The rise of the contractor workforce

It’s hardly surprising that the government relies on the private sector to provide experienced and skilled IT workers.

What is surprising is the number of IT workers being provided by companies.

Except that nobody knows the exact number. Neither the government nor the companies themselves seem to track that data.

One thing is true, however: The number may be two, three, or even five or more times the number of federal IT workers in some agencies.

To explain that ratio, you would have to look back decades to see how it began.

“If you go back about 30 years, the private sector began to outspend the government in research and development,” said Stan Soloway, head of the Professional Services Council, an industry association in Arlington, Va. “Now [the dollars] are four-to-one. ... That means a lot of technology skills are drawn to the private sector because it’s the cutting edge.”

The Year 2000 software crisis also provided a boost to the sector in the late 1990s, as the government scrambled to rework code to keep computers from crashing at the start of the 21st century.

Next came Sept. 11 and the government’s attempt to shift its attention
suddenly to homeland security, with accompanying contracts.

The impact on the systems integration community has been striking, in terms of market growth, consolidation of some of the large players through mergers and acquisitions, and business opportunities for niche firms that provide specialized skills.

Paul Leslie, president and CEO of Apogen Technologies Inc. of McLean, Va., said his company is capitalizing on these factors.

“We do a lot of work at [Energy Department] labs, for instance, and we have a very large group that does technology R&D,” he said, in areas such as “communications using laser light [and] multispectrum imaging.”

How the government’s acquisition of contract manpower and services has affected industry generally has been harder to quantify. Companies famously are reluctant to provide any information that goes beyond the bounds of what they normally have to report to the Securities and Exchange Commission.

To try to get a handle on just how big the IT contractor workforce is, GCN submitted questionnaires to more than half of the companies on Washington Technology’s 2006 Top 100 systems integrators list. Fifteen companies responded; 10 of them provided answers to almost every question.

While that’s not a large enough sample to statistically extrapolate the size and composition of the contract IT workforce for all the companies on the list, it could be considered a reasonable representation.

Some of the responding companies clearly are focused on providing workers directly to the government.

One company stated that 80 percent of its contract workers actually use government facilities, rather than its corporate locations.

Another company indicated that 97 percent of the employees in its federal unit are under contract to government agencies.

It’s hard for a company to gauge its performance relative to others in the field without some baseline, said Payton Smith, an analyst with Booz Allen Hamilton Inc. of McLean, Va. The figures compiled by GCN, though scant, are enough to raise interesting questions for the industry, he said.

“How high can a company take that contracted-out percentage of workers” compared to the number of employees that stay in-house, Smith said. “What tie-ins are there to company performance, to the rates they’re able to charge, to the proportion of overhead? Which niches, what services are these companies providing?”