Cost Plus

I work on a medium sized government contract. Previously it was a five year contract. However the latest one is three or four years in duration. It is a maintenance contract. We fix software problems and add small new features to a big system.

My relationship with my company is that I am a full time salaried employee. I am supposed to work at least 40 hours a week. However I get paid the same amount of salary regardless of how many extra hours I work per week.

In the old days, I thought I would put in a little extra time each week. The project always had a lot of work for me to do. My thinking was that if my company billed me out at say $100 an hours, I would be making my company an extra $100 for each hour I worked past 40 per week.

Just this week I went to some training for my company. The course I took was an overview of the company I work for. We did not get into details for any of the subjects we covered. One such topic was working on government contracts. I am now under the assumption that most of our contracts are based on a cost plus profit billing.

What this means is that the company charges the customer (the government) the actual costs it incurs during the work, plus some percentage of profits. I mentioned earlier that I am salaried. My cost to the company is fixes regardless of how many hours I work. Therefore working extra hours does not make my company any more money.

Since I am salaried, I know working more hours reduces my effective dollars earned per hour. However it also reduces the hourly rate my company charges the client. This is just a metric however. The amount of profit the company makes is not changed by the number of extra hours I work each week.

The conclusion of this discovery is that I should not work more than 40 hours a week. If I can get my job done exactly within the first 40 hours of the week, then it would be best to then go home. Working extra hours will not generate any extra dollars for me or my company. It would be a waste unless we were behind schedule. How novel.

Contractor Identification

When a contractor is doing work for a government agency, the client is going to want to know who are the employees that shall perform the actual work. There are many levels of validating these employees. At my company they requires that contractor employees get fingerprinted. It seems this is the same as the author of the Software Maintenance blog.

In the past I had to go to the police station to get a set of current fingerprints. Then I would take this to the government agency that issued the contract to my company. This was a messy business, with the ink for my fingers. It was also a bit disturbing to go into the police station. I felt like I was getting fingerprinted next to all the criminals that were getting processed.

Luckily my government client handles all the fingerprinting. And they have modern machines that can take the print digitally. No more need for messy fingerprint ink. The digital fingerprint scanner does not always work on the first try. But it is a big improvement over the old technique.

Who Pays For Software

I work on a good sized development contract. The customer wants us to accept input files in a different format next year. To assist in this, I think we are going to buy a product called XMLSpy to get the job done. The enterprise version of this product costs over $1000. Here is the challenge. Who pays for this software? And how do I get them to buy it for the project?

My company would like the client to pay for the software. However procurement is a lengthy process. It seems to take forever just to get the client to buy the software they need right now. It may be even harder to get them to pony up the funds to purchase a product they might need in about a year. I think this is a job for our Software Development manager. He actually knows how good a product XML Spy is. So I do not think it will be hard to get him on my side. Unfortunately he is the decision maker.

Things like this seem to vary from contract to contract. In some arenas, procurement of up to $1 million or more is no sweat. But you need to be talking with the top man, the decision maker. Right now I do not have the ear of such a person. I guess it is time to make those contacts. They could only help our company and project out in the long run.

Selling Source Code

I read posts on a software development message board frequently. Mostly these are guys that have started small companies to sell shrink wrapper software. One guy from Australia said he encountered a request from a United States state government agency. They wanted to purchase a license for his source code. They wanted to do their own modifications. The software author wondered what to do.

Here is a little more background. This guy sells an application for $150 a copy. This state government has a 1000 user license which cost them $5500. Some people commented that big agencies like to make sure they can continue to use the software even when the manufacturer goes out of business. This seems reasonable. But how do you come up with a price to charge the government for such a request?

You could calculate how many hours it cost to write the software. Then you could apply some hourly rate such as $100 per hour. Finally you could multiply that by a factor which represents the loss of you selling the license. Suppose it took you 1000 hours to write the software. At $100 per hour that would put you at $100k. From there you would apply some multiplier such as 2 or 3 to get the final bill.

Now I do not have any successful software selling for $150 a pop. But if I did, I would think that you could charge whatever the government was willing to pay for a license of the source code. This guy sounds like he is in business after all. It is just another type of business transaction. Of course he would probably have to go through some justification on how he arrived at the cost. But in the world of the government, there is probably a huge budget. A couple hundred thousand would be no big deal.

Work Locations Continued

In this post I continue a previous summary of places my current project has been located. The places listed in my previous post were sites leased by the client. They varied from good to bad. In this post I will review some other places our project has been located, including sites leased by the contracting company (my company).

An executive came to one of the bad sites we were located at. He decided this was no place for people in his company to work. So he pulled the project into a building owned by our company. This was quite an upgrade. You could tell the difference. There were people who made sure any problems we had got resolved. Phone not working? Somebody would take care of it right away. The network speeds were great. If I needed hardware, my boss could get it for me. An IT staff made sure all network printers were always up and filled with toner. The employees on the project felt good.

All good things come to an end. My company lost the maintenance contract on the project. I joined the new company that won the contract. However we went back to work at the client’s site. They did not have any cubicles for us to work out of. So we got placed in a big lab. I got the feeling that we were not invited guests there. People screamed whenever somebody pulled a network plug out of the jack. The door to the lab was locked, and it took forever to get access. So I spent a lot of time banging on the door to have someone let me in. There was a lot of noise in the lab. And it was either freezing cold or burning up. The only reason I stuck around was that the promised this was only temporary.

Once again my company came through for me. They relocated me to an office site leased by my company. I was required to dress more formally. But I can put on a tie for a good office. At the new location I have an office with a real door. And I have a window to the outside. I do share an office with one other company employee. However he must be away because I have not even met him yet. I have a lot of desk space in this office. I have a lot of room to put my books on a bookshelf. And I think I can request things for the office like a white board. This is the high life. I am expecting my morale to skyrocket. Parking is plentiful here. Sometimes being a contractor is not too bad.

Work Locations

When you work on a government contract, you work location is usually decided. I have been on my current project for a long time. So far we have moved six times. Some locations have been decent. Most of the locations were not optimal. When I talk about a location, I am talking about the physical environment. I thought I would share some of the places I have been stationed for my current project.

My first site for work on my current project was in a bad part of town. I guess they liked it because it was in the cheap rent district. However there were some advantages to it. Even though it was a building leased by our customer, there was hardly anybody from the customer organization there. We did have to go through metal detectors every day. But the atmosphere was relaxed. I brought in a bunch of toys to keep at my desk. I ran around without shoes most of the time. This environment allowed me to get a lot of work done for the project.

The second site for my current project was on site at the customer’s main building. It allowed quick access to the customer staff which was good. But it also meant that we were available for the customer to drop by our cubicles. We had to be on good behavior. The client did not want us making any noises that would disturb them. However we had a lot of noise pollution from other people. I will say this about the site – it had a darn good cafeteria. And even though we were in cubicles, the cubicles were decent.

We started to fail on a big new project for the customer. At that point we got moved to another site leased by the client. They put us in the basement of a remote office. The network was painfully slow there. People complained that nobody cleaned the bathrooms. We were still in cubicles. However they seemed smaller. We had trouble getting access to conference rooms. These were the gloomy days on the project. I don’t know if this location was chosen to punish us for failing on the big new project. It sure felt like punishment.


Our company requires you to undergo annual training on some of its policies. We must review the book on company policy. We also have to go over the company’s policy for working on government contracts. This is not unusual. The unique thing we must do is pass on online test. I found this test to be pretty lengthy and difficult. And you cannot get credit until you get all the answers right. The test helps you review the company policy when you get the answers wrong. This was all pretty impressive. Normally companies just make you sign something that says you got the training. My company makes sure you know what you need to know.

A good piece of evidence that the company is serious about following the rules is that they provide a separate charge number for you to do the training. Many other companies will skirt the issue. I guess those other companies are indirectly trying to get you to charge the hours to the client or do them on your own. This is not an accusation against some other companies that we compete with. It is what I experienced when working for a number of contractors. This is just life.

Here is the part that confuses me somewhat. My company goes through all this training and trouble to make sure we conduct business at a high level of ethics. But from the outside, I get the impression that people think the company is a bit sketchy. Once again I can testify to this myself. Prior to joining the company, I had thought the company used underhanded methods to win government contracts. Perhaps this was just because I did not know the facts. Or maybe the people involved with obtaining this specific contract were corrupt. I do not know. I don’t have hard evidence It is just that some circumstances seemed very suspicious in one of their wins.

In the end I joined the company. I figured that if you could not beat the competition, you should join them. As you have read I was pleasantly surprised. The company should do some more PR work to get the word out that we operate in this way.

Government Employee

When you are working on a government contract, you sometimes have to interact with a government employee. Some of them fit the stereotype perfectly. Come in and drink their coffee. The read the newspaper until lunch. Long lunch leads into an afternoon coffee break. Finally they leave early for the day.

But there are many other types of employees who work for the government. Some of them are very talented and hard working. Often times our subject matter expert is a government person. And I have been surprised to see that many government employees work late and on the weekends to get their job done,

In terms of software development contracts, the government employee normally has the role of overseeing the contract. They make sure things are running well. And if not, they try to figure out why. But there are also situations where the government workers are tasked to work side by side with the contracts, doing the actual programming for the task.

I have some insight into the government employee situation because one upon a time, I myself was employed by the federal government. But that is a story for another post.

Preferred Vendors List

Sometimes government contracts are open to anybody who wants to bid on them. My company's client has a different arrangement. They first issue a request for companies to submit proposals to get on the list of companies that are eligible to bid on tasks. More often than not, only very large government contracting companies win this right. Because you need to have money and time and expertise to submit your proposal. And winning only gets you the right to win actual work. You don't get any money for the first level win.

Once the rights have been awarded, all work that the government agency needs done will be put up for bid by those who have won the first level. This is, in effect, creating a list of preferred vendors for the government to award work to. I imagine this is a process that ensures the only contractors doing work have the ability (and size) to complete the large tasks that need to be awarded. It also simplifies the distribution of work since there is only a fixed number of companies that even quality to perform the contractual tasks.

There are times when this system appears inefficient. I spot many oppotunities where a smaller firm or even an individual could do a better job for some tasks. But I guess the client like the ease of this setup. For those with truly exceptional skills, but do not belong to any of these companies, there is sometimes the ability to subcontract to the approved list of contractors. There are no rules that state subcontractors cannot do the work. But the tasks can only be awarded to contractors on the approved list.

It is funny how these contacting and subcontracting arrangements work. There are even times when sub contractors themselves subcontract out the work. This scenario results in a high end cost to the government. I do not think that cost is much of as issue for them though.

Winning the Recompete

My company is a large government contractor. In fact, our vice president said we are the largest contractor providing services to our particular customer. There are some benefits to working for the big guy. I guess for the right people, there is a lot of money to be made. And we have the budget for overhead functions like proposal writing.

The current contract I am working on was coming to an end. Normally this is not a big deal. The client puts the contract out for recompete. And usually the incumbent contractor has a good chance to win the work in the future. Our situation this time was a bit different. We failed to deliver a huge rewrite of the system two years in a row. This cost the client a lot of money, both in paying us, and in lost profits from a lack of a new system.

Due to our situation, our company called in the big guns to ensure we would win the recompete for our contract. For once we got a truly competent project manager. And we got assigned a new director who was a superstar headed towards a vice president position. So listening to these guys, I was fully expecting us to pull off a win. And they put on a good show when presenting our case for why we should win the work. Unfortunately we lost the contract.

It appears a smaller and more hungry contractor underbid us significantly. They plan to do the same amount of work with less people. And I think they also plan to pay their employees less than my company pays us. If this new team can do the same work that my company can do, then the client has made a smart choice. Only time will tell. For now I am wrapping up work on this contract. Luckily my company is big. And they plan to roll me off onto another contract. In fact, my next gig will be a much larger project. Hopefully that means the potential to make a larger salary as well. Good luck to me.

Big Contracts = Big Money

I live in the Washington DC area and am a software engineer. Although I have worked for on a few commercial software projects, most of the work here is in support of one government contractor or another. The big contracting companies have relatively stable positions that pay well. Government contracting is a science all by itself.

In this blog I would like to explore the world of government contracting. I want to focus on those large contracts for software services. This does include contract to develop software systems. However the most common software contracts are those for long term software maintenance.

It is my hope that I can relay the experience of working for any one of the big contracting companies to other software professionals. I know the government contract world is nothing like the life at a normal commercial software development company. Maybe I can make the case for you to try working on a government contract yourself. Or maybe it will solidify your decision to stay in the commercial arena. Either way I invite you to come along for the ride.