Gov Careers

By Phil Piemonte

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You knew it all along: Compared to contractors, feds are a bargain

Most of you won’t be surprised at this, but in general it costs the federal government a whole lot more to hire contractors to do the same jobs done by federal employees.

Naysayers will be quick to point out that comparisons of federal employees and private-sector employees in comparable jobs do not take into account total compensation—which has become the monster point of contention in this ongoing public pay/private pay debate.

That’s why a good-government group, the Project on Government Oversight, decided to compare total compensation. But it compares three numbers rather than two: full federal annual compensation, full private-sector annual compensation, and … contractor annual billing rates.

Guess what they found?

In some cases, federal workers made more in total annual compensation than their private-sector counterparts.

In other cases, private-sector workers made more in total annual compensation than their federal counterparts.

But in 33 out of the 35 occupational classifications reviewed by POGO, the amount paid out under contractor annual billing rates exceeded the total annual compensation of both feds and private-sector workers. And far more often than not, that amount was a whole lot more .

In fact, POGO found that, on average, contractors may be billing the government about 1.83 times what the government pays feds to perform similar work.

And when it comes to those private-sector workers, the billing rates charged by contractors on average were more than twice the amount private-sector employers pay out for the same services.

In one instance—claims assistance and examining—contractor billing rates were nearly five times more than the full compensation paid to federal employees performing comparable services. In that case, total annual compensation for a fed was $57,292, compared to $75,637 for a private-sector worker, compared to a whopping $276,598 that a contractor would charge to fill that slot.

Moreover, private-sector compensation (to which feds’ salaries are often compared when anti-fed types howl) was lower than contractor billing rates in all 35 occupational classifications POGO reviewed.

If this has whetted your appetite for more information—and ammunition for the next time you hear someone griping about your salary—you can find the report right here.

Happy reading.

Posted by Phil Piemonte on Sep 15, 2011 at 12:13 PM


Reader comments

Tue, Oct 25, 2011

Downsizing the Federal workforce means more contractors, it is as simple as that. I was part of several A-76 studies where the cost of doing the work was compared, Fed to contractor. In a majority of the cases I was involved with the contracor's bid was lower than the cost for Feds. However, in almost every case I was involved in that Contractor went over budget and it was not more cost effective after all. Downsizing does NOT mean the work will go away, it will either be given to someone that is already working 60 hours a week or to a contractor. My comment is not "on point" with the article but follows a couple of the threads above.

Wed, Sep 21, 2011 Than N. Dallas

As a Government IT Contractor, I can tell you there have been many positive things information technology contractors have accomplished: combating terrorism, cleaning up the environment and managing vast amounts of critical data. Many of us work hard to add value for the government agencies we work for.

Wed, Sep 21, 2011 Fatal Flaw

Well researched report with several fatal flaws. First, while GSA rates are an easy place to start, they are probably the worst place. Footnote 75: "In some instances, the listed billing rates can be negotiated down to a lower rate. POGO has no access to how many rates are negotiated or for how much." The report acknowledges that these are ceiling rates - the highest a contractor would charge, but then dismisses any discounts. Huh? Discounts for volume are the norm. Amounts actually paid based on full-time equivalent work is a huge hole in this report. Second is the statement in the report: "In addition, POGO did not include in its comparative analysis additional costs that the government incurs as a result of outsourcing services to contractors. Those costs would only add to the costs associated with outsourcing documented in this report." But the Government can have a contractor employee removed from site at will (no termination cost to the Govt), and replaced by a new contractor employee (no hiring cost). This flexibility has a cost. Bottom line, the report is slanted to a pre-ordained outcome.

Wed, Sep 21, 2011 rachel

I've been military, contractor and civil servant. Fed employees are cheaper than contractors. In both jobs I recevie/d excellent benefits and 401K/TSP matching. ex: make $20/hr as cont. or $40/hr as fedemp - both with comparable benefits. This is the kicker - contractor billing was at $80/hr. I brought home 1/4 of what the cont comp charged the govt. That's simple math and supports the argument. The real problem is the military pay - now that is shameful!

Wed, Sep 21, 2011 T Va

One comment cited the additional costs that the contractor had, such as management and admin costs, etc., but that missed the point. These costs are redundant and just add to the cost to the government, the point being that contractors cost more than government employees, regardless of individual compensation because of these additional costs.

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