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Federal Contractors Are $600 Screwdrivers 593

Posted by samzenpus
from the cost-of-doing-business dept.
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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Federal Contractors Are $600 Screwdrivers

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

    • Re:Um.... (Score:5, Informative)

      by MacGyver2210 (1053110) on Monday October 31, 2011 @10:56AM (#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

      • Re:Um.... (Score:5, Insightful)

        by ackthpt (218170) on Monday October 31, 2011 @12:16PM (#37897032) Homepage Journal

        "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

        See, this is the thing. Golden Fleeces were being handed out, fingers pointed, voices of indignation were hollering at every microphone and camera they could find - it was like a scene out of Bloom County - so preposterous and yet happening.

        Forward a few years and instead of buying a special model of hammer or seat meeting a particular specification, we now have contracted out an enormous amount of work - and from what I've seen, a lot of the result is garbage - it's far worse now than $600 toilet seats. The contractors who flooded Iraq were taking home tons of money, while much of the work was done by sub-standard hires - and we saw some of the results in the news, but Cheney's old company made a sickening haul and nobody seemed to do more than bat an eye at this seeming corruption - Just how was it that Halliburton was awarded a giant no-bid contract, because they were the only company seen to be prepared to handle it? Talk of inside information .. there must have been a conversation including something like this from Cheney, "Get oil, security, contruction, everything ready now, because we're going to invade Iraq in a year and if you are ready, we give you a fat no-bid contract, OK?"

        Old advice, too, from someone in my past - if you want to make money, get contracts for government - education, too. You can sell rubbish which you could never get away with in the private sector markets.

        • by TiggertheMad (556308) on Monday October 31, 2011 @02:54PM (#37899284) Homepage Journal
          I have a friend that was doing help desk work for a large software company around the time that the whole Iraq thing started. He was a competent guy, but he didn't posses any special tech skills. I suspect that he was making about 35k a year with a few benefits. He caught wind of a job that was providing help desk support to the troops in Iraq that paid something like 90 or 100k per year, and jumped on it.

          At the time, I was rather shocked at the rate of pay. He was making something like 2 to 3 times what you would realistically pay someone for the same thing stateside. Then I heard a few stories from him as time passed. They were sequestered in a military base 24/7 for the duration of their time in country, so they wouldn't get murdered. I asked him once about why he slept in a tent in their base, and his reply was that 'The buildings tend to draw mortar fire', so there were some dynamics that made life more interesting than most help desk gigs.

          As an outsider who just sees the 100k a year job without understanding what it entails, it seems like a $600 hammer. The government isn't stupid (well, mostly not stupid), so there is usually a reason for things.

          I could have taken the job, but getting possibly shelled, shot at, and trapped in a desert base surrounded by 18 year old marines with SAWs for 10 months, no benefits and no promise of a job past the current contract wasn't worth the money.
      • by s73v3r (963317) <.moc.liamg. .ta. .r3v37s.> on Monday October 31, 2011 @12:37PM (#37897290)

        The problem with some of these "outrageous" expenses is that they never are given with any context. Why do they need such an expensive hammer, when a hammer is like $5 from Home Depot? As it turns out, the need for the expensive hammer is found in where it's used. The hammers were used in situations where gas might be around, like in gas tanks. Therefore, they needed hammers that could hammer without giving off any sparks.

        • Re: (Score:3, Informative)

          by Mes (124637)

          1) Ampco Non-Sparking Safety Hammer from Amazon: $56.99
          2) Bill $500 to the Feds
          3) Profit

          • Re:Um.... (Score:5, Insightful)

            by pnutjam (523990) <slashdot@ b o r o w i c z . o rg> on Monday October 31, 2011 @01:54PM (#37898348) Homepage Journal
            The real problem is the way the produce billing. Say they need a toolkit for a specific plane. They get the specs for space and everything. Someone specs out and tests each component of the toolkit. The time and materials comes out to $6k, for a 10 piece tool kit, ok $6k divided by ten pieces, $600 per tool.
          • Re:Um.... (Score:5, Informative)

            by hey! (33014) on Monday October 31, 2011 @04:00PM (#37900204) Homepage Journal

            (1) Amazon did not exist in 1980 when this story emerged.
            (2) There never actually was a $600 hammer. The actual (averaged) price to the program was $435.
            (3) That $435 included $420 the design and testing of the toolkit, amortized over each thing in it. For example, if you paid the vendor a nickel for an allen key, you'd call that $420.05, even though you only paid a nickel. The actual marginal cost (i.e. what the government actually paid the vendor) for the hammer in question was $15.
            (4) Using the same accounting methods that arrived at $435 for the hammer would yield $476.99 for your Ampco hammer, regardless of what you actually paid the vendor for it.

            What does this show? That you should beware when somebody peddles this kind of story. They're more interested in how effectively the story sways your opinion than whether the story is true.

            Many of the biggest money wasters in government are stupid attempts to save money, as in the case we are discussion here.

    • by Anonymous Coward on Monday October 31, 2011 @11:00AM (#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.

    • ..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.... (Score:4, Informative)

      by Chapter80 (926879) on Monday October 31, 2011 @11:10AM (#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.

    • Re:Um.... (Score:4, Insightful)

      by elrous0 (869638) * on Monday October 31, 2011 @11:16AM (#37896072)

      *Knowing* it and getting a Congress that's absolutely owned by said contractors to do jackshit about it are two very different things.

  • 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.

  • 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.

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

    • by ClintJCL (264898)
      No way do those benefits add up to a doubling or tripling of expenditures. Show us the numbers.
    • by Anonymous Coward on Monday October 31, 2011 @11:00AM (#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.

    • by hrvatska (790627) on Monday October 31, 2011 @11:00AM (#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.
    • by MacGyver2210 (1053110) on Monday October 31, 2011 @11:04AM (#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.

    • by compro01 (777531)

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

      Except that they are accounted for already.

      http://www.pogo.org/pogo-files/reports/contract-oversight/bad-business/co-gp-20110913.html#Summary%20of%20Methodology [pogo.org]

      Because the contractor billing rates published by GSA include not only salaries but also other costs including benefits contractors provide their employees, POGO added OPM’s 36.25 percent benefit rate to federal employee salaries 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.

    • by s73v3r (963317)

      Oh noes! Unions actually fight to keep decent benefits for their members! The horror! They should be willing to gut everything for the enrichment of their employers, just like everyone else has!

      Next time you want to rant against union benefits, remember, the correct position is not "Why do they still have this when I don't!", it's "Why do I not have this while they do?" Don't be pissed off because someone was able to negotiate a better deal than you.

  • 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].

  • by TheLink (130905) on Monday October 31, 2011 @10:40AM (#37895474) Journal

    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".

  • by ibsteve2u (1184603) on Monday October 31, 2011 @10:41AM (#37895486)
    You're not supposed to reveal that "privatization" is a scam...that's "top secret".
  • Confused Mishmash (Score:4, Interesting)

    by MozeeToby (1163751) on Monday October 31, 2011 @10:42AM (#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.

    • by asylumx (881307)
      You make some good points and I agree about companies maximizing profits. Off topic, but that's why I've always felt like tax breaks for the sake of "creating jobs" is utter bullshit. The company will not hire employees it doesn't need, no matter what the tax rates are. So, if you lower taxes, that money is going to go straight to their bottom line -- they are NOT going to increase their expenses if they don't have to, and if they have to do it, then they'll do it regardless of tax breaks.

      So, same sto
  • by AngryDeuce (2205124) on Monday October 31, 2011 @10:42AM (#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.

  • Duh? (Score:4, Interesting)

    by COMON$ (806135) on Monday October 31, 2011 @10:47AM (#37895592) Journal
    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.

    • I think you guys are thinking more so of private contractors where such incentives and the like pay off.

      But what's being talked about here is mass contractor employment. Low-pay, zero incentives, in fact often they couldn't care if you sat at your desk all day and did nothing. So long as they can legally bill the government for your time.

      It's an entirely differently system than corporate contract work.

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

    • Ooo, can I be a contractor for the agency responsible for creating and maintaining the web site please?
  • 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 feder

    • 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.
  • by k6mfw (1182893) on Monday October 31, 2011 @10:57AM (#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 (Score:4, Interesting)

    by MikeRT (947531) on Monday October 31, 2011 @10:59AM (#37895778) Homepage

    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)

    • by asylumx (881307) on Monday October 31, 2011 @11:47AM (#37896574)

      2. Fire the dead weight left and right (liberals: boooo)

      I just want to point out, most liberals are not against firing dead weight, but they just want the person doing the firing to actually have a reason (prove that the firee is actually dead weight). At-will termination means you can fire someone just because you don't like the shoes they wear, for example.

    • by garyebickford (222422) <gar37bic.gmail@com> on Monday October 31, 2011 @11:55AM (#37896716)

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

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

    • by Syberz (1170343)

      Humm... he's complaining that the contractors are charging 170k for a given job, yet paying the actual person doing said job about 80k (less than the national average and less than a government employed equivalent). In the poster's experience, the contractor isn't actually providing anything, the government pays the utilities, the office space and provides the equipment. So that extra 90k is for... uh... to make sure that the contracted employees fill out their timesheets, and... uh... that's it.

      He's not sa

  • by sl4shd0rk (755837) on Monday October 31, 2011 @11:04AM (#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)

  • by david.emery (127135) on Monday October 31, 2011 @11:12AM (#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.

  • Been there, seen it (Score:5, Informative)

    by BenEnglishAtHome (449670) on Monday October 31, 2011 @11:22AM (#37896156)

    I was a government IT worker in the U.S. Treasury for decades. Before I retired, contractors were being brought in to replace workers in my position. One guy comes to us fresh from a front-line support position at, believe it or not, Best Buy. After a long while, he turned out to be not so bad, trainable, and useful. It took about a year to get him up to speed.

    At some point, he decided he trusted me enough to talk about pay. I was shocked. Why should he treat salaries as some sort of secret? As a public employee, my pay is known to anyone who wants to look it up. I showed him how to look up what anyone in the organization made, showed him my salary, and couldn't imagine why anyone would think of this stuff as proprietary information.

    In his case, though, I can see why his employer had gone to great pains to create the impression that salaries were some kind of secret. He was doing the same work as a first-tier support employee but was being paid roughly one-fourth as much money. The contract to his employer was sufficient to support employees like me (the agency was paying roughly twice the annual salary of a senior computer specialist for each contractor who reported to a job site) yet the contractor simply took the contract, took a cut, and subcontracted the rest out. The subcontractor took a cut and subcontracted the rest out. The next level subcontractor took a cut and hired an out-of-work Best Buy leftover to report to the job for a pitifully small percentage of the original contract payment.

    It was a multi-level sham. I was annoyed at the waste. The contract guy was annoyed that he wasn't making any more money. Overall, contracting for these positions was a completely stupid thing to do that only accomplished just one thing - slicing off shares of pure profit to a few middlemen. Ultimately, the workers on the ground and their customers got screwed and the U.S. government got a *very* poor return for the money spent.

    Naturally, once the guy was fully trained and providing real value to the organization, budget cuts forced cancellation of the support contract and he was gone in a flash. All that training time, all that productivity diverted from helping customers to bringing him up to speed was, in an instant, flushed down the toilet.

    I'm sure it's not always the case, but contracting for services like this by the government is, in every case where I've gotten a close look, a completely stupid thing to do.

    • by Rich0 (548339)

      There is a tradition in private industry of keeping wages secret. I think that everybody likes to think that they're a good negotiator and that they're the best paid person in the department. However, the guys who work out your salary are actually professionals at such things and they've almost certainly given you a deal that you might not be happy with.

      Just another case where we shoot ourselves in the feet over privacy...

  • by mbone (558574) on Monday October 31, 2011 @11:23AM (#37896184)

    I was around in the Government when the Reagan administration came in, RIFed a bunch of people, and put in hiring freezes all over the place, nominally to reduce the size and cost of government. However, they didn't really reduce either departmental budgets, or the tasks that those departments had to fulfill. The result was a vast hiring of contractors, replacing people making X with people making 2X, which (with burden) was billed to the US government as 4X+. I thought at the time that this was not about cost savings at all, or better efficiency, but about funneling cash to politically well connected contractors, and I have seen nothing to make me change my mind since.

  • by PortHaven (242123) on Monday October 31, 2011 @11:32AM (#37896340) Homepage

    Essentially, there seems to be a debate regarding government employees vs contractors (at 2x the rate).

    But the truth of the matter is those contractors never see that double income. All the talk of how 2x let's you pay for your own benefits is hogwash.

    Here is how the system works for the most part. Rather than having government employees hired for a task which is likely to be short-term (1-5 years). The government contracts it out. Instead of hiring a $50K-$75K employee they pay a major contractor (Northrup, Lockheed, L3, Accenture, etc, etc, etc) $100-$150K to fill that position.

    These companies then hire from vendors adding an additional tier to the puzzle. (If the contractor is a foriegnor there may be a third party involved in sponsoring their visa.) So of that $100K-$150K paid by .gov for that contractor. The contractor might see $40K-$75K. All the rest is eaten up by middle-men.

    But it doesn't stop there. The way the contract system works, it is not uncommon for one of these contracting firms to mass hire dozens of people toward the end of a fiscal year. They do this so they can use up (bill the government) for every dollar the contract allows for. Upon the end of the fiscal year many of those contractors will be let go. No severance. Nothing.

    Essentially, the contract system allows for an at-will hire and fire. Which in an economy that has 9%-16% unemployment becomes a gross abuse. You literally watch people hired for two weeks only to be let go. Positions are advertised as part of a long-term contract. New hires are often misled into thinking there is an element of job security. Some even leave jobs for these positions only to reach a very rude awakening.

    Seriously, Unions need to quit wasting their $$$ being campaign fundraisers and get on the ball with what unions were all about. Defense of the worker.

    In the current market, a potential new hire has little to no ability to negotiate on contract. And if misled, lied to, etc - has even less recourse.

    There needs to be a fraud law that mandates whether a position is long-term (min. 1 year) or merely short term. If fraudulently mis-portrayed, than the hiring firm would be obligated to pay the employee for one year of time.

    This would help end the abuse of contractors that is rampant in government work.

For every bloke who makes his mark, there's half a dozen waiting to rub it out. -- Andy Capp

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