Working Up

by Dwayne Phillips

I explain how any government delay leads to wasted taxpayer money.

No connection between the two items? Let’s walk through this.

Company A contracts with the government. Which government doesn’t matter – national, state, local – as they all exist on taxpayers’ money. Company A has these smart, dedicated employees who work on government contracts.

When they don’t have a contract, these employees sit around watching the grass grow.

They charge their salaries to what most companies call “overhead.” These overhead charges add to the bills that Company A must pay. Company A pays them with their “overhead rate” on government contracts.

Say Company A pays John Smith $50 an hour. Company A charges the government $110 an hour for John Smith. The difference is the overhead rate (that is a simplification, but the concept is true).

If Company A has to pay John Smith to watch the grass grow, that raises their overhead rate. Instead of charging the government $110 an hour, they charge the government $130 an hour. Their overhead rate went up.

How does the government reduce the overhead rate? By issuing contracts on time. How does the government raise the overhead rate? By delaying the issuing of contracts.

Hence, to pay John Smith closer to his actual salary, the government needs to be efficient and quick. Hmm, when was the last time any of us saw that?

Many years ago, someone described this situation to me. My reaction was quick and simple:

If John Smith has nothing to do – fire him. Hire him back when you have a contract.

That doesn’t work either. Due to government regulation, hiring a person costs a lot of money – more money than paying them to watch the grass grow.