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The "free market" appears to be more a game of shills and payola

When the U.S. Central Intelligence Agency (CIA), U.S. National Security Agency (NSA), and other intelligence firms get their spying dollars they contract out much of their work to private analysts.  But this process has long been suspected by some to be less free market and more outright corruption.  A fresh leak affirms that much like rumors of spying on U.S. citizens -- these claims that were once were dismissed as paranoid irrationalism have now been proven to be true in America's warped political landscape.

I. Intelligence Official: "Brilliant People Get You in Trouble"

The latest document was published in The Washington Post and comes courtesy of former NSA analyst Edward Snowden.

Mr. Snowden was never supposed to have access to this document -- nor many of the others he obtained.  But as with much of his trove of documents, he obtained the kind of whistleblower information that was far too explosive for even a privileged employee of his clearance, by using digital espionage to escalate his privileges even higher.

A former intelligence official quoted by NBC News described Mr. Snowden, stating:

Every day, they are learning how brilliant [Snowden] was.  This is why you don’t hire brilliant people for jobs like this. You hire smart people. Brilliant people get you in trouble.  The damage, on a scale of 1 to 10, is a 12.

Edward Snowden
Edward Snowden was "too smart" to hire, says one former intelligence official.  When he caught wind of massive gov't spying and corruption he blew the whistle in a responsible way when a "dumber" employee might have stayed quiet, ignorant, and obedient . [Image Source: AP]

If that sounds a little bit like a mob mindset, you might not be that far off, when you consider the numbers from this latest document.

While the document has plenty of interesting revelations, perhaps the most revealing graphic as to why the NSA and other organizations are so keen on spying on millions of law abiding Americans can be found on page 79 of the "top secret" classified Budget Summary for Fiscal 2013:

Intelligence spending
[Image Source: The Washington Post]

The graphic above shows that about 18 percent of the intelligence workforce -- or roughly one in five contractors -- is from the private sector ("civilian" workers represent non-military government personnel, i.e. staff at CIA or NSA offices or counterterrorism "Fusion" Centers).

While contractors represent fewer than 20 percent of the workforce, 70 percent of the intelligence budget goes to them, according to a figure from the U.S. Director of National Intelligence Agency (DNI) at a Colorado sponsored by the Defense Intelligence Agency (DIA).  While it's possible that this number is a few percentage points more or less today, that rare peek behind the veil is likely still relatively accurate.

II. Obama's Donors are Cashing in on Pork-Barrel Spy Spending

Traditionally the lion's share of this money has gone to Northrop Grumman Corp. (NOC), Honeywell Int'l Inc. (HON) (via is Science Applications Int'l Corp. subsidiary), Raytheon Comp. (RTN), Lockheed Martin Corp. (LMT), and Edward Snowden's former firm Booz Allen Hamilton Holding Comp. (BAH).

Given that these companies were among President Barack Hussein Obama's (D) top donors, giving twice as much to him as his Republican rival, it seems unlikely that the agency chiefs would cut back funding to these "friends of the state".

The list of President Obama's top campaign donors reads like a who's who of the intelligence contracting industry including -- Booz Allen Hamilton ($176,000 + $281,700 USD to supporting PACs); Lockheed Martin ($285,600 + $854,300 USD to supporting PACs); Honeywell Int'l ($93,600 USD + ~$100,000 USD to supporting PACs); Raytheon ($155,800 + $522,300 USD to supporting PACs); and Northrop Grumman ($251,500 + $323,300 USD to supporting PACs).

Obama spying
Barack Hussein Obama is a master of "spying" a payday... it's not suprising he managed to get elected President (twice) and lavished private intelligence contractors with kickbacks.
[Image Source: Reuters]

Given that "generosity", it's possible that the percentage of the President's intelligence budgets that is being funneled to campaign donors-cum-private contractors may be well over 70 percent at present.

But let us assume the 70 percent figure for a second.  So that figure indicates 70 cents out of every intelligence dollar goes in a private pocket.

One might assume that under the "free market" these contracts would deliver lowers costs.  But in reality it appears they are dramatically higher.  With the information from the latest leak (that contractors only comprise ~18 percent of the workforce), it can be estimated that the federal government pays ten times as much of your taxpayer dollars per private sector analyst as they do per government employees.

In other words in America's political system, the much villainized "desk job bureaucrats" (along with a small contingent of members of the military) are actually raking in much less than the private sector firms "competing" for that work.

Central Bureaucracy
It's an ironic day when bureaucrats are 10 times cheaper than the closed market alternative championed by corrupt politicians. [Image Source: Matt Groening]

This makes no sense from a capitalist perspective until you realize that this isn't capitalism at all and that the nation has devolved into a system in which both parties unilaterally take from the taxpayers and pay off large contractors, who consistently shower both supposed "sides" of America's two party ruling system with campaign cash.

III. Contracts Awarded For Payouts, Not Product

There's no transparency, and little competition to speak of, because contracts typically go to those who pay, not those who offer the best payout of results.  For example, Inc.'s (AMZN) PAC in 2012 paid a roughly 56-74 split (D/R) of campaign cash to members of the House and 37-12 split (D/R) to members of the Senate, according to OpenSecret's numbers from its PAC.  Lo and behold in each case money went to whatever party was in control of chamber and could pass spending legislation.  According to the site's statistics Amazon claimed $2.5M USD in lobbying expenses in 2012 alone.

Congress bribes
Congress is as much in the pocket of the owners of big money intelligence contractors as the President. [Image Source: Wikimedia Commons]

Punch that into your old calculator with the numbers from a 2011 study by researchers Raquel Alexander and Susan Scholz of the University of Kansas School of Business which estimates that per $1 USD spent on lobbying a company gets back $220 USD, on average in contracts, tax breaks, grants, etc. and you get an estimated that Amazon's $2.5M USD contribution should theoretically earn it a $550M USD payoff.

Lo and behold Amazon reportedly received a $600M USD confidential contract recently to provide "data services" to the CIA.

Friendly bribe
Bribery pays big dividends in U.S. politics.  Given that federal politicians have little legal responsibility to recuse themselves from decisions involving campaign donors and given that the payoff is $220 USD per $1 USD spent lobbying it's a dream investment.
[Image Source: Haberrus]

Likewise, Oracle Corp. (ORCL) -- another top tech industry recipient -- spent so much that even Amazon might blush.  It spent $6.7M USD in 2012 alone.  And results?  Consider that Oracle pocketed most of a $1B USD U.S. Air Force project that last year was deemed a complete failure and whose work was mostly tossed out (don't worry Oracle kept that hard earned taxpayer money).  Perhaps that's why Oracle CEO Larry Ellison was so eager to defend the NSA -- an agency who he reportedly helps spy on millions of Americans daily.

IV. Most of the Pork is Pocketed by Big Shareholders, Not Contracting Professionals

So it's been settled that the U.S. government is taxing citizens over $50B USD per year to spy on themselves, and is operating as a closed-market system when it comes to contracting, with any signs of capitalistic life few and far between.  But one would hope at least some of that money was going to the employees of defense and electronics industry intelligence contractors.

But this does not appear to be the case.  While private sector employees do earn more, they don't earn ten times as much.  Associate Consultants at BAH -- a position similar to Mr. Snowden's make an average of $108K USD yearly according to Glass Ceiling (Mr. Snowden reportedly made $122,000 USD/year), while an NSA "analyst" in a similar post reportedly earns around $70K USD.  So if private contractors aren't even earning a measly twice as much, where is all this pork going?

Contractor firms' professional employees only make marginally more than their gov't peers, studies show.  Most of the pork is stuffed into the pockets of hedge fund owners, the ultimate target of intelligence industry pork. [Image Source: Mother Jones]

The answer is that the money is pocketed as corporate profits, which are distributed to shareholders via programs such as dividends, share buybacks, etc.  Of course much of this money goes to America's top 0.01 percent -- the individuals who control the hedge funds, which in turn own much of the corporate IT industry and defense contracting industry's public stock.  Essentially the corporations just act as one more layer in the food chain above the paid off politicians who scavenge on taxpayer dollars.  At the top of food chain are the hedge fund owners, the great whites of the American budgetary sea.

Thus contracting -- the primary recipient of intelligence dollars -- is not only a corrupt closed-market system with artificially inflated prices -- its a system in which skilled professional at most earn a small cut of these ill-gotten gains.  The leech-like construct ultimately funnels the lion's share of defense contracting dollars to a fortunate few, operating as a plutocracy.

V. Small Contractors Show Similar Tendencies

As for smaller contracting firms the same principle applies.  Studies show that funding -- much of which passes through earmarks -- is largely received by contractors that donate to the politicians sponsoring the earmark.  
FBI tracking
Snaller contractors are equally fond of payola, scoring contracts on facial recognition, data mining, smartphone snooping, and other forms of spying. [Image Source: Hang the Bankers]

The U.S. Department of Homeland Security's (DHS) $6M USD "BOSS" project to use facial recognition to spy on American citizens is a perfect example.  The earmark of $6M USD went to Electronic Warfare Associates Government Systems, Inc. (EWA GSI) who had donated heavily to Senate minority leader Sen. Mitch McConnell (R - Kent.) -- who happened to write the earmark.  Lo and behold this award which Sen. McConnell claimed featured a "competitive" bidding process had only one bidder.

More often these small firms -- like EWA GSI -- are private with profits going to their venture capitalist backers -- the same lucky lot that have cornered the big business side of the market via their corporate stock holdings.  Why select one route of corruption when you can have two?  

Mitch McConnelll
Sen. Mitch McConnell (R-Kent.) is fond of funneling kickbacks to his generous "donors".  For example facial recognition spying firm EWA GSI recently got $6M USD [Image Source: AP]

The best plutocrats surely have balanced portfolios of small and big contractors alike, all of whom are wooing the best politicians that money can buy.

VI. How Big Intelligence Taught me to Stop Worrying About Bureaucrats and Love the Bomb

A final point worth mentioning is that while intelligence budgets are at record amounts in dollars -- they are not at record amounts when adjusted for inflation.  In the late 1980s inflation adjusted budgets peaked at around $71B USD, according to The Washington Post.

But what is different is the product that's being paid for and who is getting paid.

In the 1980s most intelligence dollars went to government employees and their expenses.  Intelligence was expensive as it was largely the work of field operations in regions of interest.  This required a lot of employees and a lot of logistics spending.  Contractors are though to have received a far smaller cut.

Today most intelligence money goes to private contractors.  Intelligence today should be far cheaper as most of it's done locally in the U.S. with little in the way of logistics costs.

NSA spying taxpayers
Today federal spying is low cost and focuses more heavily on U.S. citizens.  This all equates to more pork for paid of polticians to push. [Image Source: The People's Cube]

In the 1980s most intelligence dollars went towards spying on the Communists and their allies.  Today a large percentage of the money spent on spying goes towards collecting, storing, and even at times improperly analyzing the communications of citizens of the U.S. and ally states.

Thus America has unwittingly traded expensive bloated bureaucracy in the Cold War for an even more wasteful closed market plutocractic system in the "9/11 era".  And in the process they're getting far less for its money, all while installing systems that could later lead to dangerous violations of citizens' civil liberties.

NSA spying
The bitter irony?  We're paying for the weapons that could one day rob us of our Constitutional freedoms. [Image Source: Nation of Change]

You know you're in a nightmare when you're wishing that you could get your slightly-less-overpaid bureaucrats back.  But that is where America finds itself.  Welcome to the surveillance state.

Sources: The Washington Post [1], [2], [3]

Comments     Threshold

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fix your system!
By Yofa on 8/30/2013 11:11:12 AM , Rating: 5
as a candadian, i'm glad we still have morality and ethics in our elected officials. we have an independent elections commitee and auditing, and multiple political parties.

get those 2 things in your political system, and you might turn your government back into a democracy. as it stands, your elections are up for sale, and it's painful to watch from the outside, given how much influence you have on the rest of the world.

RE: fix your system!
By inighthawki on 8/30/2013 11:21:04 AM , Rating: 5
Its painful to watch from the inside too...

RE: fix your system!
By Reclaimer77 on 8/30/13, Rating: -1
RE: fix your system!
By Ammohunt on 8/30/2013 1:00:27 PM , Rating: 2
You forgot free Back Bacon, Molsen and touques!

RE: fix your system!
By ClownPuncher on 8/30/2013 1:07:03 PM , Rating: 2
Less corruption, at least.

RE: fix your system!
By Da W on 8/30/13, Rating: -1
RE: fix your system!
By ritualm on 8/30/2013 6:25:33 PM , Rating: 5
So full of misinformation.
Innaccessible free healthcare. Speaking against it is pure heresy.

Better than the American version: unless you are very financially well off, a single illness WILL bankrupt you.
Ultra-freaking high taxes.

Think our taxes are too high? Look at your No. 1 ally, the UK! What an uneducated imposter.
Still waving the Queen's flag.

We're not waving your Stars & Spangles, and that's okay, because right now the US flag is a symbol of state-sponsored surveillance dragnet.
Just as much corruption as everywhere else, but provinces other than Quebec are not looking into it.

Much less than what's going on at Congress and Senate right now. Capitol Hill looks no more different than an exclusive gentleman's club, where only the rich and powerful need apply.
For that matter, Anglo-Franco hatred that feels like civil war is coming. The separatist premier nearly got shot on election night.

For that matter, you guys have a thoroughly unchecked race war between blacks and everyone else. And the blacks are winning.
Winters are getting shorter and shorter. That's bad for mapple syrup.

The US Midwest is getting more droughts. Next time, say hello to a dustbowl for me.

RE: fix your system!
By Da W on 9/2/2013 8:37:42 PM , Rating: 2
You speak as if i was an United-Statian. I'm a Canadian, from french ancestry since 1646, mixed with indian blood. There is no canadian west of the Ottawa river that is more canadian than i am (except for amerindians). You could say I am the true canadian, most of you are invaders.
Still hate the Queen and what 25M blokes have made of my country.

RE: fix your system!
By Azethoth on 9/3/2013 6:04:50 AM , Rating: 2
Oh you are from Quebec. No wonder. Well anyway, we do not want you guys to secede, we want to kick you of Canada.

BTW, it is "American", not "United-Statian". Also, Canada has its own flag which is in fact not the union jack.

RE: fix your system!
By Captain Orgazmo on 8/30/2013 10:55:50 PM , Rating: 2
-You are correct about the healthcare.
-Wrong about taxes - we have far lower corporate rates and no estate tax.
-Nobody gives a fart about the Queen and we are not beholden to the UK at all.
-Corruption is a problem, especially in dynastic provinces (political parties in power too long) and in our joke senate
-Civil war - with wooden spoons maybe? It will happen again far sooner in the USA thanks to the race-baiting marxist freaks in power there.
-Maple syrup? good one.

RE: fix your system!
By Captain Orgazmo on 8/30/2013 10:48:55 PM , Rating: 2
Reclaimer, you are correct about the healthcare scam being perpetrated up here, however we are in a far better economic position than the United States right now. Something that has been completely ignored by our communist media is the fact that the current Conservative government under Stephen Harper has actually cut real dollar spending (I mean actual budget spending has been reduced - not the usual "cut" which means a smaller increase) for the first time since the end of WW2.

Also our corporate tax rates our far lower than the US, and we don't have estate taxes. I never expected to see it in my lifetime, but currently Canada is a far more economically free nation than Obamatopia.

RE: fix your system!
By Reclaimer77 on 8/31/2013 12:05:13 AM , Rating: 3
Well honestly I never wanted to get into a nationalistic argument in a typical USA vs Canada Internet bashfest.

I know we have problems, but the OP came off really condescending and it just pissed me off. I don't need some Canadian rubbing my nose in our problems. People who live in glass houses and such.

Having said that, I appreciate your post and you make fair points. Nobody is more upset about the mess America is in than me, but you know what they say, it is OUR mess :)

RE: fix your system!
By Captain Orgazmo on 8/31/2013 6:50:23 PM , Rating: 2
I know the usual USA vs Canada arguments are silly, it's like sibling rivalry between two nations effectively joined at the hip. Canadians love to bash the USA, but when we are mentioned by a notable American or your media, the elitist snobs turn into giggling schoolgirls. I find it hilarious.

Now fix that mess going on down there, and restore the constitution (the single greatest idea in human history), so I can move down there away from this freezing, boring, stifling land of wannabe commies in toques. :)

RE: fix your system!
By slunkius on 9/2/2013 1:46:00 AM , Rating: 2
in other words, "your country is great, but it sucks, so i will not leave crappy Canada"

RE: fix your system!
By voicequal on 8/30/2013 6:47:10 PM , Rating: 2
This article is a string of tenuously connected arguments fueled by the author's entrenched biases.

RE: fix your system!
By KFZ on 8/30/2013 7:21:57 PM , Rating: 2
That we have so much influence is precisely why corruption is big business, and part of that business is keeping the public locked into an "us vs. them" mentality, preventing any real reform.

It's basic instincts turned against gullible, ignorant and usefully idiotic masses by unimaginably wealthy and powerfully networked forces.

Now, if you'll excuse me, my tin foil hat has a tear in its crown.

RE: fix your system!
By KCjoker on 8/30/2013 7:34:26 PM , Rating: 2
I wonder why so few want to move there as opposed to the US then?

RE: fix your system!
By YearOfTheDingo on 8/31/2013 8:02:23 AM , Rating: 2
or this baby seal gets it!

RE: fix your system!
By flyingpants1 on 8/31/2013 9:34:36 AM , Rating: 2
Whoa, are you stupid? There is nothing moral or ethical about Canadian politics.

RE: fix your system!
By Reclaimer77 on 8/31/13, Rating: 0
RE: fix your system!
By Captain Awesome on 9/1/2013 12:09:56 PM , Rating: 3
Our political system in Canada isn't actually any better, it's just most efficient at buying votes, and the corruption is more old school.

In Ontario the Liberals have been in power for over a decade by buying votes and support from the teacher's union, and other public sector unions. In Quebec their government was recently elected with college/university student votes after they promised to freeze tuition.

We're just as corrupt too. Just this June the mayor of Montreal resigned after being charged for taking bribes, the whole construction industry in that province is corrupt and run by biker gangs.

Ontario's just as bad, except it's corruption is more at the individual level. Friends, family and supporters of the Liberal party are rewarded with bogus "consultant" jobs. Then there's the Sorbara family, who recently bought up tons of land to sell to the government after Greg Sorbara (the finance minister) pushed for a subway to be built out to the middle of nowhere, going through all of his family's recently purchased land.

Flawed or Incomplete Data
By Jeeem on 8/30/2013 11:30:53 AM , Rating: 5
Disclaimer: I am a DoD contractor.

You shouldn't use the chart showing the workforce percentage as a basis for your funding argument unless you know exactly what data you are being shown. Based on my many years of experience, it isn't showing what you think it's showing. It's actually only showing you part of the story. In all likelihood, it is only showing you a small fraction of the total contractor workforce. Typically the government does not show contractors as part of the workforce except when they are filling a role in a government facility. (We call them "Meat in the Seats" contracts.) Most contractors do not fit in that category. Here's an example.

On my current contract there are only 2 government (civilian) personnel. The rest of their office is staffed by a (different) contractor. I think there are around 30 of them. They all work in the government facility and are reflected in their head count and organizational charts. My company only has 3-4 people in the government facility. The other 100+ of us are working out of our own company facilities and are not reflected on any head counts or org charts. You would never know how many of us there are. All you would see is Program "X" and a dollar amount. So over 75% of the workforce is invisible. This is especially true of fixed price contracts.

So, without knowing the nature of the data behind that chart, you should not use it as the foundation for an argument or position, especially for one as strong or controversial as this. Sure, 70% of the funding may go to the contractors, but they are also likely performing that work with a workforce that far outnumbers the government staff. That's pretty much been the nature of the DoD workforce for the last 20 years.

RE: Flawed or Incomplete Data
By jbartabas on 8/30/2013 11:45:05 AM , Rating: 2
Agree. This seemed like a very questionable analysis to me, unless he knows more details about these numbers than were reported in the article.

RE: Flawed or Incomplete Data
By Master Kenobi on 8/30/2013 3:33:37 PM , Rating: 1
The analysis is much like the leaked data, no knowledge beyond what is in the document itself. You can thank Snowden for the snatch and run job, but none of the accompanying information necessary to draw conclusions.

RE: Flawed or Incomplete Data
By ritualm on 8/30/2013 6:30:27 PM , Rating: 2
Better to be killed as a martyr than live as the hand of a tyrant.

All this talk about going to war against Syria is being done to distract the likes of such "free" people as you, sir, from the Snowden Leaks. Wanna know what's sad? It's working.

RE: Flawed or Incomplete Data
By Master Kenobi on 8/30/13, Rating: -1
RE: Flawed or Incomplete Data
By ritualm on 8/30/2013 10:47:20 PM , Rating: 5
It takes a lot of balls for Snowden to do what he did.

The kinds of stuff you just don't have.

All you whine about is how he violated confidentiality and contractual agreements, while completely disregarding the disgustingly plain fact that the nation's intelligence services - or rather, the entire government and the entire defence industry combined - can play fast and loose with your basic Constitutional rights. All without due process, oversight and accountability.

Yet you are showing your full support of these Orwellian programs.

When the state goes after you, because they've already locked up everyone else around you - what are you gonna do, internet tough guy?

RE: Flawed or Incomplete Data
By Master Kenobi on 8/31/13, Rating: -1
RE: Flawed or Incomplete Data
By HostileEffect on 9/1/2013 2:36:38 AM , Rating: 3
Master Kenoni, do not forget your oath.

I'm an active duty grunt in the Marines and I don't take kindly to people trampling my rights or screwing with my country.

RE: Flawed or Incomplete Data
By Master Kenobi on 9/2/13, Rating: -1
RE: Flawed or Incomplete Data
By Azethoth on 9/3/2013 6:14:01 AM , Rating: 2
Bingo. Also a familiarity with how spying was done in for example WWII illustrates the folly of Snowden more completely. I just hope this does not lead to a new Pearl Harbor because we lost our spycraft edge.

RE: Flawed or Incomplete Data
By sld on 9/1/2013 2:23:54 PM , Rating: 4
That's what every government wants: obedient, blind, doggy individuals who make good unquestioning soldiers, who will at war crime trials make the excuse for themselves "I was just following orders".

RE: Flawed or Incomplete Data
By MechanicalTechie on 9/1/2013 7:52:11 PM , Rating: 4
Your blind patriotism is turning you into a short slighted fool, and your nothing more than just another cog in the grinding machine of death and lies.

RE: Flawed or Incomplete Data
By CSE1985 on 9/2/2013 8:52:43 PM , Rating: 2
Is that how you responded to the Patriot Act and the spying under Bush?

Surveys show that reactions to news of government spying is very partisan....70% of Republicans approved under Bush but oppose it under Obama and vice versa for Democrats.

So before you accuse someone of blind patriotism, look in the mirror.

By MechanicalTechie on 9/3/2013 2:39:03 AM , Rating: 2
What!? The Patriot Act is nothing more than a criminal excuse for the government to overreach their constitutional limitations and abuse their responsibilites. Any idiot to ever support the PA needs their head examined!

9/11 has been a resounding success for the terrorist, not because of their attacks but by how the US gov reacted - its has literally turned the US into a police state with a never ending war against an unknown enemy, they have managed to alienate the bulk proportion of the planet even when after accumulating the worlds sympathy after the attacks .. and dont get me started on the self inflicted economic downfall.

To accuse me of blind patriotism is totally laughable!!

RE: Flawed or Incomplete Data
By HostileEffect on 9/1/2013 9:27:50 PM , Rating: 2
Ultimately its disappointing and very sad to see just how divided America is.

RE: Flawed or Incomplete Data
By Reclaimer77 on 9/2/2013 8:01:59 AM , Rating: 1
Actually its encouraging. There's still a portion of the population standing up for what is right.

By Master Kenobi on 9/2/2013 7:56:27 PM , Rating: 2
What is "right" is a matter of opinion.

RE: Flawed or Incomplete Data
By voicequal on 8/30/2013 9:02:35 PM , Rating: 2
An aggregate personnel distribution is arbitrarily mapped to an aggregate budget distribution without establishing that we're actually comparing like data. And thus a conspiracy is born.

Not all going to employees
By RocketChild on 8/30/2013 11:17:22 AM , Rating: 5
What does not get highlighted though enough is that the money really isn't going to the contractor on the ground, doing the work. Often they only make about as much as the civilian employee they are working next to. I'm not comparing Blackwater guys to US Army soldiers. I'm talking about just contractors in A/C rooms alongside Gov employees. Those guys make about the same, but the government employee has insane retirement plans, amazing amounts of vacation, etc. But they are making about the same.

What the regular contract employees make, being about the same, the rest of the funds goes to the corporation above them. They charge the government $200hr for an employee and then only pay that contractor $30hr.

RE: Not all going to employees
By Jeeem on 8/30/2013 11:44:26 AM , Rating: 2
BINGO! Many in the government operate under the assumption that contract employees are paid in gold bars. That's far, far from the truth. What the government sees is the bill rate for a position. That is NOT the employee's salary. Typically the employee's salary is less than half the bill rate.

The government employees I have worked with have had higher salaries and better benefits, but got to hand all their work off to me. What a deal!

RE: Not all going to employees
By vol7ron on 8/30/2013 12:53:13 PM , Rating: 2
First, you generally outsource for 1 of 3 reasons: you have the know-how, but don't have the resources to accomplish the job; you don't have the know-how, and someone else does; or it's cheaper. Where #2 and #3 are more likely, since someone with the know-how and funds may higher internally. There's also logistical reasons, which I am not including, which I believe cuts into the "cheaper"; for instance, a job may be small and require only a limited amount of time, so it may cost more to higher/train short-term employees.

That said, because things may be cheaper I would expect salaried employees to get paid more than contractors for longterm (a year or more) contracts. Whereas, I'd expect short-term contractors to be compensated more favorably.

Remember that contracting companies also carry overhead, insurance, time off [+ other benefits], and even legal fees. Operating a business is often more than meets the eye.

RE: Not all going to employees
By Solandri on 8/30/2013 1:37:33 PM , Rating: 2
But this is the wrong comparison for what you're describing. This is comparing federal employee salary to what contractors are paid. If you want a fair comparison, you need to compare federal employee salary + cost of everything they're working with and on, and compare that to what contractors are paid. Then you can decide which is cheaper.

Normal rule of thumb in small business is that an employee will cost you 2-3x more than their salary (in taxes, insurance, equipment, facilities, support, etc). The number gets skewed even higher in tech companies where the employees are frequently playing with toys which cost several dozen times more than they make in a year.

RE: Not all going to employees
By mlmiller1 on 8/30/2013 4:59:02 PM , Rating: 2
Rule of thumb for professional consulting: what an individual gets paid is 1/3 what the company charges. So if you want to make $100k / yr, you better bring in $300k year.

About 50% of what comes into a company goes out for taxes & deductions; your personal 33% and the 15% the company pays for you.

Then there is overhead and benefits, like matching 401k and health care. Over head people, like HR, managers and BD are not typically billable but need to be paid too. When your done, if 1-5% is left to kick back to shareholders, your doing good.

That's the way it is. If you can do better, start that company and make it happen.

RE: Not all going to employees
By marvdmartian on 8/30/2013 2:00:03 PM , Rating: 2
A big part of the problem is, the government doesn't know how to write a contract that's worth a damn (it's the ONE thing they ought to contract out!!). Contracts for services usually are missing key points, that then later have to go back for re-bid, costing more in the long run.

Sadly, it's been shown, time and again, that the A-76 outsourcing (that Congress FINALLY put a moratorium on) was costing MORE than the civil service "most efficient organizations" (MEO's) that the contractors competed against, due almost solely to the performance work statement missing too many items that later had to be added to the contract, which added cost.

It's not unusual for the shell companies formed by bigger defense corporations (so they can bid as small businesses on contracts) to strategically underbid these contracts, when they compete against the MEO's, knowing full well that they will end up beating the MEO, lose money for a year or two, but end up making a tidy profit when the government reworks their contract. Oftentimes, at a higher cost than the MEO would have cost the taxpayer.

Why do you act so surprised?
By hiscross on 8/31/2013 2:14:46 PM , Rating: 2
Just read Atlas Shrugs. The Bible would be your better choice, but one book at a time.

RE: Why do you act so surprised?
By Skywalker123 on 8/31/2013 5:20:58 PM , Rating: 2
Both are works of fiction

RE: Why do you act so surprised?
By hiscross on 9/1/2013 11:08:52 AM , Rating: 2
Funny how liberals always say that and have nothing to provide that is better. Is is because liberals can't do anything meaningful?

RE: Why do you act so surprised?
By ritualm on 9/3/2013 2:50:12 PM , Rating: 3
The Bible was written by various philosophers who wanted to create a "god" that people can follow, yet leave room for various interpretations of specific passages.

Jesus Christ does not exist. Neither does the Lord or God Almighty. They are fable, imaginary beings if you will. Created for one purpose: to control you.

The only thing liberal about it is the morons who think it's all a grand liberal conspiracy to discredit their chosen gods.

By Da W on 8/30/2013 9:52:15 AM , Rating: 2
We see this problem in every field of activities in every coutry. I live it as an economist, i see contracts being given to contractors that i could do myself for 10 times less, and with better quality.

The problem is that there is still not enough independant contractors. Few people dare go on advanture, risking everything to open their own office. Getting a stable job is easier.

Add to that that most tender offers are done by invitation, between a select group of a few firms. Because they are known, because the government agencies know they can rely on them. Still this hinders entry, prevent competition and strikes at the heart of what free markets are supposed to be. The remedy is simple: open the process and post everything on the internet, free for every one to apply.

RE: Competiton
By lagomorpha on 8/30/2013 10:28:00 AM , Rating: 5
The remedy is simple: open the process and post everything on the internet, free for every one to apply.

Well first they would need to actually admit to the world the sorts of (mostly unconstitutional) things they are hiring the contractors for...

RE: Competiton
By Master Kenobi on 8/30/13, Rating: -1
RE: Competiton
By Reclaimer77 on 8/30/2013 5:48:14 PM , Rating: 2
They actually acknowledge the Constitution on the news? Since when?

Clarification on these numbers
By jbartabas on 8/30/2013 11:41:06 AM , Rating: 3
While contractors represent fewer than 20 percent of the workforce, 70 percent of the intelligence budget goes to them

Does the 70 percent of the budget cover contractors' salaries only, or does it cover total amount of contracts, including software/hardware (and associated off-site workforce not necessarly appearing as NSA/CIA contracted amployee)?

For exemple, when Amazon charges $600M to provide "data services", does any Amazon employee involved directly or more remotely connected to the project gets labeled as part of the intelligence worksforce (your quoted 18%)? And do they represent a significant part of the cost anyway compared to the infrastructure costs involved (hardware & software)?

RE: Clarification on these numbers
By Jeeem on 8/30/2013 12:21:10 PM , Rating: 2
That's another good example.

I suspect the chart also reflects what has been a standard DoD practice, hide or obscure the size of the contract workforce. I can't say that I fully understand the reason for that other than politics, but the DoD has never openly revealed the size of the contractor workforce and honestly, they probably don't know, since it really isn't their problem. If it were up to me, I wouldn't track it either.

By zephyrprime on 8/30/2013 12:01:53 PM , Rating: 2
This entire article can be summed up in one word: corruption. Wake up people! Historically, corrupt governments have been the norm - honest governments are the exception. We have to work and be eternally vigilant that the government is a government that serves us rather than corporate interests.

RE: corruption
By japlha on 8/30/2013 5:46:07 PM , Rating: 2
There's no such thing as "honest government". It's like calling someone a "moral slaveowner". Governments cannot serve "us". Governments can only exist by controlling us, using our productivity against us and stealing our money at gunpoint.

Governments are a byproduct of our species inability to act decently, respectfully and morally without the threat of some kind of punishment.

Being vigilant to this idea is the wrong goal.

By Samus on 8/30/2013 12:17:24 PM , Rating: 2
Why is this article on a tech site?

RE: Relevance?
By superstition on 8/30/2013 2:16:07 PM , Rating: 2
Read paragraph number three for a start.

By bug77 on 8/30/2013 11:35:42 AM , Rating: 2
While there is truth in this article, it's also true you cannot look at intelligence like any other market. Otherwise, it would have been outsourced to China aeons ago,

By erodth83 on 8/30/2013 12:44:13 PM , Rating: 2
Just because one sector gets more money does not mean that they are getting paid inflated wages!

We have no idea what the breakdown of this money is, but from experience I can presume that 20% of the money goes to a government employee that then manages the 70% of money moving to the civilian space that may got to 1 or more people.

Even if the money only went to one person, that money would be paying for research, supplies, field work, etc. rather than simply the salary of a manager sitting behind their desk.

It is articles like this that are so blatantly biased and attempt to wrongly incite people that irk me!!!!!

By superstition on 8/30/2013 2:17:51 PM , Rating: 2
This makes no sense from a capitalist perspective until you realize that this isn't capitalism at all

(something heard in every "capitalist" nation that has ever existed)

Bad management, bad ethics
By dgingerich on 8/30/2013 2:21:14 PM , Rating: 2
You hire smart people. Brilliant people get you in trouble.

Obviously, this person is oblivious to what is actually wrong. the problem with hiring brilliant people isn't a matter that they cause trouble. It is that they cause trouble for people who don't do things right. This is quite typical of the US government these days. Obviously, the management in the NSA is incompetent, the behavior is unethical, and the motivations are against the wishes of the people they are supposed to protect.

Our government these days is kind of like a rotting carcass: it's been rotting on the inside for a while now, but the intact skin has been holding it in. Now the skin has begun to rot and we are now seeing that the whole thing is going to fall apart very soon. There is no saving it.

By catnipgames on 9/2/2013 7:59:01 AM , Rating: 2
Why is this insanely biased opinion piece being represented as a news story on DailyTech?

Better metric
By PaFromFL on 9/2/2013 9:12:12 AM , Rating: 2
A better (but hard to measure) metric might be the amount of work performed by a contractor versus a government employee per dollar of wages and benefits. It would be hard to convert this into a ratio if it were discovered that the government employee performs negative work.

I didn't know SAIC was a subsidiary of Honeywell. Was this some secret leaked by Snowden?

it is a wel earning project
By mehcin on 9/2/2013 2:28:35 PM , Rating: 2
what Joseph explained I'm taken by surprise that a mom able to get paid $7383 in four weeks on the internet. see it here

By Latanya1RPowell on 8/30/13, Rating: -1
More piss poor reporting
By flatrock on 8/30/13, Rating: -1
RE: More piss poor reporting
By Master Kenobi on 8/30/2013 3:40:33 PM , Rating: 1
Snowden is a clown that wanted to gain some fame and get into the history books. He has succeeded in that goal brilliantly.

If your goal is honest and open disclosure, you don't run to China and then Russia. You go somewhere like Switzerland.

RE: More piss poor reporting
By Reclaimer77 on 8/30/2013 4:55:57 PM , Rating: 2
Yeah thank god Snowden is blowing the whistle on Government waste!! I mean, who knew!??? I'm flabbergasted and stuff...

RE: More piss poor reporting
By Master Kenobi on 8/30/2013 7:16:05 PM , Rating: 2
If you are surprised about government spending, you don't pay attention. While we're at it, let's do some budget trimming on some of our other big sources of government waste. I'm talking of course about Medicare and Social Security.

I have no problem cutting the defense budget, but I'd also like to see the other two get some heavy cuts as well.

RE: More piss poor reporting
By Reclaimer77 on 8/30/2013 8:01:37 PM , Rating: 2
I was being sarcastic :)

RE: More piss poor reporting
By Master Kenobi on 8/31/2013 9:04:17 PM , Rating: 2
Hard to tell on these boards sometimes :P

By ShaolinSoccer on 9/2/2013 3:16:40 AM , Rating: 1
Well, maybe he got his face on a few magazines, a few TV shows, and a few (insert whatever the hell you want in here). If he made bank, then he accomplished what he wanted. I'm sure he got advice from a bunch of people on what he should do.

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