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Pay Cuts, Layoffs and Contract Recompetes

Posted by Bill Branstetter

LayoffI’m going to oversimplify the world of government contracting for the sake of explaining why you might experience a pay cut or a layoff after a contract recompete.

The government essentially has two options when it comes to soliciting work from contracting companies. They can base their selection criteria on a best value basis or a Lowest Price, Technically Acceptable (LPTA) basis. Best value, sometimes referred to as Performance/Price Trade-Off (PPT), needs little explanation. It means the government is willing to pay more to get a better solution or service. LPTA contracts on the other hand ultimately come down to price. The government will rank the proposals they receive in order of price. Beginning with the lowest-priced solution proposed, the government will determine if it meets all of the technical requirements. If it does that company will receive the contract award.

The government will usually provide the previous contract award dollar amount and the number of personnel on the contract to potential bidders. This is important data because, unless the scope of the work significantly changes, companies will always try and bid lower than the last award amount on an LPTA solicitation. Aside from sharpening their pencil when it comes to profit, there are two main strategies bidders use to cut costs:

  1. Proposing fewer people (resulting in layoffs and an increased workload for the remaining crew), and
  2. Proposing pay rates that are barely enough to hire minimally-qualified personnel.

Here’s where you come in.

When companies receive the solicitation from the government the list of qualifications needed for your position is usually very different from what you bring to the table. You are a systems engineer with 20+ years of experience, a Master’s degree and a handful of high-level certifications, but the solicitation calls for a systems administrator with 2+ years of experience, no degree and only one certification. Companies who are bidding on the work typically know nothing about your qualifications or your current pay rate. Even if they did, they wouldn’t be competitive if they priced your position to keep you at the same rate. Companies do market salary research using the minimum qualifications identified in the solicitation and propose rates accordingly. If they can divvy up your workload to others, they will cut your position. It’s not about you.

LPTA contracts have grown in number over the last decade due to increasing budget cuts. They aren’t popular with anyone except the people managing the budgets. The warfighter gets an inferior solution devoid of innovation. The customer gets personnel needing significant ramp-up time and additional training. The contracting company fights a constant battle between making enough money to keep the lights on and keeping their customer and employees happy. Employees change jobs more frequently to keep their pay rate in line with their qualifications.

If you’re looking for someone to blame, you’re going to have a hard time finding the right person. Even the top brass are working to curb the use of LPTA. The Under Secretary of Defense, Frank Kendall, issued a memo in March of this year clarifying the appropriate use of LPTA. Summary: Good for buying toilet paper. Bad for buying technical services. Click here to read the LPTA memo.

How should you prepare for an upcoming recompete?  If you don’t already know how long your contract is for, ask your company’s Program Manager for the dates of the base period of performance and any option years. Your CAC expiration date should also give you an idea. When the end of the current period approaches, search a government site called FedBizOpps.gov (also fbo.gov) to see if there is a new solicitation. When you find it, look at the selection criteria and determine if it’s LPTA. Then find your own position in the performance work statement and see how you match up with the requirements. If you’re overqualified or if your specific responsibilities aren’t mentioned, you should update your resume and LinkedIn profile.

As I stated at the beginning, I have oversimplified many aspects of the process. There are too many possible variations to account for in a blog post, but I hope this sheds some light on what goes on behind the scenes during a recompete and why it sometimes results in pay cuts and layoffs.

Bill BranstetterBill Branstetter is a corporate IT Recruiter, HR Director, Facility Security Officer and IT Manager for ASG in San Antonio, TX. He’s also the author of The Six Second Resume. Follow Bill on Twitter @billbranstetter.

This entry was posted on Monday, June 08, 2015 7:28 am

8 thoughts on “Pay Cuts, Layoffs and Contract Recompetes”

  1. Very good article. I thought it was about me until I started seeing my colleagues get laid off as well.

  2. Nice article – seriously – no smart vibe intended just in case.

    Unless you own your own company, maybe you could stop all 4 of those jobs for ASG or any other company and that would also help the situation – because I am 100% positive that when each of those responsibilities was piled on you, you did not translate it to money and ask for additional compensation, so you are essentially doing free work…

  3. Dear Bill,

    Read your article on contracts, very informative. I was wondering if you were looking for an FSO for your company. If so, please let me know.

    Regards,
    Juan Morales

  4. Recruiter: Government requires you to have 25 years of experience, TS with full-scope poly, CISSP, PMP, currently have a Bachelors and Masters degree and be willing to work 3 job roles.

    You: What is the salary range?

    Recruiter: $65,000 annually

    You: GET THE F OUTTA HERE WITH THAT BS!

  5. Good article, and so true. In past year, I’ve been RIF’d from two LPTA contracts when task orders weren’t funded. Each time I took a pay cut to get back to work. There’s no stability in contracting. “Expensive” employees are the first cut.

  6. Spot On. I’ve been through this process enough to realize some characteristics within all re-competes I’ve experienced:
    1. gaining company immediately loses half of the incumbents. They move on to other positions that maintain or increase their salaries.
    2. remaining incumbents are also “fishing”, the job just isn’t there yet. But they leave over time – along with your corporate knowledge base – to better paying positions. It’s knowledge base death by a thousand cuts.
    3. new incoming personnel are literally young people right out of the military with the right clearances, but no knowledge/experience. So you need to spend time and money on a vigorous training program.
    4. Within 6 months new incoming personnel gain just enough knowledge to know they are being under-paid for the work. They start “fishing” and leaving to better paying positions.
    5. remaining MID-level incumbents go on what we called in the military the “ROAD” program – Retired on Active Duty. Meaning they do just enough work to keep their job and no more.
    6. gaining company expects personnel to be team players for the company after cutting their salaries. Ain’t happenin’. Employee morale ranges from “indifferent” at the top end to absolute “loathing” at the bottom. If you’re the company PM looking for a friend, get a dog.
    7. the Intelligence Community (IC) is larger than DoD. Other Gov’t Agencies needing good qualified experienced personnel are taking advantage of DoD’s LPTA proclivities to hire away IC personnel who otherwise would not leave DoD.
    8. gaining company loses money in HR Shop due to constant turn-over as new hires replaces new hires of six months ago. DoD loses money on constantly granting new clearances for new hires, transferring old clearances to other agencies.

    I could right a book on this stuff.
    9. Gov’t customer is NOT happy with all this turmoil. But the Gov’t contracting Officer who approved this LPTA is long moved on to an SES position for saving the Gov’t money!!!

  7. Gov. customers, including IC, take advantage of the “new normal” in contracting. At start-up they want so many Level 1, so many Level 2 through 5 agile developers, project managers, or systems engineers, etc. At 5 years it’s re-compete time and the new RFP states requires THE SAME MIX of Level 1 to 5 technical people. Incumbent company can’t say “we’re your best choice because of our great experience and track record,” if they bid the same people (who know what they are doing) again and win–they got promoted, got raises in those 5 years. Success literally made them non-competitive–UNLESS they bid, win and say “now you folks must take a 10 to 25% pay cut to keep doing the good work you’ve shown us.”
    It’s interesting that no one on the procurement (government) side of this process ever gets told they have to take a pay cut every 5 years of hard work, or to spend the next 5 years with NO benefits. As a proposal manager I saw our company lose to an outfit that told the Government they would simply re-define their (exempt, high-tech) employees’ 40 hour work week to 44 hours. Any government folks had their work week re-designed lately?
    But this will stop because contractor employees vote. Congress will be told to force the Government to treat contractor employees essentially the same as its own employees. Just think, regulations now set, for example, wage ranges for certain trades. They will eventually mandate reasonable treatment of overtime-exempt, non-military, non-civil service workers.
    Just as some work and decisions can only be carried out by “Blue-Badge” folks, other stuff–critical to national defense–is best assigned to, and best done by contractors (who often deliver superior quality, dedication, and incredible passion).
    In the meantime, outrages are allowed, and even driven by the current environment.
    Take heart (or take heed, depending on which side you are on). The number of cleared tech workers available to be mistreated is on a downward trend due in no small part to the bizarre clearance process–we ITIL nerds would call it anything but a “process”–retirements, government security snafus, etc., etc. We will gain increased leverage. THE PENDULUM WILL INDEED SWING BACK.

  8. You would think that some of the smart folks who evaluate IT contracts would realize that their is no free lunch and that all of patently bad business practices will have future consequences. I mean no sarcasm when I say “smart folks” because frequently those evaluating are truly the best and brightest. There does seem to be an accountability issue here as one of the above commenters mentioned, but there will always be a cosmic toll for those creating hardship for honest, hard-working people. I’ve just been RIF’d as an intimidation tactic against the rest of the team — as a senior guy and mentor for the rest of the team, I spoke out to management of the new prime. I hope my demise benefits the young guys who really can’t afford to take the salary cut.

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