2 years ago | (#37895482)

Part of how corruption works is you create a job and then fill it with the party of your choice at the rate of your choice, and bill the taxpayer for the whole thing. Then you make the "free" media shut up about it by threatening to cut off their privileged access to the inner circle. We have created an incestuous government that no longer has regard for us. The only solution is to elect real patriots and then limit even their terms in office.

lollll...they're going to WikiLeaks you... (4, Insightful)

ibsteve2u (1184603) | more than 2 years ago | (#37895486)

You're not supposed to reveal that "privatization" is a scam...that's "top secret".

few things (0)

Anonymous Coward | more than 2 years ago | (#37895488)

There are a few things here. The cost to the federal government/employee is not your salary. Its approximately 3x your salary. This includes benefits, infrastructure and so forth. Further even if all things are equal that is 3x your salary is the contractor price it is still often the case better go the contractor route because it offers hiring / firing flexibility for jobs that may be one offs or have huge temporal variances in workload. Namely the contractors can be hired for a few months of the year and then let go in a way that employees can not be.

Re:few things (1)

rollingcalf (605357) | more than 2 years ago | (#37895796)

They accounted for benefits given to federal employees when making the comparison. And pointed out that the government provided the infrastructure (office space, computers etc.) to the IT contractors as well as the employees.

Half truth (0)

Anonymous Coward | more than 2 years ago | (#37895494)

I Contracted at the Air Force Army Exchange Service and did get about twice the pay of the staff for the same job. But they got health benefits second only to the US Congress, have a fantastic retirement plan that let them retire after 20 years at very close to their top pay with COLAs given regularly, got to park in the AAFES parking lot instead of scrambling through a rubble field near the building, got to use the onsite gym & other facilities that contractors could not visit, and had a sick leave policy that had many folks coming in when they felt like working. And if anything burbled, they had a union to go to bat for them while contractors were routinely sacrificed when a Peter Principal manager screwed up and needed someone to take the fall.

Re:Half truth (1)

elucido (870205) | more than 2 years ago | (#37895772)

I Contracted at the Air Force Army Exchange Service and did get about twice the pay of the staff for the same job. But they got health benefits second only to the US Congress, have a fantastic retirement plan that let them retire after 20 years at very close to their top pay with COLAs given regularly, got to park in the AAFES parking lot instead of scrambling through a rubble field near the building, got to use the onsite gym & other facilities that contractors could not visit, and had a sick leave policy that had many folks coming in when they felt like working. And if anything burbled, they had a union to go to bat for them while contractors were routinely sacrificed when a Peter Principal manager screwed up and needed someone to take the fall.

Contractors are a way for the government to save money because they don't have to pay out benefits.

Confused Mishmash (3, Interesting)

MozeeToby (1163751) | more than 2 years ago | (#37895502)

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:Confused Mishmash (1)

MacGyver2210 (1053110) | more than 2 years ago | (#37895904)

What planet do you live on? Where do you think the contractors get the money to pay for their startup and overhead? That's right - from the government.

But that's not the point of this article. The point is that people are getting $600,000 for startup/overhead/payroll and only $100,000 is actually being used for that, with the rest going into some suit's pocket.

That money goes to a good cause (0)

concealment (2447304) | more than 2 years ago | (#37895504)

In the name of increasing equality, our government gives priority to women, minorities, gays and small businesses when it chooses its contractors. While these companies in turn higher independent IT contractors for relatively low rates, the difference in cost goes to furthering our goal of equality for these people. You may see it as $306 billion dollars wasted, but I see it as an investment in our future by increasing equality in America.

Re:That money goes to a good cause (0)

Anonymous Coward | more than 2 years ago | (#37895764)

And how the fuck is that equal?
I get offended every time I see this bullshit on applications.
If you were truly an equal rights company/government, YOU WOULDN"T ASK IF I WERE A VISIBLE MINORITY.

I'm a white male, and I can't find a job either. Why should my chances of being hired
be lowered because other white males have been successful in the past?

Re:That money goes to a good cause (0)

Anonymous Coward | more than 2 years ago | (#37895774)

It's also crazy expensive and part of reason contract costs are so high these days. Also, it's not really an investment as very few of the business transition off government business and into private sector business. Let's call it what it is. Corporate welfare.

Re:That money goes to a good cause (0)

Anonymous Coward | more than 2 years ago | (#37895800)

You make about as much sense as Mel Gibson on a bender. Bless your heart, I will pray for you.

Re:That money goes to a good cause (1)

Reidsb (944156) | more than 2 years ago | (#37895854)

I'm sorry, but what? I think I missed the "Let's hire gays and women as military contractors" memo. Elaborate?

War is a racket... (2)

AngryDeuce (2205124) | more than 2 years ago | (#37895508)

Smedley Butler tried to warn us... [wikipedia.org]

President Eisenhower tried to warn us... [youtube.com]

Question is, what are we going to do about it? Either through political means or revolutionary ones, we can't wait around for other's to solve this problem for us. It's time to make the change ourselves.

Re:War is a racket... (0)

Anonymous Coward | more than 2 years ago | (#37895972)

War isn't the racket, preparing for war is the racket, and then when war breaks out (because you've been ramping up for one) you can't fight it very well because all your equipment is a mishmash of junk spanning 30+ years.

The DHS shares many qualities with the Maginot line when you think about it.

Do you actually feel safe?

Duh? (3, Interesting)

COMON$ (806135) | more than 2 years ago | (#37895592)

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.

Re:Duh? (1)

schlesinm (934723) | more than 2 years ago | (#37895754)

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.

This is the biggest reason why they have contractors. At the end of a project, you say bye to the contractors. You can't easily do that to employees.

My company has a lot of contractors (at least 2-1 contractors to employees). The reason why is that when the economy goes down and money dries up, we cut the contractors. It has to be a really long dry spell before we start cutting employees.

Re:Duh? (1)

Attila Dimedici (1036002) | more than 2 years ago | (#37896000)

That was my thought as well. Typical business rule of thumb is that an employer charges somewhat more than 2x the rate they pay the workers. That is the basic rule for companies that hire people as employees and then charge customers and hourly fee to do work (mechanics, autobody repairmen, carpenters, etc). For contract employees, the agency usually charges somewhat more. I came across a well written column on being an independent contractor in IT, they said you should charge 3x what you would want as an employee for the work. As others have pointed out, it is easier to get rid of contract workers when the job is finished than it is to get rid of employees (especially government employees).

If you pay them twice as much (1)

AdamJS (2466928) | more than 2 years ago | (#37895656)

Then they should be subject to thrice as much scrutiny and thrice as many penalties.

Re:If you pay them twice as much (1)

elucido (870205) | more than 2 years ago | (#37895792)

Then they should be subject to thrice as much scrutiny and thrice as many penalties.

But they aren't really paid twice as much. It's a myth that they are. If you are a contractor you get more cash, but yo ustill have to buy your health insurance, pay your own retirement, pay for all the benefits government employees take for granted.

The only reason to use Contractors are the tax benefits and the fact that it's just better in a lot of ways, less micromanagement.

Personal Example (0)

Anonymous Coward | more than 2 years ago | (#37895674)

I worked for Raytheon as an IT Architect in Baghdad for a year. I was paid 244k for the year, which included housing, food, and travel back and forth to the states 2x a year. I don't know, but have been told that Raytheon charged the government 450k for my time over there. I can definitely say I didn't do nearly that much work, and the living conditions weren't really all that bad.

Visibility is a government agency. (2)

sgt scrub (869860) | more than 2 years ago | (#37895692)

The government has the ability to force contractors into full disclosure agreements. A federal law should be passed that forces any business that accepts a government contract to fully disclose how the money they received is spent. A federal web site ( ie. contractors.gov) should be implemented so contractors can easily journal receipts, wages, and other payments, without specifying the names of employees specifically of course. The journal should be kept during the entire process and maintained on the site for no less than 10 years. The web site and all information should be freely accessible to all U.S. citizens.

Overhead and profit margins (1)

sjbe (173966) | more than 2 years ago | (#37895702)

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.

It's a for profit company. Does he seriously think they were not charging any sort of a markup on his services? Furthermore there is a LOT more cost that just the salaries. Even for companies whose main cost is labor, overhead is huge and can easily double costs without even considering profit margins. This is especially true for business with high insurance costs. Furthermore if you've ever dealt with the government, the amount of bureaucratic cost can be off the charts. Doing business with the federal government involves all sorts of red tape and bureaucratic hurdles (some necessary, some not so much) which are very expensive to deal with. Frankly with my own dealings with government contracts, I wouldn't touch that work unless there was a fairly steep markup on it. Not worth the hassle otherwise.

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."

$306 billion is a lot of money but that doesn't establish whether it is cheaper or more expensive for the government to provide those tasks. It might very easily cost the government more. It might cost less. There is no evidence here one way or the other aside from a unsupported insinuation that there must be some sort of inefficiency here.

Re:Overhead and profit margins (2)

DetriusXii (632162) | more than 2 years ago | (#37895790)

Actually, from the other citations, it would actually cost the government less to insource their work. The current evidence points to government contractors as inefficient ways to accomplish work.

All the bitching will end in 2012... (0)

MobileTatsu-NJG (946591) | more than 2 years ago | (#37895728)

Boy are you guys gonna regret bitching about this article when the saucers arrive.

contractors are guvmint types (4, Informative)

k6mfw (1182893) | more than 2 years ago | (#37895748)

This whole concept of contracting is like outsourcing, looks good on paper as it saves costs. Then politicos can brag how they are reducing costs because there are less govt workers (though there are a zillion more contractors), i.e. NASA or number of troops overseas (much of those positions replaced by contractors). Only advantage of contractor is it is easier to fire someone than a civil servant. Don't think unions are all powerful and all members have juicy benefit plans and pensions (they don't). Now people like to say how much better contractors are at saving money (uhmm, J35 fighter has doubled cost in past five years and its contractors have a lot of political power like lobbyists and work less regulation than before so don't blame govt people. Oh, did you know the J-35 began as CALF, Common Affordable Lightweight Fighter?).

Others say contractors are good because it is private enterprise, you gotta work hard to make it successful unlike govt which don't have to make profits or deal with customers. However, pretty much all federal contractors have only one customer, the federal government so they are government. I see almost all these companies could never compete in the "real world." And those that do work in the real world are highly dependent on government contracts. Which I think is why federal spending has skyrocketed because it is the only big thing in town, as all other industries have collapsed.

There was a time when becoming a police officer or working some other govt position was considered low pay (especially NASA civil service in the 80s). Right now it looks really good because all other middle class jobs have collapsed. But even for them salaries and bennies are dubious.

Summary is moronic (3, Interesting)

MikeRT (947531) | more than 2 years ago | (#37895778)

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)

Top 1% (0)

Anonymous Coward | more than 2 years ago | (#37895838)

Once again, Top 1% profiting ridiculously... stealing, from the 99%.

Off with their heads!

Not new (2)

sl4shd0rk (755837) | more than 2 years ago | (#37895870)

Follow the money, follow the greed, find the power, find the corruption. It's a pretty common theme and has been going on for decades. Most of you may be too young to remember (http://www.wnd.com/index.php?pageId=4314)

It's Corporate Welfare (0)

Anonymous Coward | more than 2 years ago | (#37895876)

BTDT. As an IT contractor, you were lucky to make half the rate the Feds were paying the contracting company, whose benefits were always far less than those of the gov't folks we'd work with. Most of the jobs I worked should have been government jobs, the positions were there for decades in some cases. But the people changed every time the contract was let to a new company who managed to bring a new low to what they could get away paying their peons, and all that institutional knowledge gained over the previous one to four years evaporated.

Has anyone ever seen an actual (and credible) study of the benefits of contracting versus direct gov't employment? I've kept on the lookout since Reagan started this process in earnest, and am hardly surprised not to have found any: Contracting companies have the purchasing power in Congress to quash it.

it costs more than just salary to employ someone (1)

s.d. (33767) | more than 2 years ago | (#37895942)

From the company's perspective, keeping you on staff costs a lot more than just your salary. Insurance, 401(k), employment taxes, tuition reimbursement, etc, are all "hidden" costs above what they give you on your paycheck.

It's not unreasonable for it to cost an employer 1.5 to 2 times the salary amount for an employee.

I don't like the idea of a contractor overcharging the gov't egregiously, but if their costs are 1.5x the employee's salary, then charging the gov't 2x means they make 1/4 of that amount in "profit," not 1/2.

Cut the middleman? How about cutting the end-man? (2)

starmonkey (2486412) | more than 2 years ago | (#37895956)

I have a better, though perhaps revolutionary idea. Why not save nearly the whole $306 billion by being less of an aggressive warmonger?

Overhead on govt contracts (5, Informative)

david.emery (127135) | more than 2 years ago | (#37896002)

If you remember the stories about the $600 hammers, and you actually read the details, what you find out is that the hammer cost $10, and the contracting overhead cost about $500. That includes all the rules for government procurement, Federal Acquisition Regulation compliance, EEOE, small and woman/minority owned business requirements, limits on subcontracting, requirements for exhaustive financial/time accounting, etc, etc, etc.

Most of those overhead requirements are placed for good reasons, either for social policies (e.g. small business/minority business) or for fiscal or technical accountability (e.g. time accounting, facility security, etc.) But when you add them all up, you have a lot of overhead for doing government contracting that you don't have in business. It's part of the reason why government is inherently inefficient.

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