Cut Government Employees, But Keep Contractors?

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This topic contains 40 replies, has 21 voices, and was last updated by Avatar of Henry Brown Henry Brown 2 years, 5 months ago.

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  • #159841

    Did you see the article over on Government Executive which suggests DoD is capping civilians and keeping contractors? Here are some quick excerpts:

    • “Cost-cutting moves by the Defense Department that include capping the number of civilian employees at 2010 levels have prompted protests from House and Senate lawmakers…”
    • Sherrod Brown of Ohio and Kirsten Gillibrand of New York sent Defense Secretary Leon Panetta a letter saying they are “concerned that while the size of the civilian workforce is proposed to be cut back to fiscal 2010 levels, no comparable constraints were imposed on workforce hired through contractors…”
    • They go on to say: “Because of the arbitrary standards set by the Pentagon, civilian employees are being fired, and private contractors that charge more for the exact same service and are less accountable to the public are being hired…”
    What do you think about this issue?

    Do you think it’s a trend that is going to (or has already) become more widespread beyond DoD?
  • #159921
    Avatar of Henry Brown
    Henry Brown
    Participant

    Always been this way and IMO will always be this way…

    Much easier to downsize civilian employees instead of downsizing contracts and is probably cheaper when one takes into consideration the cost of cancelling a contract.

    Yes, as in the past, the contracts/contractors will be downsized, although the “USUAL” justification has been we have got to hire more contractors because we let go of too many federal employees.

  • #159919
    Avatar of Corey McCarren
    Corey McCarren
    Participant

    Interesting dilemma. I wonder if there’s cases where people have been cut from government only to be picked up at a contracting company and placed in the same office that they were at in the first place.

  • #159917
    Avatar of Peter G. Tuttle
    Peter G. Tuttle
    Participant

    Corey: Yes, it happens. Let’s cut to the chase here. Inadequate long-term human capital planning has also added to this situation. Here we go again.

  • #159915
    Avatar of Henry Brown
    Henry Brown
    Participant

    Use to be done alot of the time, at least in the DOD group that I was in. Especially when we were talking about project managers and below. I don’t believe that they have ever been under the restrictions faced by political people, where there is a set period of time before they can go to work for the contractor/lobbying entities…

    Being fair there has always been alot of movement the other way(contractor to Federal employee) as well especially when times are good…

  • #159913
    Avatar of William Lim
    William Lim
    Participant

    Yes! This is a nationwide problem beyond DoD/Fed Gov. You see this also with city and state functions like social services, education, sanitation, even public safety and corrections. Beyond accountability and the potential cost/benefit fallacy, there is the issue of market failure. In theory, an underperforming/overcharging contractor can be replaced through competitive bidding. But what happens when the market for a particular service or product is not competitive enough for government to choose from a number of different bidders? Or what happens when, in the interest of hiring the lowest bidder, a more expensive but higher quality contractor is displaced and agency effectiveness suffers? Finally, I am reading about companies like the Corrections Corporation of America, which has litigated or lobbied in favor of building more immigration detention jails (to be run by them of course), not just running existing ones. This type of self-dealing or agency capture should be troubling from any public policy perspective.

  • #159911
    Avatar of Corey McCarren
    Corey McCarren
    Participant

    So in this instance, the Corrections Corporation of America will be essentially privatizing the prison system?

  • #159909
    Avatar of Ron Falcone
    Ron Falcone
    Participant

    It is an interesting dilemma. I’m not sure if it is easier (administratively) to downsize civilian employees instead of downsizing contracts. My understanding is that it’s harder to “terminate” federal employees. I’m also not sure if it is cheaper than the terminating a contract. As far as contractors “picking up” recently terminated/downsized government employees, it’s probably a good thing – if they don’t produce or add value to the contractor then they will be seeking employment elsewhere. In the long run, this may be a more finically attractive model for the government.

    Ron

  • #159907
    Avatar of William Lim
    William Lim
    Participant

    A lot of what I’ve read supports this notion. Of course I’m of the opinion that there are certain core functions of government, such as the ability to incarcerate someone and deprive them of liberty, that should not be outsourced, largely for accountability reasons. Instead of reducing bureaucracy, certain types of outsourcing only add to the opaqueness of government. Think Blackwater.

  • #159905
    Avatar of Corey McCarren
    Corey McCarren
    Participant

    I tend to agree with you. It’s very dangerous. I also do not think that prisons should be a business.

  • #159903
    Avatar of Julie Chase
    Julie Chase
    Participant

    Don’t get me started. It’s happening and has been a reality for quite some time. Yes, I do believe it is going to become more widespread beyond DoD, the taxpayers are looking for cuts. The military is going to be gutted again. However, when it is gutted, it will be from the bottom up, when it should be top down.

    Yes, contractors are less accountable. You ask for one thing extra, YUP, there goes an amendment and this is going to cost you, bigtime. Contractors count on it. It’s a work around. If one i or t is not dotted or crossed, and you say, “woopsee….I forgot, I want you to do such and such…..Nope, not in the contract, no can do. Also, the security screening of contractor employees is not as rigid as what CS folks go through. Read the news about contractors hiring illegal aliens to work on military installations. I answered a blog several years ago about that, and the reply came back, “Oh, so what, they just cut the grass and weedeat, no big deal.” Come again? Really? What a great way to “observe” what is going on as you ride around on a lawn mower or sway a weedeater side to side. Duh!

    Procurement, another great example. We…CS can’t purchase supplies/services whatever that are not listed on the TAA. However, a “contractor” can go to China and buy all he/she wants and “sell” it to us….(after it has been security screened of course). And yes, I am referring to IT.

  • #159901
    Avatar of Chris Cairns
    Chris Cairns
    Participant

    Contractors are a variable expense. Government employees aren’t!

  • #159899
    Avatar of Ron Falcone
    Ron Falcone
    Participant

    Some might argue it even further — Government employees would be considered fixed costs, and some could be considered sunk costs.

  • #159897
    Avatar of Robert Bacal
    Robert Bacal
    Participant

    Peter, I agree about the “here we go again”, and the issue of long term planning, as more fed layoffs announced in Canada this week. But I’m wondering if it’s even possible to do proper medium to long term human capital planning in today’s economic and political climate.

    Do you think that IS still possible?

  • #159895

    Ouch. ;-)

    How easy is it to remove a contractor if things aren’t going well?

  • #159893
    Avatar of Henry Brown
    Henry Brown
    Participant

    Depends on how the contract is written… Have seen contracts say renogiations required for changing personnel on the other end of the spectrum seen where project manager has total authority on personnel even to the point that PM controlled salaries and bonuses

  • #159891
    Avatar of Eric Koch
    Eric Koch
    Participant

    Rather hard I would say, unless someone repeatedly has conduct issues (e.g. sleeping on the job).

  • #159889
    Avatar of Peter G. Tuttle
    Peter G. Tuttle
    Participant

    It’s pretty easy to remove individual’s who are contractor employees. I’ve seen them disappear in less than 24 hours with no cost penalty to the government for the change . Poor performance and “fit” issues seem to be the biggies, as well as security clearance issues. Now, the ease of removing of contractor firms for cause is another story. In that case, for the most part it’s all about performance, or lack of it.

  • #159887

    So this might suggest that while contractors are not “fixed,” they are something short of variable.

  • #159885
    Avatar of Peter G. Tuttle
    Peter G. Tuttle
    Participant

    Hi Robert. I agree that it extremely difficult to conduct longer term planning in a fluid political and fiscal climate. On the other hand, executives should have a very good idea of what skills must be retained (either organically or outsourced) in order for their organizations to remain viable. The task of distinguishing the “must haves” from the “nice to haves” is difficult at best with all the conflicting voices that must be heard in any organization or enterprise. It probably comes down to “really” understanding what the goal or mission of the enterprise is, identifying and fighting for those “must haves” and being willing to give up the “nice to haves.” Obviously, all this is much easier said than done since it involves people’s lives, careers and jobs. Cheers.

  • #159883
    Avatar of Joe Mooney
    Joe Mooney
    Participant

    Since recent studies show that many government workers are paid more than private industry counterparts, this is not a surprise. Also, for many tasks, temporary staff can accomplish the work and if the agency is not paying for benefits, the cost savings are considerable. And while it may be difficult for an agency to rid themselves of a contract, it is not as difficult to “fire” an individual consulting staff member and get a more qualified replacement.

  • #159881
    Avatar of Chris Cairns
    Chris Cairns
    Participant

    Maybe this is off topic, but let me try to say this tactfully: THE GOVERNMENT NEEDS A TALENT REFRESH. It should also be as easy to fire someone for underperformance as it is in the private industry. That alone will fix a lot of problems. Why is this so incredibly hard to achieve? Why?

  • #159879
    Avatar of Henry Brown
    Henry Brown
    Participant

    MY Opinion!

    IF the government had compentent managers would NOT be difficult at all to fire underperforming employees…I know because I have done it.

    Unlike private enterprise one cannot easily fire an employee that the manager doesn’t like, although I suspect that MIGHT not be as easy as one would think…

    As far as getting a Talent Refresh, why would anyone want to apply for a government posistion because of the somewhat NEGATIVE opinion’s floating around

  • #159877
    Avatar of Henry Brown
    Henry Brown
    Participant

    Most of these studies are comparing apples and oranges. As an example, the few that I have seen compare a starting data entry clerk to a data entry clerk who has 10 years of experience….

    In a lot of cases, contract employees have at least as good as benefits as government(federal at least) it is often “buried” in the contract thereby possibly giving the impression that Contract employees cost less….

  • #159875
    Avatar of Joe Mooney
    Joe Mooney
    Participant

    Perhaps at state and local level it is different (although I remember a 2010 study by the State of New York that found their staff engineers were compensated more than private industry counterparts) at the Federal level this recent study finds that in all put the highest compensated areas, it is pretty consistent that federal employees costs of wages and benefits are higher than private sector.

    CBO Compensation Study

  • #159873
    Avatar of Corey McCarren
    Corey McCarren
    Participant

    I would definitely have to say that the whole hiring/firing process in the federal government needs restructuring. I get that we don’t want patronage, but I don’t think the current process really encourages the most talented individuals to get into government. As a matter of fact, I’d say the hiring process turns a lot of talent away.

  • #159871
    Avatar of A.L.Rodenberg
    A.L.Rodenberg
    Participant

    I’m not sure that the comparison between government workers and private industry workers was reasonably framed. In order to legitimately compare, you’d need to make sure you were comparing a federal secretary in DC to a private industry secretary in DC. Comparing someone’s salary in DC to someone’s salary in Omaha isn’t a one-for-one exchange. I’ve been on both sides of the equation and as a GS 6 in 2002, trying to live in DC on a government salary did not put me in the lap of luxury.

    Temporary staff do have some advantages. But you also have the question of divided loyalties, lack of direct control, and the fact that whatever that person is getting paid, the company is charging at least twice that, if not closer to three times, for the work being done.

    A better solution would be to fix federal HR.

  • #159869

    +1!

    Why? I hate to say it because I am big supporter, but…I think it’s unions.

  • #159867
    Avatar of William Lim
    William Lim
    Participant

    Public employee unions have been everyone’s favorite punching bag in this recession. But I don’t think you can just say do away with unions and get a clean slate to revamp government HR. There are tens of thousands, if not hundreds of thousands, of govvies who are not unionized. I’m one of them. Separate and apart from unions (although perhaps as a result of union advocacy), most agencies union shop or not are subject to civil service rules and administrative hearings such as through the Merit Systems Protection Board or similar. While union contracts may govern wage/hour issues and promotion schedules, it’s the civil service boards that govern terminations for cause.

  • #159865

    This is true…and some of them have a political bent.

    The CBO report cited below is a good, non-partisan one. Caveat: though overall it suggests Feds make more than private sector counterparts, check out this article which shows that if you dig deeper in the data, more well-educated folks in government make less than their peers in industry:

    http://www.nextgov.com/technology-news/wired-workplace/2012/01/cbo-highly-educated-feds-earn-less-than-those-in-industry/55158/

    So to Henry’s point – not apples and oranges with the reporting…especially on a more granular level.

  • #159863
    Avatar of Jaime Gracia
    Jaime Gracia
    Participant

    It is just a fact that cuts need to be made across the board. I also agree with the posting that a comprehensive, enterprise-wide view is needed, which also requires a comprehensive human capital strategy that includes contractors as part of the workforce.

    Simply cutting contractors is the usual first step in cost-reduction initiatives, although getting rid of contractors usually entails insourcing, and disruptions to the small business community. Many small businesses are getting gutted with these approaches.

    Contractors normally offer a vital, flexible, and value added service that is meant to be short term and mission focused. Sure there are bad actors out there that should be cut, as they add little value and simply steal the government’s watch and tell you what time it is.

    However, this is also the government’s fault through poor oversight and governance. Details that organizations like POGO miss (I very much respect POGO, but not the rabidly anti-contractor bile they foment).

    The government would be best served by doing the hard work upfront, through a strategic human capital strategy, that includes contractors as part of the workforce for proper workload and resource planning. Not sure how else this can be done without knee-jerk reactions and emotional rhetoric that adds little value to the conversation.

  • #159861
    Avatar of Faye Newsham
    Faye Newsham
    Participant

    Contracting rates are often 2x but depending on the situation, the company can even be taking a loss on a certain position due to specialized requirements and need in the contract. I’ve been contracted out at less than my pay rate on a few occasions. That’s what the company needed. They made it back with a few other folks but they keep competitive and keep their rates cut to the bone, the company doesn’t loose money but they also aren’t making it hand-over-fist as some might think. The bottom line is that the value of any individual is measured the same whether they are a contractor or a Fed. The contractor may seem more expensive but they are more easily dropped and the Fed compensation package is often ignored in these calculations. I know plenty of people on both sides who are shafted by each system as individuals (retirement age contractor for the same contract for 20 years who will end up being let go at some stage by some contract company – a string of more than 7 – will let her institutional knowledge go without a thought once she is no longer “useful” to them and the Fed won’t realize what they are missing until later.)

    In any case, good value individuals – no matter their stripe – is what counts.

  • #159859
    Avatar of Katt Hancher
    Katt Hancher
    Participant

    Yes, this happens frequently.

  • #159857
    Avatar of Barbara Skoglund
    Barbara Skoglund
    Participant

    Perhaps at the Federal level. In my state we are paid significantly less than private industry counterparts. I’m so tired of having my salary compared to a burger flipper with a GED!

  • #159855
    Avatar of Barbara Skoglund
    Barbara Skoglund
    Participant

    I find it interesting that no one has mentioned the political value of firing government employees and hiring more contractors. In my state contractors take up a larger part of the state budget than state employees. They could fire every single one of us – state employees – and not make a dent in the budget deficit. Yet – that’s the first thing to be cut – state employees. We are beyond cutting into bone. Anyway – laying off state employees makes for great headlines and sound bites to aid re-election campaigns.

    The other “dirty little secret” is how many contractors have been chosen after providing campaign contributions; how many former political appointees and legislative hacks become contractors.

    The other phenomenon in my state is the use of political appointees in lieu of state employees.”Unclassified” appointees don’t need to meet any minimum qualifications and are in job classes with higher average salaries. They are supposed to be used for short-term projects not lasting more than 3 years. They usually get to stay as long as “their guy” is in charge. Because they are in job classes all their own, they get to keep their jobs when long-time state employees – who actually work – get laid off.

    (sorry to sound so bitter but I got laid off in the 90s while the commissioner’s personal make-up artist continued her ‘important work’)

    In my experience, contract workers cost more and provide less value, but in this era of bash the government employees it isn’t going to stop anytime soon. State employee unions and civil service rules have only reduce political patronage jobs, not eliminated them.

  • #159853
    Avatar of Kevin Schafer
    Kevin Schafer
    Participant

    I agree with Mr. Penetta. I was watching C-SPAN of a Defense Budget hearing and noticed Mr. Penetta was getting hammered on why the Military was asking for so much money when GS employees are less expensive than contractors. I feel, I need to explain… contractors salaries are higher… Does the Comittee of House Republicans know about no constraints put on hiring contractors???

  • #159851
    Avatar of Allison Primack
    Allison Primack
    Participant

    This is what a GovLooper said on Facebook:

    Stacy L. Carpenter I think they are called SuperTemps or Permatemps. Long term contract workers (such as 2 years) or project contract workers. It is pretty widespread and increasing. We see it increasing in the engineering/design world and it is increasingly popular in the technology sector. Stable employment with the same employer is becoming a luxury in many places.

  • #159849
    Avatar of Ron Falcone
    Ron Falcone
    Participant

    I don’t agree witth Panetta. He’s confusing contractor salaries with contractor labor rates. A contractor’s loaded hourly rate may actually be lower than a feds loaded rate. Think about the government’s overhead rate — it has to be astronomical now especially with the bloated deficits, debts, & inefficiencies, wasteful spending etc….

  • #159847
    Avatar of Stacy L. Carpenter
    Stacy L. Carpenter
    Participant

    Good morning,

    This may have already been posted as an interesting reference, but I was having just this conversation with my brother (who heads a tech company) a few days ago after he posted the link to the Harvard Business Review article in LinkedIn: Rise of the SuperTemp.

    Cheers~

  • #159845
    Avatar of Randy Steer
    Randy Steer
    Participant

    I’ve seen other analyses similar to the one Andrew cites, which observed that it was advantageous to be a Fed if you are low-skilled or have less education, but disadvantageous if you are in a high-skill job or have an advanced degree. The spread of Federal salaries is somewhat less than in the private sector.

    But many agencies, like mine, have responded with a very logical practice: we have almost no “secretaries” or administrative assistants any more — they’ve simply cut off the lower end of the pay scale where it may be true that costs are too high. If a team needs an administrative assistant, it is almost always a contractor. So my agency is actually getting the best of both pay-scales: they hire the cheaper contractors for the lower-paying jobs, and the cheaper Feds for the high-skill jobs.

    I think there’s hardly anyone in our 800+ person corner of our agency who has less than a Bachelor’s degree, and I think the majority have graduate degrees. In my previous agency (which was admittedly an elite) it was essentially a requirement to have a graduate degree.

    Before grad school, I worked as a defense contractor for about 6 years (’76-’82). Our salaries were essentially tied to the civil-service rates for comparable skills and positions. Overhead costs were roughly similar (although the 8% “general & administrative” charge was probably a bit more than it would cost the gov’t to handle payroll and benefits), so basically it cost the Navy about the same as a Fed to hire me, plus roughly 8% (profit margin in the contract).

    When friends and family asked what I did, I said I was a “surrogate bureaucrat”. Back in the 1960s my job would have been done by a Navy civilian employee, but efforts to “limit the size of government” meant that now it was done by a contractor. Every time there’s been a new fervor to limit government by reducing the number of civil servants (one of our standard political cycles from the 1970s on), the deficit goes up, because the work still needs to be done.

    Such “surrogate bureaucrats” are not the same as what the private sector considers “consultants”. They don’t come and go on short jobs. And if one company doesn’t get their contract renewed, another will take its place — perhaps a little cheaper, perhaps not — because the work still needs to get done.

    The only way to reduce discretionary spending (which isn’t REALLY the problem anyway) is to reach public agreement on having the government DO LESS.

    But the 800-pound gorilla in the budget world is “mandatory” (entitlement) spending, which largely goes to retirees, farmers, welfare recipients, veterans, medical practitioners, and pharmaceutical companies. The latter two categories are where most of the cost-escalation has been, and to really address the budget, either those services will need to be restricted (which no-one wants) or the costs will have to be forced down (which the health industry spends hundreds of millions of dollars lobbying against).

  • #159843
    Avatar of Brian Dowling
    Brian Dowling
    Participant

    My sense is coming more and more to the view that we are speaking of a more fundamental change than the choice between government employees and contractors. There are structural changes in our economy and in the way business will be conducted in the future which will have a substantial impact on how government conducts its business and the type of employees that will strive in such an environment. I do not expect to change to come quickly but it will come.

    We have a public relations problem with the public as a result of budget shortfalls and stories of overly excessive retirement benefits. Unfair, I know, but regardless, we will not be returning to the ways things used to be. We now have the potential for greater user participation from citizens and that will also help to redefine the future. One defining factor will be determining what is called by Disruptive Innovation perspective as the Job-to-be-done and who it is being done for.

    Those interested in working in a government or governance related career (as opposed to specifically working for government) may find themselves part of the growing creative class of our economy. I realize that this may be a strange prediction but I believe that the tea leaves for such changes are already present.

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