The government contractor 'scam?'

Tuesday - 7/8/2014, 2:00am EDT

Senior Correspondent Mike Causey is on vacation. This is one of a series of guest columns written by Federal Report readers.

Information technology, and how it fits into the corporate world, has been a strangely evolving jungle of barely controlled chaos since the early 1980s. Technology — and the professional skills required to manage it — changes constantly.

The federal government has technology needs just like any private corporation. It is hard to find good IT talent and even harder to retain that talent.

So, the various IT departments within the federal government often turn to contractors to subsidize the existing federal staff. The idea is that these "experts" can come in and hit the ground running — no training required. They perform a very specialized function, and, in theory, do it very well. When the job is done or the contract expires, they vanish and move on to another client. It sounds like a cost-effective idea.

But is it?

I have been running a cybersecurity division for a federal agency for enough years to become fully jaded with the contractor selection process. It begins with the fed issuing a request-for-proposal (RFP), which contains a rather lengthy description of the type of work and other details. Companies then submit proposals for the work which they customize to fit the RFP. These proposals now need to be reviewed, so that the best candidate wins the contract. The fed creates a review panel hopefully consisting of people (feds) that are qualified to decide who that company should be.

I have sat on a number of these panels and reviewed a myriad of proposals sent in by private contracting corporations — many of them pitifully lacking in just about every area. When a contracting official has to begin the process by reminding the panel that they cannot take off points due to poor grammar, misspellings or unclear sentence/paragraph structure, it is a sudden reminder that we, as a federal agency, embrace mediocrity. It is like coming to a job interview without showering, wearing gym clothes, and handing in a resume full of typos and other glaring errors, yet being told by your company to "ignore all that." Personally, I find it very hard to ignore.

Alas, the futility of my exercise is clear. Many of the proposals are just bad. It's tough to overlook the inexperience and ambiguity I am reading, but I am told I must — and so I do. Thank you, Uncle Sam, for appealing to the lowest common denominator, and ensuring that my contractor support will be terrible for the next year, and then likely for the four option years that will follow.

One of the sections of each proposal typically includes resumes of the actual people who will support the contact. There are times this section looks fantastic. But wait! I know that guy! In fact, I know where he works, and we just spoke two weeks ago. How is it possible that his resume is now with this new company? A quick phone call confirms that he isn't, and that the company who wrote the proposal "borrowed" his resume from a random online source. The people that are being pitched with this proposal have no intention of being a part of this new contract. What a scam!

A healthy contractor relationship should be rather simple. It should offer valued experience and talent for a reasonable price. If either the talent or cost is not reasonable, then the contract should be re-evaluated.

The problem is that every company wants their piece of the federal pie. To land a federal contract is big money. Contractors lament about high overhead costs, marketing expenses and how they are barely breaking even on their contracts. I recently spoke to a manager of a contracting company who explained how times were tough and profit margins thin, yet how much he was enjoying his new Mercedes CLS. Let's wipe away those crocodile tears and look at the numbers.

IT contractors are commonly charging the government $200K or more per year per person and paying them $100-120K per year. I recently learned of a contractor to a federal agency who was being paid $175 per hour for Cisco work which breaks down to about $350K per year. Even if the net profit to the contracting company was a measly $150K (sarcasm intended), that's not too bad for one employee.

And here is where the contractor magic gets even better — if you demonstrate that you will tolerate substandard talent and not complain, they will start filtering in "professionals" to your office who cannot possibly command salaries higher than $45K-$75K anywhere. So they are charging $200K per year and fill the slot with a person that they only pay around $50K. The profit margin just got a lot bigger, and my technical support just got a lot worse. I have even heard contractors joking about how certain agencies will "take anybody" and never complain.

Some will argue that I have no idea what I am talking about. I am just a dumb fed who cannot possibly comprehend what it takes to survive in the private sector.

Actually, I ran an IT corporation for about 10 years. I know exactly what it costs to pay for a benefits package, health insurance, training and all the other costs that go into fully burdening a billable hourly rate for IT professionals. Some will be offended that I am calling "all contractors" thieves or liars. I can accept that, and I know there are very skilled contractors doing IT work for the fed every day; however, I also know that for every IT rockstar currently employed by the fed, there are about 20 that are terrible. But to those 20 I say, take heart, your low salary and high billing rate just paid for someone's Mercedes. I guess that is the silver lining.
David C.


NEARLY USELESS FACTOID

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(Source: BabyCentre)


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