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Contract labor: Pay, benefits often double that of feds

Sep. 19, 2011 - 06:00AM   |  
By SARAH CHACKO   |   Comments
(Getty Images)

A new study says contractors cost more than federal employees doing the same work oftentimes, far more.

The study, released last week by the Project on Government Oversight (POGO), is perhaps the most detailed look yet at the long-argued question. It found that contractors earn 3.17 times more than feds in the case of attorneys, 2.75 times more for budget analysts, 2.4 times more for accountants, and 2.38 times more for building managers. In all, the study analyzed 35 job classifications, covering more than 550 service activities.

The study showed that contractors also cost considerably more in most cases than those doing comparable work in the private sector.

Not all job categories showed contractors as the more expensive option. Federally employed groundskeepers and medical records technicians, for example, cost more than their contractor counterparts, according to the study.

But the findings are not straight apples-to-apples comparisons, which has prompted contractor groups to disparage the findings.

To calculate federal costs, POGO relied on averages of Office of Personnel Management data detailing pay and benefits for federal employees by job category. It relied on averages of Bureau of Labor Statistics data to calculate private-sector pay and benefits.

To calculate contractor costs, POGO relied on averages of contractor billing rates listed on General Services Administration services contracts.

But those GSA contract rates, contractor advocates argue, factor in numerous costs not included in the federal costs that POGO calculated, including corporate executive salaries, equipment, supplies, rent, marketing and other administrative costs.

"The fact is that POGO's report draws false conclusions by comparing fully burdened contractor rates which include all costs charged to the government, such as salaries, benefits, overhead, supplies, equipment, materials, rent and more to an estimate of just salaries and benefits paid to a similar government workforce," said Stan Soloway, president of the Professional Services Council trade organization, which represents federal contractors.

"Their analysis ignores the full range of overhead and other non-personnel costs that drive the cost to the taxpayer for federal employee performance," Soloway said in a statement.

Overhead, supply and facility costs should be irrelevant in the comparison, POGO said, because its analysis compares jobs that are done at government sites.

POGO went back and added 12 percent an overhead cost calculation once used by agencies to make public-private employee comparisons to the federal compensation amounts, said the organization's general counsel Scott Amey. Contractors still cost 70 percent more than federal workers, he said.

"On the grand scale, people in government are operating under the assumption that contracting out saves money and [they] don't question that," he said.

American Federation of Government Employees public policy director Jacque Simon said there is no dispute that it costs money to maintain a business. But the cost of a federal worker does not include a percentage of his top executive's salary but contractors are allowed to bill agencies for a percent of their executives' pay up to $700,000.

"Those data produce even higher differentials and make contractor costs even more outrageous and insupportable," she said in an email.

POGO's analysis also does not include the costs to government for competing and managing contracts, Amey said.

Jacques Gansler, former undersecretary of Defense for acquisition, said one factor that helps inflate contractor costs is the regulatory requirements government forces on them, such as those concerning auditing, accounting and security.

Gansler, now a public policy professor at the University of Maryland, said he's heard people in the private sector say their commercial clients care about how much something costs, while the government cares about accounting for every dollar.

"In order to set up these specialized requirements, you have separate costs," he said.

GSA's billing rates do not segregate salary and compensation, and government websites do not provide detailed cost estimates or the justifications for outsourcing decisions, POGO says.

Soloway also criticized the POGO report for relying entirely on GSA contract rates to calculate contractor costs. He said federal agencies typically negotiate lower rates than those listed on GSA contracts when they conduct competitions.

"Let me see the better prices," Amey said. "In contracts I've seen, and others have said that, government isn't doing a good job of drilling down and getting good prices. These are pre-approved prices that many times the government relies on that are pre-approved as fair and reasonable."

Amey and Simon said agencies generally don't decide whether to rely on contractors or federal employees to do certain work based on a cost comparison rather, they employ contractors because Congress imposes ceilings on how many people they can employ. And agencies, pushed to get contracts out the door, do not have time to negotiate every contract price, Simon said.

But Jeff Flint, executive director of the National Association of Security Companies, said in an email that agencies are seeing savings with contractors.

The Government Accountability Office reported in June that seven of nine federal agencies currently using contract security officers do so because they offer a cost saving over using federal security officers.

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