Thursday, August 28, 2008

37,000 Contract Employees In IC; Cost 66% More Than Government Employees

Dr. Ronald Sanders, the Associate Director Of National intelligence for Human Capital, held a conference call (transcript of that call here) yesterday to discuss the recent results of an inventory of core contractor personnel. Based on the information in the call (and a little math) it appears that there about 100,000 military and civilian personnel in the US national security intel community along with about 37,000 (or 27% of the total 137,000 workforce) contract employees (Note: The numbers were pretty confusing and there was a lengthy, somewhat disconcerting discussion concerning algebra near the end of the conference but I came up with 37,000 based on what was written and so did the Post, so I feel better). Dr. Sanders went to great pains to explain that this was only the core contracting requirements of the IC. He was not including guys contracted to seal the asphalt at Langley, for example...

Dr. Sanders also quoted a number of interesting reasons for using so many contracted personnel. The number one reason (56%) was "to provide unique expertise to IC missions and functions." Specifically mentioned were scientific and engineering expertise, foreign language and regional and cultural expertise. 11% were hired because of the way the budget was structured. The IC wanted to hire permanent government employees but couldn't but had money to hire contractors. 10% of the contractors were hired because it was more cost effective, in some way, to hire them under contract and 8 percent were hired due to surge or non-recurring projects. (Note: I am not sure I understand all these numbers. For example, if you are hiring someone for "expertise" and it is a recurring requirement, then why isn't that person also someone you would want to bring on permanently?).

It also appears that these contractors cost the government 66% more than the average government employee ($207,000 per year vs. $125,000 per year). These numbers appear to be based on full life cycle costs including salary, benefits while in service, pension costs, health benefits into retirement, etc.

The total number of contractors on the payroll from 06-07 was "essentially a flat line" according to Dr. Sanders. Interestingly, the DNI didn't collect data on the numbers of contracted personnel prior to 2006 and can't speak to the exact trend in hiring though he did admit, "We know – you know there’s been a sharp increase in the number of U.S. government civilian employees in the intelligence community."

6 comments:

Tom McCormick said...

The true cost of Government employees in that discussion is VERY much an apples to oranges comparison.
For example, we run a small firm which provides some of the contract services noted to both government and commercial customers. By the laws and regulations imposed by the DCAA, our total "wrap" rate (including General and Administrative costs for things like power, light, rental of workspace directly used by the workers, etc) and our overhead costs (rental of general use spaces such as the lunchroom area, the latrines, plus the power to heat and cool them, etc) comes to some 230% of the hourly salary and fringes we pay for direct labor. Thus, if we paid an hourly salary of $1.00, the hourly rate we are REQUIRED to charge the government for that worker would be $3.30, WITHOUT a nickel of profit.
If the same accounting rules were applied to the cost of irect labor for the Government employee, they would likely result in the same, or higher, costs. Why? Bigger buildings, parking lots, etc to cover in the rate build.
Thus, the cost differential is NOT what it seems.

Kristan J. Wheaton said...

Tom,

Thanks for the comment. Dr. Sanders tried to address the apples to oranges issue:

"We’ve actually gotten a little more precise in that regard and, again, one of our challenges is to try to make an apples-to-apples comparison. On the civilian side, the 125,000 is consistent with our best guess. That’s salary, benefits, as well as full lifecycle costs; it is pension costs and health benefits into retirement, et cetera. So 125,000 is a good figure.

"This year, as a result of the second iteration of our contractor report, we’ve been able to I think
become more precise in our per-capita cost per contractor, contract personnel FTE. And we’re
now estimating it’s about 207,000. So it’s still higher than a U.S. government civilian. And as
best we can calculate it, that 207,000 is direct labor, does not include overhead. When you start
trying to figure where overhead plays on the contract side as well as on the U.S. government
side, it gets really, really fuzzy. "

Anonymous said...

I think that people are too concerned about the government to contractor ratio. While it may seem logical that the IC should be composed of nearly 100% government employees, it's not an easy mission to execute. I've been a contractor supporting the Intelligence Community since the mid-1990's. At this point, there's no chance of me becoming a government employee; my pay is too high and I've seen the dysfunction of the government system up close.

An important statistic that isn't mentioned is the turnover rate within the civil service versus that in the contracting community. I've seen many highly qualified government civilians come into a job only to leave for the private sector two years later once they realize that they're not getting reimbursed in accordance with their worth. However, I've known contractors that have supported the community for decades. Most good govies leave shortly after they arrive because they realize that the job isn't as glamorous as they were led to believe, they aren't getting paid what their worth, the benefits really aren't so great, and the work environment is more political than Capitol Hill. However, contractors often overlook the crappy work environment, primarily because of the higher pay, and become the continuity within the office.

Furthermore, many young and talented people are being overlooked by the civil service because the hiring paradigm has a preference for former military personnel and current civilians. Contractors, however, are geared toward actually hiring the best person for the job, rather than applying preference points to retreads.

All of this is to say that contractors are not the enemy and government civilians are not knights on white horses. There are certain things you can do with contractors, such as force them to sign organizational conflict of interest agreements, that add a level of trust to the contract. All-in-all, advisory contractors are far more valuable to me than most of the civilians that I work with. If I were standing up an organization, I would rather have a roomful of contractors than stadium full of civil servants.

Anonymous said...

We (the Government) are our own worst enemy. We continue to pay contractors more than we pay govt. civilians. It's an upside down incentive/disincentive program! The answer? Cut off the contractors. If they want to work, they'll accept the jobs at the going govt. rate. If they can find a better paying job elsewhere, more power to them. I'd expect they cant' find work elsewhere, since the govt. is the biggest employer around and they will be back to work in a matter of weeks.

Anonymous said...

In response to.... "We (the Government)..."
I guess this is all about jobs and money then, rather than mission or national security? So let's cut everybody's pay to... say... GS-7 level. Then we could REALLY save money. And since - according to your logic - nobody is capable of doing anything else and there are no other jobs available, they'll just stay and work for it. Right? Good grief!

Anonymous said...

To "We (the Government) are our own worst enemy..."

With higher pay comes greater responsibility and risk. Would you be able to hire the best corporate CEO for $150,000-$250,000 annual salary? Most decidely not. Yet, that's what some agency directors and cabinet heads pull down. Furthermore, military leadership pay tops out at a horrifically low salary by DC standards.

I believe that we should go to a real pay-for-performace system. Good people will cost more money, however that will hopefully mean that you will hire fewer. Today we have a modified welfare paradigm in place. Govies never get fired. Contracts are filled with the same people under different management. We need a system that pays people more if they're able to cut expenditures. That pays people more if they're able to show meaningful results. That pays people more if those under them are successful. A system that isn't afraid of lawsuits by disaffected employees. A system that finishes projects and moves on.

What we need are higher paid, more agile, increasingly intelligent, personable, driven federal employees. I fear however, that for the foreseeable future we're in for more of the same. Comparatively low pay, decreasing benefits, non-incentivized workers that continue to rot the federal government from the inside out.