How many contractors does the government have?

Commentary by Jeff Neal
Founder of ChiefHRO.com
& Senior Vice President, ICF International

This column was originally published on Jeff Neal’s blog, ChiefHRO.com, and was republished here with permission from the author.

Photo courtesy of Jeff Neal

Rep. Chris Van Hollen (D-Md.) recently asked the Congressional Budget Office (CBO) how many contractor employees the federal government has. CBO’s answer should not surprise anyone who is truly familiar with the subject. They said “Regrettably, CBO is unaware of any comprehensive information about the size of the federal government’s contracted workforce.” CBO took six pages to explain its answer, providing a comprehensive explanation of why it does not have a number.

I would have been stunned if the CBO said anything other than what it did. Does that worry me? Not really, because it does not tell us anything actionable. When I was at the Department of Homeland Security (DHS), we spent a lot of time trying to explain how many contractors we had. A lot of numbers were reported, including one that said we had over 200,000 contractors (more than the number of civilian DHS employees). It turned out that number was wrong. The best estimate was less than half that. We spent a lot of time debating the number before we started doing what we really should have been doing all along — making informed decisions about the degree to which we should rely on our own employees and rely on service contracts. Those sourcing decisions can generally be based on empirical data and assessments of risk.

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Rep. Van Hollen’s request was prompted by proposals to cut some arbitrary percentage of the federal workforce. Proposals to cut the number of any sector of the workforce — federal, contractor or grantee — by an arbitrary number should be taken with a grain of salt. When someone calls for a 10 percent reduction in federal employees or a 10 percent reduction in the value of service contracts, ask what they want to cut. Doing a salami slice across-the-board cut is unlikely to make government better. When we need to make cuts, we should follow the good management practice of making informed decisions based upon priorities, costs and risks.

I know this is a subject where there is a lot of disagreement. You can disagree with whether a particular function should be performed by government or industry. You can disagree with who costs more. You can disagree about who does better work. People tend to treat the fed/contractor question like it is a religious argument. Either all feds are great and contractors stink, or all contractors are great and feds stink. The truth is that both statements are absurd over-generalizations. There are great federal workers. There are great companies that do super work for their clients. There are grantees who provide outstanding services in their communities. We need all of those sectors to have a healthy and balanced workforce that accomplishes the people’s work at a fair cost.

So — we can disagree about a lot, but here are some facts.

  • Government uses a lot of contractors and a lot of civilian employees.
  • We think we know how many federal employees there are, but we really do not. The numbers of employees in some agencies are classified. We also have thousands of non-appropriated fund employees who do not show up in most counts.
  • We do not know how many contractor employees there are, because they are not the government’s employees and the government does not generally contract for FTE. It contracts for services. When we pay a firm to provide a service, we should care whether they are providing the service, doing it effectively, and at a reasonable cost. In some cases government can get the number of FTE, but in many cases the number may be proprietary and disclosing it could harm a company’s ability to compete for work (because it gives their competitors too much information).
  • Government uses a lot of grantees to do government work. We do not really know how many employees they have either.

And here are some opinions, informed by spending 33 years in government (from GS-5 to Chief Human Capital Officer of DHS) and more than three years working for a firm that has many government clients.

  • We cannot have it both ways. The government should not contract for services, then try to tell the firms how many employees they can use to do the work, what they should be paid and how they should be assigned. Those are management decisions that the firms have to make on their own. If the government wants that level of control, they want a federal employee.
  • Using only federal employees is not going to happen. Our political climate would not allow the government to hire hundreds of thousands (or millions) of new employees.
  • Using only federal employees should not happen. There are a lot of things the government does extremely well. There are others where government either does not do well, cannot effectively compete for talent to do the work, or where the work is temporary and hiring government employees to do it does not make sense. There are other situations where government needs and wants the flexibility that service contracts provide.We have a mix of federal employees, contractors and grantees and are likely to always have a mix. We can debate what the numbers should be, but no one is arguing that we should insource everything or outsource everything.
  • Just like federal workers, contractor employees are a vital part of the economy. Their firms provide direct jobs, indirect jobs (in their suppliers, landlords and subcontractors), and generate billions of dollars in taxes that go back into the government’s coffers.

I believe most taxpayers care about good, effective and efficient government. They care about the government getting what it pays for from its contractors. They care about the government writing good contracts so contractors know what is expected and how to price it. They care about integrity in the workforce (and I have seen it on display both in government and in industry). The number of contractor employees may be interesting, but I do not believe knowing it will result in any of those things that most taxpayers care about.


Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.

MORE COMMENTARY FROM JEFF NEAL:

DHS shutdown twofer: Burning money and morale at the same time

What does it mean when the government ‘closes’ due to weather?

How bad would a shutdown be for DHS?

4 steps toward a better hiring process

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