DoD assures Congress contractors will share in the pain of sequestration

The Defense Department is examining all of its contracts as part of the reductions necessary under automatic budget cuts. Reductions to contractors, not civilia...

The Pentagon’s top leaders told senators Tuesday that if they’re worried civilians are suffering more than contractors under sequestration, they shouldn’t be: DoD says the entire non-uniformed workforce will share the pain.

The topic arose as the Defense Secretary and the Chairman of the Joint Chiefs of Staff testified before a key Senate subcommittee in the immediate aftermath of the self-outing of Edward Snowden, the Booz Allen Hamilton employee who says he was the one who leaked classified details of NSA surveillance programs to media organizations.

At the outset of a hearing on DoD’s 2013 budget and sequestration, Sen. Dick Durbin (D-Ill.), the chairman of the Appropriations Subcommittee on Defense, used Snowden to add fuel to an ongoing battle over the cost-efficacy of government civilians versus contractors.

“This was a high school dropout, he didn’t finish his military obligations, he dropped out of community college and he was being paid $200,000 a year,” Durbin said. “The average contract employee costs two to three times as much as the average DoD civilian. And there’s not been a civilian pay raise since 2011.”

Booz Allen Hamilton issued a release Tuesday saying it had terminated Snowden’s employment on June 10 and that he had a salary rate of $120,000.

In DoD, most of those civilians will soon have their pay cut by 20 percent while they endure one-day-per week furloughs for the remainder of the year. But Defense Secretary Chuck Hagel said the sequestration cuts prompting those furloughs certainly won’t hold the government contracting industry harmless.

Significant adjustments on the way

“We are reviewing all contractors right now. We have no choice. There’s no question we’re going to have to make some significant adjustments, and I certainly don’t disagree with any of your analysis on contractors,” he told Durbin. “When you look at the buildup over the past 12 years, the money flowed in, but the time has come where we’re going to have to make some hard choices.”

Undersecretary of Defense Robert Hale, DoD’s comptroller and chief financial officer, said as distasteful as he finds the civilian furloughs, they’ll only represent about $2 billion of the $37 billion the department will have to shave from its spending in 2013. The majority, he said, will come from contractors, including service contractors.

“We’re going to see a drop in contractors. I don’t know how much, because the year isn’t over. But I think it will be a sharp drop,” he said.

Hale said Durbin’s assertion that a contract employee costs two to three times as much as a federal civilian “sounds about right.”

“But let me say that whether a contractor or a civilian is cheaper or better depends on the circumstances,” he said. “There are some cases where we simply don’t have the skills that we need, or it’s a short-term job and it wouldn’t make any sense to grow that workforce. Audit readiness is an excellent example: I’m hiring a lot of contract auditors because they know how to do audits, and we don’t yet. In other circumstances, if you’re going to have the job over a long period of time, it’s probably better to have a government employee do it.”

DoD has spent the past several months determining, in excruciating detail, how many of its 780,000 civilians would be furloughed, under what circumstances, for how long, and sending a furlough proposal letter to each affected employee. Such decisions and calculations are impossible with regard to the contractor workforce because when military components hire outside firms, the contract terms often dictate that the company provide a certain level of service rather than a defined headcount of staffers.

Number of contractors unknown

Nonetheless, since 2008, Congress has ordered the Pentagon to develop a way to take a census of the contractors working for it so that, among other things, it can make better decisions about the best mix of military, civilian and contract workers for a given function. DoD plans to bring a departmentwide data system online next year to begin collect that manpower data. DoD components will begin supplying data on most of their service contracts by 2016, according to the Government Accountability Office.

But Hale acknowledged that as of today, there’s still not a reliable count.

“I know that sounds bad, but it’s true. Because if you do a fixed-price contract, the company has no obligation to tell you how many people are doing it. They just do the work, and if they do it satisfactorily, we pay them,” he said. “We’re in the process now of asking all of our contractors to tell us, probably at some expense to the government, how many people are involved, even if it’s a fixed- price contract. So we’ll know better soon, but roughly 700,000 contractors is our best estimate right now.”


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