1. If any fiscal entity (i.e., company, corporation, non-profit organization, division of the company or institution etc) in any given year receives more than 50% of the revenue from government contracts, then it has to (i) adhere to the General Schedule pay system and (ii) make its staff compensations transparent. 2. Such an entity cannot assign the same employee to perform some work for the government and some work for other clients. Staffing the government projects should be on the basis of utilization of 100% of each particular employee by not allowing any side work. 3. The worker/manager ratio should be made transparent in contract and regulated by the government client.
Bases: It would be fair for taxpayers, government and company/organization non-management employees and would save taxpayers' money.
By nature of my work, I happened to learn of the internals of one relatively small not-for-profit research organization with annual budgets over $20M that had long-term government contracts renewed every 5 years. The organization has status of the Federally Funded Research Center and is supposed to perform long-term research for the certain government entity on non-competitive basis; it had its charter emphasizing that it cannot compete for other government contracts. Initially, the organization had relatively low cost for its services, high research productivity and high quality products. Every year it prepared the Operations Plans that included research needed to be done during upcoming year and approved by the government client. But with time passed by, the governmental client made the organization staff perform more and more day-to-day routine work that government employees are supposed to be doing, and in effect, turned the organization staff to its own extension to a certain degree. That process was welcomed by the organization management who saw this as an opportunity to become indispensable for the client. The organization top management continued getting more and more concessions from the client, beefed up its own internal management structure without any reasonable justification but with the only goal to give relief and raise wages for several top managers of the organization, give them more opportunities to travel around the globe in search for new business with foreign clients, attend various forums, conferences and symposiums around the world for the taxpayers' expense and with no benefit to the client. By the year 2008 the worker/manager ratio was about 2.1 – 2.3, that is close to two workers per manager! Because of this low ratio and high overhead, the non-management employees had to spend nights and weekends for work and travel with no compensations whatsoever. The employees had so-called exempt status, meaning exempt from the labor laws, they could not demand any additional pay or compensation hours for overtime work, travel on nights, weekends, and holidays. The top management also continuously pressed the client to change the charter of the organization, so specially organized sub-division in the organization could compete for other government contracts non-related to its primary client. After the charter was changed under this pressure, the sub-division was quickly organized and its staff was able to write contract proposals and doing work for other government clients by charging its time to the primary government client projects, since it’s impossible to control how many hours a particular person spends on Project A and how many on Project B during a given workday. Top management used reorganizational opportunity to create another (!) layer of management and elevating their own levels by one more notch even though the total number of staff remained the same and number of non-managerial staff actually decreased. The pace of such organizational deteriorations was slow; it took about 30 years and even attracted attention of the local media that published articles on unjustified repetitive 10% annual raises for the top management only. The answer was that raises were needed to maintain quality top managers from leaving to other companies. At the onset of economic recession, the answer sounded pathetic. By the end of 2007, this not-for-profit organization of total 60 people including secretaries was receiving more than 90% of its revenue from a single government client, while the organization had its three top managers receiving compensations at 3.2, 2.2 and 2.0 times of the GS-15/10 level, respectively. Unjustified management compensations, overblown internal structure, low worker/manager ratio, high overhead made the organization’s services very expensive and non-competitive but their client did not have a choice anymore on cost+fee 5-year contracts. The government client had no other alternatives to have certain work done, it became overly dependent on the organization's services over the years, regardless of their uneffectiveness. Due to the government entity vertical and horizontal staff movements, the contractor became, in effect, "the corporate memory" of its own client! In addition, the organization’s newly organized sub-division continued to spend time searching for new business and doing actual work for others partially charging the projects of the original government client.
This example illustrates that how government client's relations with a contractor can degrade over the years and lead to create the situation that is unfair for the contractor's non-management employees and wasteful for taxpayers although may be completely legal.