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FTE Costing: DoD Civilian v. Contractor
Michael Wright COL, USA (Ret) Vice President, Wittenberg Weiner Consulting, LLC
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How much should an FTE cost? � Clients equate one hour of GS employment to
one hour of contractor employment
� Clients think in terms of on-budget costs
� Clients are unaware of what the government’s overhead costs are.
� Every hour of productive office labor has hours of
non-mission-focused activities around it.
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How much does an FTE cost?
DoD Civilian Contractor
Salary $80,000 $90,000
Total $ $
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Calculate Cost of Benefits
DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included $++
Total $ $
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Benefits (don’t apply to 1099s) � State unemployment insurance � Federal unemployment insurance � Employer taxes (medicare & social) � Holidays and vacation � 401K management, reporting, insurance and
match � Health insurance � Health cafeteria plan
You are easily at a 1.3 or 1.4 wrap rate already before any overhead or G&A!
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Off Budget Costs
DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included $++
Off budget costs: legal, recruiting, compliance, payroll, real estate, utilities, maintenance, management (how far up should we count management costs?)
“Free” $++
Total $ $
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Pension…the long tail
DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included $++
Off budget costs: legal, recruiting, compliance, payroll, real estate, utilities, maintenance, management (how far up should we count management costs?)
“Free” $++
Pension (long tail) Sometimes included $0
Total $ $
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Professional Advice DoD Civilian
Contractor
Salary $80,000 $90,000
Benefits Sometimes included
$++
Off budget costs: legal, recruiting, compliance, payroll, real estate, utilities, maintenance, management (how far up should we count management costs?)
“Free” $++
Pension (long tail) Sometimes included
$0
Outside counsel (hourly, and therefore expensive for small business)
“Free” $++
Total $ $
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Audits: all hours of audit plus bookkeeping billed to overhead � SBA compliance (audit or financial review) � Floorcheck audits � Pre-award audits � Systems audits � GSA audits � Facility Clearance Audits � ICE audits � IG investigations � Labor audits � Obamacare audits � Insurance audits � IRS audits
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Idle Time
DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included
$++
Off budget costs “Free” $++
Pension (long tail) Sometimes included
$0
Outside counsel “Free” $++
Idle time: “On the beach” costs, frequent severance
$++, but it doesn’t add to the budget
$++
Total $ $
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Insurance
DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included $++
Off budget costs “Free” $++
Pension (long tail) Sometimes included $0
Outside counsel (hourly, and therefore expensive for small business)
“Free” $++
Idle Time $++, but it doesn’t add to the budget
$++
Insurance “Free” $++
Total $ $
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Insurance
� Workers’ Comp � DBA � Liability � Key man � Country insurance/SoS insurance � Renters’ insurance/facility insurance � 401K plan insurance
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Transactional Costs DoD Civilian Contractor
Salary $80,000 $90,000
Benefits Sometimes included $++
Off budget costs “Free” $++
Pension (long tail) Sometimes included $0
Outside counsel “Free” $++
Idle Time $++, but it doesn’t add to the budget
$++
Insurance “Free” $++
Transactional costs: meetings, teaming agreements, NDAs, proposal writing, BD, marketing, web site development.
“Free” $++
Total $ $
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References � The only publicly accessible cost figures for government employees pertain to military
manpower, this one is from the Reserve Forces Policy Board (http://rfpb.defense.gov/Portals/67/Documents/RFPB_Cost_Methodology_Final_Report_7Jan13.pdf).
� This one is from the Pentagon’s CAPE office (http://www.ngaus.org/sites/default/files/CAPE%20FINAL%20ACRCMixReport.pdf).
� No one has really done the analysis on the civilian side, but CSIS did a report describing how the Pentagon could approach it (http://csis.org/files/publication/110517_Berteau_DoDWorkforceCost_Web.pdf).
� DTIC’s current manpower cost estimation instruction (http://www.dtic.mil/whs/directives/corres/pdf/704104p.pdf), its analysis of civilian costs is not fully-burdened and is therefore an apples-and-oranges comparison to contractors.
� OSD Comptroller Instructions on Military Personnel Reimbursement rates (http://comptroller.defense.gov/Portals/45/documents/rates/fy2018/2018_k.pdf)
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Lawyers are expensive! � Contract interpretation & negotiation � Teaming and subcontract negotiation � DCAA compliance � IRS compliance � Corporate compliance � EEO compliance � Labor law compliance � SOFA compliance � Sourcing or export compliance � JV regulations compliance � Protests
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Overhead Labor relating to Contract Employees � Recruiting � Interviews � Onboarding � Training � Badging/CAC card, etc. � Meetings with supervisor � Describing past performance for proposals � Employees conducting interviews � Command picnics, changes of command, etc. if not
authorized
� Compliance training � Continuing education (program cost plus time)
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Random eventualities: more reasons why overhead is high � Employee has cancer: overhead � Djiboutians don’t return rental deposits:
overhead � Employee’s clearance is suspended through
no fault of his own: overhead � Snow day in DC, government shutdown:
depends � Severance: overhead � Recruiting and backfilling an employee who
can’t perform: overhead
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More random eventualities � Need to fix office equipment: overhead � Regulations change, requiring new employment agreements:
overhead � Mods to contract require review: overhead � A solicitation is reopened to clarify the font that is required
—redo graphics: overhead � Client isn’t renewing option but would like to renew “in a
few weeks”. Keep employee on the beach: overhead. � Employee wages are garnished, monthly reporting � Employee games cafeteria plan or doesn’t meet hours
requirements � “Competition sufficient” solicitation changes to cost pricing
data solicitation � Client doesn’t pay
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What comes out of fee?
� IFF fees for GSA schedules � Swag (pens, shirts, etc.) � Pizza dinners, happy hours, morale
building
…these are all unallowable