Policy: Economy

Defense contractors make three times private sector wages, numbers show

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Watchdog,Barack Obama,Project on Government Oversight,Economy,Defense Spending,Waste and Fraud,Follow the Money,Government Contractors,Minimum Wage,Logan Porter

President Obama put federal contractor pay in the spotlight with his State of the Union address proposal to raise the minimum wage for employees of companies doing government work.

But how much do federal contractors make now? The numbers show they're paid an average of twice what than private sector workers earn in the same position -- and defense contractors earn three times as much as their private sector counterparts, according to a 2012 report by the nonprofit Project on Government Oversight.

Many government contracts span multiple years, and spending on federal contracts has increased 45 percent in the past decade. It's a trend POGO researcher Scott Amey finds disconcerting.

“The government now buys more services than goods, and it’s outsourcing most of its services,” Amey said. “The myth has always been, 'Contractors save you money.' ”

Indeed, part of the administration's sales pitch for the raise is that "a higher minimum wage for federal contract workers will provide good value for the federal government and hence good value for the taxpayer,” according to the White House fact sheet on the plan.

For some defense contractors, minimum pay already far exceeds the $10.10 per hour Obama promised, according to a General Services Administration pay schedule showing how much it charges for various Raytheon contractor positions.

Raytheon charges the government $90 per hour for “administrative support/clerical” work for individuals with a minimum of a high school diploma and two years of experience, and slightly more than $100 per hour for first-tier management consulting.

Rates for labor are offered as a price to the government, with no information available as to how much is used for overhead, profit or actually distributed to workers in the form of pay. Moreover, the government does not collect data on the number of contractors it hires.

“The numbers are impossible to obtain,” said Amey. “We need better data on contractors.”

Although not exact wage rates, the prices for all categories of labor covered by the contract are included in Raytheon's GSA-approved price schedule.

The 2014 prices are a 2.9 percent increase over the previous year, meaning contractors' pay increases are outstripping inflation, and that they make more money each year in real dollars.

This is despite the fact that even the lowest-paid of major federal contractors are better off than their private-sector peers, POGO discovered.

For example, the median total compensation for a security guard in the private sector is $32,953, roughly double the minimum wage, according to the Bureau of Labor Statistics.

Security guards contracted by the federal government, on the other hand, make more than $68,000 at their annual billing rate, according to POGO.

Further up the ladder, the hourly rate multiplies. A midlevel manager contracted through defense giant Science Applications International Corp. costs $195.99 an hour for government work done at SAIC sites, according to the GSA.

For work done on government sites, SAIC offers the discounted rate of $166.60 an hour for the same middle-management position.

The federal government purchased $510 million of such services from SAIC in 2013, according to GSA data.

Raytheon and SAIC pay pale in comparison to the hourly rate for information technology services, the kind of work for which Edward Snowden drew a six-figure salary, despite the fact he only completed a GED.

Senior program managers for a government IT project known as the “General Purpose Commercial Information Technology Equipment, Software and Services” contract cost the government $366.71 an hour.

That adds up to an annual salary of more than $700,000 -- $260,000 more than the imposed limit for federal contractors set by Congress.

Fortunately for contractors, this limit does not apply for fixed-price contracts, a category that accounts for roughly 60 percent of all contract spending.

Nevertheless, Amey considers it a step in the right direction. “It’s a start,” he stated. “While it’s not 100 percent of all contracts, budgets are tight, so government has to cut back.”

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Author:

Logan Porter

Staff Writer
The Washington Examiner