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Contractor execs paid 64% more than feds

Oct. 2, 2011 - 02:08PM   |  
By SARAH CHACKO   |   Comments
Carol A. Bonosaro is the president of the Senior Executives Association.
Carol A. Bonosaro is the president of the Senior Executives Association. (Tom Brown / Staff)

A growing gap between federal and private-sector executives' pay may drive some of the government's most talented leaders to leave public service, federal employee groups said.

Government contractor executives are paid 64 percent more on average than their federal counterparts in the Baltimore-Washington region, according to a new study.

The Human Resource Association of the National Capital Area surveyed compensation at more than 300 area businesses for nine categories of executives, including CEOs, chief information officers and chief human resources officers. About 100 of the businesses were classified as government contractors because they earn 50 percent or more of their revenue from government contracts.

The same study in 2010 showed contractors were paid 46 percent more.

The differences were calculated using median salaries that reflect the number of employees reported for each job, which changes from year to year, said Angelo Kostopoulos, president of Akron Inc., the company that conducted the survey. Pay changes may fluctuate due to a different mix or number of companies participating, he said.

The survey is used by businesses to check competitive salaries for their industries, look for trends and plan for the next year.

The government's pay system should work in a similar manner to reflect competing markets, but it doesn't, said John Palguta, vice president of policy at the Partnership for Public Service.

"Government shouldn't be the highest-paying employer, but it shouldn't be the lowest, either," he said.

Pay alone will not drive federal executives away, said Carol Bonosaro, president of the Senior Executives Association. But along with other mounting frustrations, including pay freezes, reductions in performance pay, and proposals to increase employee retirement contributions, the pay difference may become a bigger issue to people eligible to retire or who find opportunities in the private sector, she said.

"Career executives are committed to dealing with the challenges their agencies face in their jobs," she said. "But I think there comes a point where it's hard to argue for staying."

Federal workers eligible for promotion to the Senior Executive Service said in a Senior Executives Association survey last year that poor work-life balance and the chance of being relocated were the main disincentives to moving up in government.

However, federal workers who are lured by money will quickly find that the private sector has its own demands, and not everyone in federal executive service is cut out for it, said Relmond Van Daniker, executive director of the Association of Government Accountants.

"If you don't deliver in the private sector, you're not around very long," Van Daniker said. "And people who have never sold and made contacts to sell find it sometimes difficult to make the transition."

Opportunities in the private sector also might become more limited as the government looks to do more work in-house and rely less on contract help, Van Daniker said.

"There's always going to be room for the superstar," he said. "But there are other people who are just not going to be able to leave."

The pay gap also is a hurdle for agencies trying to recruit executive talent from the private sector, Palguta said. There are too few federal workers ready to step up to replace outgoing executives, Palguta said. That is because the downsizing in the 1990s created a gap in the workforce between employees ready to leave and new workers with little experience, he said.

Agencies are now trying to grow their own executives by offering competitive pay at lower levels and moving employees up as the need arises, Palguta said.

Even though federal employees generally enjoy their work and feel they are making a difference, that connection only goes so far, he said.

Morgan Kinghorn, former chief financial officer for the Internal Revenue Service, said he left government after 25 years of service because he wanted to have a broader impact on agencies. He worked at eight agencies within government, but in his first three years of consulting, he helped about 20 agencies, he said.

Kinghorn, who recently retired from the Grant Thornton consulting firm, said when he left government in 1995, the salary was closer to what the private sector offered.

"Now the advantage for coming into the private sector, if you do well, is you can go higher than that," Kinghorn said. "But it's pretty complex why people leave."

Doug Criscitello, who recently resigned as Housing and Urban Development Department CFO and joined Grant Thornton, said his path was decided more by the type of work than by what salaries are offered.

Criscitello said he has averaged about three years in jobs that have moved him in and out of state and federal agencies, as well as the private sector. He hasn't stayed in federal government long enough to earn a pension, which provides more of an incentive for some people who want to augment their retirement with a private-sector salary, he said.

Most people make the decision to stay or leave government in their 30s and after that, from a financial perspective, it doesn't make sense to leave, Criscitello said. But with pay and benefits being ratcheted back, a career in federal service may not look so desirable to younger workers, he said.

The pay disparity becomes more obvious at the senior executive level, Criscitello said, but it wouldn't keep him from going back to the federal government.

"My recent forays into the private sector have replenished my coffers," he said.

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