Contractors vs. staff: You do the math

The latest phase of the debate about the role of contractors in government shows that even the obvious is less obvious than it seems

Whether the pendulum is swinging toward outsourcing, circa 2001, or insourcing, as it is now, any measurable change in motion is sure to stir up a debate about the appropriate role of contractors in government.

The debate is often framed in terms of determining which jobs are inherently governmental. That’s why a recent Washington Post article about the essential role of contractors in the intelligence community caused such commotion. Here, if nowhere else, the line between government and contractor responsibilities ought to be clearly drawn.

Alas, the ensuing debate showed that even intelligence work leaves room for debate. Additionally, the pendulum’s present direction — toward replacing contractor positions with staff employees — is complicated by growing concerns about the federal deficit. By insourcing jobs, are federal agencies saving money or simply adding more red ink?

Our coverage of the controversy generated a lot of debate at Here is a small sampling of the comments we received, edited for length, style and clarity.

Pay vs. Profit
I know of contract positions where the company is paid more than $300,000 per year — far more than any government employee makes. But the contract employee only gets perhaps $60,000, and the company pockets the rest in profits. The important point is how much the government pays for the position, not how much the incumbent takes home.
— David

Pay vs. Responsibility
The problem with the government pay system is that it treats all employees, regardless of skill set or responsibilities, as the same in terms of pay. Let's be honest, an administrative assistant generally has fewer responsibilities than a senior manager who he or she supports or reports to. Yet a GS-15 makes the same regardless of position, title, responsibilities or accountability. The government needs to get serious about matching salaries to skill sets and rewarding performers and sanctioning poor performers.
— Anonymous

No Duh
Basic rules of contracting from the private sector: You hire a subcontractor when (a) you don't have the knowledge or the skill in-house to do a job yourself; or (b) you don't have the time, in the form of man-hours, to do it yourself. If you don't have the skill and you need that skill for a limited amount of time and for a unique or singular project, you hire a contractor. If you are going to be handling the same type of work for more than six months and/or there appears to be a lot of repeat business that obviously justifies a full-time employee’s position, then you had better hire someone to do that job.
— Anonymous

Contractors are necessary due to how difficult it is to hire and fire government employees. Contractors are perfect for filling needs because you can eliminate them when the need is gone. Signing on a government contractor is like a lifelong contract. If the government would make it easier to hire and fire without making it the longest, most drawn out political process in the world, then the need for contractors wouldn't be there.
— Anonymous

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Reader comments

Thu, Sep 22, 2011 Earl

Wow. I would LOVE to have a chat with the contributors of this article--especially David. If you know of a company charging the government $300k for a $60k employee, then I bet I can find at least one associated crook on the government side. Contracting companies do have WRAP rates above 1.0 (pay = bill rate). Usually it's in the area of 1.6 to 2.2. That covers a lot of costs that the government would also have, and depends on the cost of doing that particular work. If you know a company charging a WRAP of 5.0 for any "normal" job, there's something EXTREMELY fishy. I'm guessing you're making a massive exaggeration. If not, look for kickbacks or other "under the table" illegalities. Contractors compete for their business at market rates (capitalism). Nobody believes a 5.0 WRAP is market under normal circumstances. And since contractors also pay taxes, we want our government to get the best value for OUR dollar, too. FLY, FIGHT, WIN

Thu, Aug 19, 2010 Bob DoD

Contractors are necessary because government employees are not skilled enough for their funtions nor have the initiative to learn new skills and increase their contribution. This is drained from them by years of getting pay increases for simply getting older. Its no wonder they are obsessed with retirement. If contractors did not perform the necessary functions, government would cease to function - yet we are treated like 2nd class citizens or money-grubbing theives. We are citizens too and are held to a higher standard of job performance. The full cost of government workers including all their benefits, if divided by their output contribution factor (0 - 1) would be in far excess of any qualified contractor. Governement employees can sleep at their desks where I work. No contractor could get away with that.

Mon, Aug 9, 2010 MJ VA

The articles that I've seen have left out a lot of important issues. The comments above help clarify some of these. But before a newspaper such as the Washington Post assumes something, they really need to do more homework. For instance, with intelligence personnel, have Government employees had a lower rate of spying than contractors? Who is cheaper? Are some types of contractors more unbiased than other types?

Mon, Aug 9, 2010 Ed Northern Va

For David - I have been a contractor a long time with several companies and I have never heard of making $300000 using a $60000 employee. That's a multiplier of 5. Multipliers of 1.6 for a small company and 3.4 for a large company are common. More study needed for any kind of comparason.

Mon, Aug 9, 2010

The problem with the math is the government isn't taking into account it's overall costs; i.e. health benefits, retirement funds, office facilities and associated equipment costs, etc. The pure profit David eludes to is not profit at all. It is the overhead cost of employing an employee. Profit on government contracts is far below what commercial companies make.

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