Contractors earn more than feds, survey suggests

Pay for federal contractors increased by only 2.1 percent in 2011 compared to 2010, according to an analysis of 448 jobs reported by more than 100 government contractor companies. The salaries of 105 jobs declined, while 137 jobs increased in pay, said Alan Chvotkin, executive vice president and counsel of the Professional Services Council, discussing the annual survey of contractor pay released in September.

Chvotkin presented a few of the results from the compensation survey of Washington-area businesses. PSC cosponsors the survey on government contractors with the Human Resources Association.

“We see the effect that the economy is having on the pay for the federal contracting workforce,” Chvotkin said.

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Comparing contractor pay to that of federal employees is part of the ongoing debate over fairness in the blended workforce.

For 2011, federal employees have been stuck under a two-year pay freeze by President Barack Obama in an effort to save money. In December of 2010, he called it “a necessary first step in our effort to address the challenge of our fiscal reality.” Congress has also considered legislation to freeze pay, limit bonuses, cut the size of the workforce and require unpaid time off. Meanwhile, federal employee union leaders and other employee supporters have urged that any such measures include contractors.

Based on the HRA-PSC 2011 survey, the contractors are paid on average 7.3 percent more than federal employees. In 2010, the difference was 2.3 percent. But remove private-sector executives from the equation and the differential is 6.8 percent. In 2010, the difference was 1 percent, Chvotkin said.

Considering executives’ pay alone, private-sector executives earn 69 percent more than their counterparts in the federal workforce. In 2010, they earned 48 percent more.

Seeing the differential in executive pay, the Obama administration proposed a new formula in September for determining how much the government will reimburse a company for an executive’s salary. Officials want to tie the executive’s compensation to the top federal executive, which is roughly $200,000 annually.

Currently, the government will reimburse a company executive up to $694,000 of an executive’s salary. The formula now is based on comparable executive pay in the commercial world. Administration officials are concerned that, based on such surveys, that figure could rise to $750,000 in 2011.

“It’s that payment that strikes us as excessive,” said Dan Gordon, administrator of the Office of Federal Procurement Policy, the office that makes the pay adjustments.

Even if the contractors’ pay is going up, Chvotkin said, it’s a relatively small increase.

“While the higher technology-level jobs continue to draw higher salaries, even at that level the increases are modest,” he said.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Tue, Oct 25, 2011 Steve DC

Contractor, you have the facts wrong. A typical first year fed gets 104 hours of vacation (13 days), so you get 40 more than the fed. A third year employee gets 160 hours and a 15 year employee gets 216 hours of vacation. However, companies of the same size as government, eg IBM were giving their employees 320 hours of leave after 15 years.

Sat, Oct 8, 2011 Mike

Fed Retiree must be a little senile (maybe that's why they're retired now). G&A, O&M, IT, etc. will be paid whether someone is a contractor or not. A GS-14, Step 10, has a 2011 Base Pay rate of $52.76 per hour...(not sure how that adds-up to $125.00 per hour; especially 4 years ago!)...not close to it, even with locality pay; then taxes too. Government matching on FERS, TSP, etc. is only about 2% per year, then you might lose the money on the TSP funds anyhow. Civil Service is also on a Pay Freeze and a Hiring Freeze at this time.

Mon, Oct 3, 2011 Fed Retiree Huntsville AL

I've seen the recent "contractor vs. government employee" cost comparison and it is totally bogus! One must compare total employee costs on a similar basis. To only compare direct hourly costs plus benefits for a government employee is simpleton logic and assumes that there is no cost to run the "business". The agency that I retired from charges federal agency clients for our services on a reimbursable basis. As a GS 14, my hourly rate four years ago was billed at about $125 per hour. This included G&A and departmental overhead rates that totaled about 160 percent of my salary. Now, that was only my total cost to the agency, not including my retirement benefits from OPM other than the agency bi-weekly retirement contribution). We had training costs, rent, utilities, travel, training,departmental supervision, organizational supervision, indirect support - such as logistics and IT equipment and support. Our agency attempted to manage all overhead and G&A costs to remain competitive with private industry. To ignore such costs in comparisons with industry is simpleton logic to me.

Sat, Oct 1, 2011 Mike

Sorry, I've got to move-on to the next task-at-hand; Non-stop; Too much to do; Time is precious; Arrived at work at 0630 today and got home at 1730 (no lunch other than eating quickly at work desk); CAC reader at home (checking work e-mail right now; responding to CC); Blackberry too; Minimize bathroom breaks to save time; Close office door and block the small window (more production, less distractions, however employees need my help, decisions and signatures); digitized Forms; digital signatures and routing files; streamline process; up at 0425; asleep at 2100 hrs; color-code and screen e-mails to sift-through and key on priority items; getting tired now (soon to sleep and then awake by alarm clock); thank God for well-spirited employees/Team at work (Feds and a few Contractors: need them all); replenish/sustain the Force; mission accomplishment; non-stop daily operations. Not sure of much at home any more...worry about significant other...Eat, Work, Sleep; (repeat). I donate leave every year (can't seem to use it all). Pay freeze; Hiring freeze; keep-up the good-work.

Thu, Sep 29, 2011 Contractor

Again @Erich Darr. In regards to retired military and CS double-dipping, you've found yet another reason comparing contractor and Fed salaries is inaccurate. A Fed has the option to come back and double-dip. A contractor who never spent time as a Fed does not. Also, I've not worked with any of the double-dippers, so saying that MOST contractors are such is likely specific to your area of expertise.

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