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Sep 26, 2011

Comments

Dfens

Lockheed's CEO, Bob Stevens, makes $25 million a year. His company has only one line of business, selling goods and services to the US government. That means your tax dollars fund 100% of his salary. If he were a government employee he couldn't make 1/10,000th of that amount. His company does not have a single contract with the US government that is on schedule and on budget. I've got to ask, why do you all think this man is so deserving of your tax dollars?

web design Landon

There are also plenty of bloated government offices and programs, where expectations are low, and don't get in the way of the stampede at 5pm. Many government partisans believe it is unfair to fold into this discussion the notion of productivity and quality. Those things are far easier to measure than mere cost, but, again, POGO averts its eyes to a key issue...can tell you there have been many positive things information technology contractors have accomplished: combating terrorism, cleaning up the environment and managing vast amounts of critical data. Many of us work hard to add value for the government agencies we work for..

Niko Borosky

Scott. Thanks. Yes, you moved the ball forward, maybe half a yard. But you wouldn't know that from the strident POGO self-congratulating polemics you are pushing on top of the study report itself. And your language--like mine on occasion--can appear to toggle back and forth between salary plus benefits that the employee makes, vs. what the employee's total costs are. . I think the benefit picture is pretty well calibrated on the government side. Contractors, however, cover a very wide range; for example, many retired civ servants accept offers of permanent, full-time employment w contractors agreeing to forego most of the benefits--because they already have them via OPM pensions and healthcare insurance. This allows contractors to be far less costly to the government than "fully loaded" employees.
The great unknown is overhead. Rough arithmetic suggests it is crushing on government employees, if added on top of their salary and benefits. Take the total cost of an agency, subtract pay and benefits, then add all expenses for all things (from computers to travel expenses to lease costs, if any). Be sure to include all the costs of the layer upon layer of management and all the staff functions. And it goes further. On top of the agency, there is a per-head allocation of the costs for OPM, GSA, all the government-wide agencies. Then there is the cost of Congress to oversee the direct-federal employees (career and political) who run the government. If you take any agency, the amount of such overhead is a tremendous addition to personnel costs--often more than the personnel costs, per head, that you are comparing with contractors. Contractors have to capture all those costs above the employees in order to price and make a profit Government throws up its hands, and that is not sup rising because the books are not made for such accounting, and the resulting numbers are a condemnation of governmental management. Until some brave souls, such as the fine people of POGO, capture that overhead on government employees (to replace the silly 12 percent, which is already discredited--and note Circ. A-76 is in stasis), the claim that contractors are more expenses is, for lack of a better term, poppycock.

Scott Amey

Mr. Borosky,

The calculations for federal employees were OPM's average base salary plus a 36.25 percent full fringe benefit factor. That factor is comprised of 1) insurance and health benefits, 2) standard civilian retirement benefits, 3) Medicare benefits, and 4) miscellaneous fringe benefits. Government overhead was excluded on both sides.

The government estimates another 12 percent overhead rate for federal employees pursuant to Circular A-76, but we DON'T know the government overhead rate to award, administer, and oversee contracts ... OR ... the government's overhead rate for contractors working at federal facilities (we excluded contractor site billing rates as they were on average 15 percent higher than the rates they charge the government for work at government sites). When we included the 12 percent overhead rate to the total federal compensation ONLY, the gap between contractor billing rates and government employees was 68%. POGO has recommended that the FULL LIFE-CYCLE costs be remodeled and factored into any decision to insource or outsource work.

There are costs that have not been added in on both sides of the equation and that's why we are urging the government to take over from here. The fact that previous studies stated that the public sector is paid more than the private sector and therefore we should outsource all federal work, is the real travesty.

I truly believe that we moved the ball forward in this debate and it is time for government agencies and Congress to do what's right -- look to see if service contracts can save taxpayers money.

Niko Borosky

Mr. Nguyen is right: there are plenty of "bloated contracts." There are also plenty of bloated government offices and programs, where expectations are low, and don't get in the way of the stampede at 5pm. Many government partisans believe it is unfair to fold into this discussion the notion of productivity and quality. Those things are far easier to measure than mere cost, but, again, POGO averts its eyes to a key issue.

The great many things contractors do are not interchangeable with government employees. Many contracts are for things the government never did itself. Whole agencies were designed to be mainly contractors, e.g., DOE and NASA. Sure, like any government agency, they have problems. But the fundamental problems are not the contractors' making. Let's give the citizens and taxpayers a break: let's go for cost-effectiveness, not lowest cost. And let's honestly tote up the costs of government and of contractors. The way the government keeps its books makes it hard, but giving up on establishing real overhead rates--and POGO never attempted that--shows the study was just not serious. And for that reason, it is not credible no matter how many times POGO asserts it is.

Than N.

As a Government IT Contractor, I can tell you there have been many positive things information technology contractors have accomplished: combating terrorism, cleaning up the environment and managing vast amounts of critical data. Many of us work hard to add value for the government agencies we work for. But I do agree Congress should institute safeguards to ensure that taxpayers stop wasting billions of dollars on bloated contracts.
Than Nguyen
http://www.insourcegroup.com/about-insource

Niko Borosky

How many times will POGO attempt to foist its defective methodology on others and stage an unseemly polemic? All this does is vastly diminish the credibility of other work you do that is well constructed. This is not.
You bought hook line and sinker the low and phony govt overhead figure. You thereby poison the comparison. Where do you think all those agencies' superstructures, and the top level, government-wide agencies' costs go? How about the cost of Congress to oversee those agencies? How about all the wasted payments and mismatched disbursements and the vast, built-in waste and abuse machines that some government programs are? These are all government costs of doing business.

They would swamp the purported costs of contractors. And you have not managed to get to the bottom of contractor personnel costs. You picked a rare, high-cost benchmark. And you have no way to untangle the cost of things from people in all the fixed price and commercial purchases and procurements. Your comparison is deeply flawed, no matter how you couch it. The real truth could be the opposite---govt workers cost more than contractors.

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