Posts Tagged‘contracting’

Market Value: It’s Not As Scary As It Sounds.

As an IT contractor I’m really just another faceless item in the meat market of IT skill sets. Every 6 months or so I’m usually in the midst of a couple of hundred other contractors all of whom are looking to either extend their current contracts or are dutifully lining up for each new job that comes along so that our prospective employers can look us over and select the best one of the lot to throw to their various project wolves. We’re still treated like real employees for the most part but we trade off things like on the job training and annual leave for the almighty dollar, usually in the hopes of coming out better off overall at the end. Consequently we’re slaves to the market as for every person that’s charging X to get Y done there’s a slew of them who will do it for a fraction less and coupled with the Gershon report there’s every chance you’ll be usurped by one of them before you know it.

Market value is the key metric by which us contractors define what rate we charge our employers. It’s a rather complicated metric to define as there’s no definitive source of contractor rates (although contracting agencies do have some on their own contractors) so for the most part it’s done on secondhand information, industry rumors and a whole swath of guesswork. Still for any given position you can come up with a reasonably good figure for how much someone in that position would be charging give or take about 10%. Of course budgets play a big part in what people are willing to pay for certain types of work meaning in places like Canberra when the end of financial year comes around we’d start to see an upward trend in rates as all the government departments spend all the leftover dollars they have.

However the term market rate doesn’t seem to apply if you’re looking to extend your contract. Now I’ve been through a few of these myself and every single time when I’ve asked for a rate increase I’ve been knocked back. I can lay a fair amount of the blame squarely at the Gershon report for that as it was responsible for devastating the contractor market initially and continues to keep our rates in check. That’s not a particularly bad thing as for a long time departments were hiding large staff costs by using contractors (our cash comes from another bucket) and the Gershon report forced them to come clean on the matter. Still when you get someone in a position and they’re doing the job aptly it makes sense to keep them at their market rate, lest they start eying off positions elsewhere. Contractors by definition are not bound to any employer and are more than happy to wear the risk of being unemployed if they feel a better deal is to be had elsewhere.

You could write that off by saying that my market rate was what they were paying me in the first place but unfortunately after leaving a previous contract and gaining the rate rise I had originally requested I knew this not to be the case. Granted at the time they had told me that they wouldn’t extend me (I had completed all the work they needed me for and I saw this coming months out) but after landing the new position they asked to retain me at the same rate, fully knowing I had already sourced employment elsewhere. My last request for a rate rise was also rejected purely on the basis of the Gershon report. I was willing to wear that one though as I’d only been there for 6 months.

I can understand the reasoning behind wanting to keep costs low as any department caught spending big on contractors doesn’t look particularly good. Still research shows that replacing an employee will cost you about 1.5 times their current salary meaning that the paltry increases that they may be asking for above CPI are mere peanuts. I have yet to find any organisation that understands this as most, whilst disappointed to lose good staff, have never made a concerted effort to retain me. Many would argue that my now long list of past employers would be a detriment to finding future work, but they’ve been saying that since I started job 3.

Maybe I’m just bitter about having to jump jobs every year because my current employers never want to give me a raise, but talking with my other contractor buddies it doesn’t seem to be isolated to just me. I turned to contracting over 2 years ago as it suited my style of work and with the hopes that my employers would then recognize the value I was providing. More and more it seems though that I’m just another employee paid from another bucket of money and if I believe that I’m worth more than what they’re paying me for my best bet to realize that is to continue the ship jumping I’ve been doing for the past 6 years. It’s quite possible that I’m just one greedy son of a bitch but my long list of satisfied customers would appear to say that I just severely underestimate my own self worth.

Yet another reason on the towering pile to get into business for myself, then I only have myself to blame if I don’t get paid enough. 😉

Gershon Report: Metrics Gone Wild.

As the old saying goes the road to hell is paved with good intentions. The Rudd government in their infinite wisdom and lust for slashing government spending after election turned their eyes onto my bread and butter: IT. This lead to the creation of a report that can send chills down any IT contractor’s spine when you utter its name, the Gershon Report. Released on 16th of October last year it coincided with some of the worst hits to the world economy in recent times and this proved to be disastrous for people like me who make a living out of providing IT skills for an hourly rate. Whilst I have managed to sneak under the radar of the Gershon report for almost a year now I know that I am not a typical case, and in most cases the report has lead to an erosion in capability for the Australian government.

Whilst the Gershon report has been in full swing I have worked at 2 government agencies here in Canberra, the Australian Maritime Safety Authority and the Australian Trade Commission. Both of these agencies have very specific requirements for their infrastructure and as such find it hard to attract people with the expertise required when salaries and benefits of the public service are far below what is available in the private sector. The remedy for this is of course contractors, as whilst their salary is higher there are no costs associated in providing things like sick/annual leave, superannuation or insurance. Additionally it is usually easier to bring a contractor on board than a permanent employee, with turn around times measured in weeks instead of months. Both of these agencies had a stable contractor workforce that was working well for them, until Gershon cast its eyes on them.

This is what sounded the death knell for many contractors’ jobs in Canberra:

Reduce the total number of ICT contractors in use across FMA Act agencies by 50% over a 2-year period and increase the number of APS ICT staff. This should save the Government an estimated $100 million (across both BAU and project-related work).

The above recommendation was made on the basis of submissions from the 100 FMA agencies as well as meetings and a couple visits to the local data centers in Canberra. The figure then was derived from primarily financial figures, giving little to no heed to the actual needs of particular agencies and whether or not they could attract the people required with the standard APS pay structure. This then lead to an outrageous backlash which decimated the Canberra contractor market by around 30%. Whilst at first this may seem like a good idea since the agencies are following the recommendations of the report there’s an underlying issue that didn’t make the headlines.

Initially many government departments offered contractors what they considered equal opportunities as permanent employees. Unfortunately for most government agencies their pay scales are unable to cope with high level specialists in any area and hence use contractors. This is in part due to the ingrained mentality that once you’re above a certain pay grade in the public service you are required to have some management responsibilities as well, something which the specialists generally do not have and do not wish to take on. Therefore many of these offers were simply turned down, and contractors continued to work out their current contracts.

When renewal time came along there was a mixed reaction from the agencies. In a shock turn around any contractor that could not be directly linked to a project or capitalizable expense was not renewed. The remaining ones were usually offered a reduction in rate and a much shorter contract. As a result many contractors then decided to take their business elsewhere, with many of them leaving for greener pastures in the private sector away from Canberra. Not only did this then leave Canberra wanting in terms of skills require for IT related projects it also drained many agencies of their corporate knowledge. Any skill gap that required filling would also require a lengthy period of corporate knowledge transfer, which typically costs around 1~2 months worth of employee time.

The Gershon report wasn’t all about contractors however, there was also a keen focus on the efficient use of IT resources. Talk to any IT expert and they’ll tell you it’s not a good idea to run something at 100% of its capacity 100% of the time. You need to build in some fat and redundancy in order to ensure that the system operates as expected without any surprises. Unfortunately the Gershon report, which used numbers more than anything else, saw this as a lack of efficiency and required extensive proof that the tolerances built into large corporate systems were required. This flies in the face of the ITIL principals of capacity management which dictate that you should plan for future requirements and build systems as such. Thus any ITIL aligned agency was then told that they had to increase utilization of their resources, which in some cases was just not possible.

The report itself was a good idea however the nature of the report is far too general to be applicable to all agencies. Specifically the smaller agencies were hit particularly hard as there is less room for them to improve their IT expenditure and efficiency. The lack of intangible cost considerations also leads to questions of the reports applicability as we have already seen that there are numerous hidden costs in trying to apply some of the recommendations.

Personally though I have been lucky to be able to duck and weave my around the reports various swings at me. Initially I did this through proposing large capital projects that would provide tangible benefits to the business, which did eventually get implemented. More recently I’ve been targetting direct cost reductions which, whilst not part of my specialist skill set, help keep me in a job for the coming months. Don’t let anyone fool you into thinking that us contractors have it easy, especially the ones of us who are still doing well in these harsh conditions.

And no, this isn’t a call for sympathy 🙂