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.