The government needs common sense contracting

The Thinker by Rodin

If like me you work for the federal government, or even if you do not, there is a good chance you have contractors in your workplace. Love or loathe contractors they are a fact of work life for many of us. Arguably, our occupation of Iraq would not have succeeded without lining the pockets of contractors like Halliburton with billions of dollars. The Army gave up making their privates peel potatoes decades ago.

Contractors are often necessary. I would not want to replace my own roof, or make a roofer my employee just to get my roof replaced. The theory of contracting is it allows you to acquire either a specialized skill for a limited period or it allows others to perform routine services that are considered so ordinary that they can be easily replaced if they do not perform. You hire employees for those unique, domain related skills that you will need performed on a continuing basis.

Where I work there are many contractors that are truly disposable. After a couple years, they seem almost like part of the furniture. Then one day they disappear along with their contract. These include what I think of as people in blue (from their blue garments): guards, floor sweepers, restroom cleaners and the people who man the registers in our cafeteria. Then there are others that are technically contractors but sure feel like employees to me.

In my last job, contractors were so pervasive and the downsizing so extreme that federal employees like myself who just happened to be able to program a computer were not allowed to. Computer programming and design, even for large legacy systems that were poorly documented, were treated the same I treat my roof: hire a contractor. Instead, we project managers were tasked to make sure our systems were maintained and modified but having little understanding of how it actually worked. Consequently, keeping the contractors who could actually retrofit the system became key to our own job success. If some of these contractors left, our agency’s mission would have been severely impacted.

After a while, it became clear that the contractors had the vital domain knowledge and project managers never would because it was out of our scope of permitted duties. It was a very curious situation: the federal employees, people who normally hang around an agency for twenty years or more, would hop and skip other agencies where they felt more vested in their work. Meanwhile some of the key contractors had stayed there for twenty years or more and were effectively managing government systems. They were indispensable. The contracting agency changed, but they still sat at the same desks doing the same work, but drawing a salary from a different company. The smarter ones incorporated and sold the services of their “corporation” to the contracting agency for higher sums of money. Some of these people were making in effect GS-15 money for GS-12 work. It is nice work if you can get it because you effectively created your own small monopoly.

Throughout the federal government, contractors are doing work that they should not. The Washington Post today documented yet another example of contracting going awry. The Inspector General for the Department of Health and Human Services audited medical equipment claims that were charged to the taxpayer. It found an error rate of 29 percent. Who is doing this work? Contractors. Should they? Probably not.

Considering that Medicare costs hundreds of billions of tax dollars a year, an error rate of 29 percent is unacceptable. Some senior bureaucrat, probably to satisfy the current administration in power, which believes in maximum contracting out, decided that it did not want to make actual employees responsible for monetary judgments like what constitutes a valid government expense. This was a boneheaded decision that has since resulted in what appears to be a waste of billions of dollars annually. What incentive does a contractor have to excel when every few years their contract will be re-competed? Why should a contractor’s employee care too much when they are looking at the calendar and are pondering their next contract too? Why in particular should they care when they are making these decisions yet are not held directly accountable for their decisions? They will be paid regardless.

Since contracts are legal instruments, contractors excel and doing precisely what the contract says and typically have little incentive to go beyond it. Many in fact prefer to do less than what is required, on the hope that it will be too much hassle to hold them accountable. This results, coincidentally, in an improvement to their bottom line. That appears to be the case at HHS. This happens because contractors are not necessarily vested in their work, like an employee would be nor is there much fear of accountability. The result can and often does breed mediocrity. Mediocrity is driven by an obsession by the government to get the lowest cost. It operates on the assumption that the work is in essence rote, when it is often specialized, unique and enduring. Yet, year after year, as I look around it sure appears that some contractors are doing this kind of work. If they look like an employee and smell like an employee why are they not treated as an employee? Why not just hire them? You already know the answer: because it is politically incorrect.

My office is big enough where it recently opened its own health club. Plastered on the door is a prominent notice: the club is for employees not contractors. As you might expect, an employee get other perks too such as a generous retirement plan. Occasionally though a contractor gets a perk that an employee does not. In my agency when a contractor travels on official business, the travel time is billable, along with all their travel expenses. Employees are not entitled to overtime for travel on nights or weekends. (Over the last few years, we were allowed to claim travel time outside of our regular hours as compensatory time. In addition, I can keep what small frequent flyer miles I earn.)

Once upon a time, I learned that the relationship between an agency and a contractor was legally considered a “relationship of equals” rather than a supervisor-employee relationship. This makes sense if you are a homeowner and need your roof fixed, but in the workplace, it often makes little sense and is a distinction that is meaningful only to lawyers.

I think contracting rules should be rewritten so they meet the common sense test. Contracting can be kept for jobs that are low-skilled and truly interchangeable, such as pushing a broom. They can be kept for highly specialized jobs that are limited in time and scope, such as a technology assessment. They should not be used to perform judgmental work for which the government is legally responsible. They should not be used as service contracts for work that is domain specific, specialized and amorphous in nature.

Until that time if any when some common sense returns to government, can we at least allow the contractors to use our health club?

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