Here is some simple truth that I didn’t appreciate when I started my business. You may think that you are an cyber/international development/big data services company but in reality you are a cyber/international development/big data STAFFING company with marketing and a shared back office bolted on.
As a services company you make money by winning contracts and then finding people to do the work and you make your money by billing those people to the government. So if you can’t rapidly find the people to staff on the contracts that you win then you will rapidly be out of business.
Additionally, in your proposals you will frequently have to submit the resumes of key staff (most often the tech and management leads) so you need a pool of talent to find people that will help you win.
Key moments in the staffing cycle: So here is how I recocommend you plan for your staffing
30 days before you SUBMIT YOUR PROPOSAL: Generally you will have to include resumes for key personnel as part of your proposal so I recommend identifying those people at least 30 days before you submit your proposal
The government knows that a lot can happen between submitting your proposal and commencing work, including your key personnel taking other jobs so you can generally sub in new key personnel (the contracting officer will have to sign off on the change but so long as the replacement is of a similar quality this shouldn’t be an issue)
You can sign a contingency contract with key personnel so that if you win they are committed to joining your team. In theory this is great but in reality this is tough because you have NO IDEA when the work is going to start. The RFP may say work will begin on May 1 but that is at best a wild guess and high quality people wont hang out not getting paid for the contract to start, and you don’t want to be on the hook to pay someone on May 1 if the contract get hung up in administrative grief and doesn’t actually begin till Aug 1 (this happens ALL THE TIME). So while contingency contracts are great don’t try to enforce them too strongly
30 days after you win: You have to be ready to start work 30 days after contract award (or sometimes less) so that means you need to have all the people identified, vetted, on-boarded, and ready to work 30 days after you win. If it is a large contract you may get away starting with 80% of the people you promised but as a new company you should shoot to be fully staffed on time.
Given this tight timeline, I hope you’ve been doing all the prep we recommend
How do I find the people: As you can see above there is a lot of uncertainty about timing but the government doesn’t care about your troubles and expects you to have the people you agreed to provide when it is convenient for them. So if you are going to make this go smoothly you need to have planned for it and have a couple of different staffing channels ready at a moment’s notice. So here are the most common ways to get the staff you need
*Cost: When we ranked options in terms of cost we considered a couple factors:
1) Whether you will have to pay someone’s salary while they are “on the beach” (while a person is non-billable which is usually the amount of time you pay their salary after their last contract has ended but before their next contract begins)
2) The cost you pay to the service provider
If you don’t use a staffing agency: If you don’t use a professional staffing firm make sure you document your hiring process, you will need this to comply with government equal opportunity requirements in case you are sued over your hiring practices.
Staffing agencies: Love them or hate them staffing firms can be a lifesave (but a potentially crippling lifesaver) so I want to spend a few minutes talking about them
How staffing agencies charge: Most staffing agencies charge on a success fee basis, so you tell them who you need and they bring you candidates, then if you hire one you pay them. In theory this is straight forward but there are some things you need to consider:
- Staffing agencies charge 2-3 months’ salary (e.g. ~20% of their first year salary)
- Profit margins on service contracts tend to be in the 10% range (so you will lose money on someone in their first year if you get them through a staffing agency)
An example: So lets do an example together:
You need to hire 5 people whose direct costs are $120K/ year each (e.g. salary plus benefits, time off, etc), or $10K a month each
You are bidding an RFP where you know that price is the critical evaluation factor so you want to keep your rates as low as possible so when you build your bid price you assume that you will not have to use a staffing agency (you’ll staff all 5 through your person network)
You win the bid but you are only able to staff 4 of the people so use a staffing agency for the 5th so what did that do to your net profit margin?
Pretty scary, using a staffing agency for one person cut your effective profit margin in half.
Another perspective on Staffing Agencies: So the above is pretty scary, but
If you hadn’t used a staffing agency you might not have been able to staff that person and you could have been booted off the contract with a negative performance review
Even if the contracting officer allowed you to start the contract with only 4 people you are not getting paid for the missing 5th person, so you are missing out on revenue and profit while you look for them
Most contracts last five years and you only have to pay the staffing agency once, so after that first year you are back to full profit
Most staffing agencies want their commission upfront so you have to pay them, and start paying the person they found which can be a HUGE strain on a small business’ finances
While staffing agencies find people and do the initial vet you will still have to do some final vetting yourself
Claw back: It is best practice that the staffing firm cannot staff the same person on another contract for 2 years (e.g. they can’t go to the person they staffed on your contract, get them to quit, and then staff them to another company)
Selecting a provider: Please see the comments below for recommendations but I’m going to promote my service this time. Eastern and Federal Foundry provide a unique staffing solution catered to the needs of the government community.
After seeing our members struggle with the financial burden of traditional staffing companies we have started our own staffing service that was designed to meet the needs of small government contractors!
For Eastern/Federal Foundry members:
- Commission: 15% of first year salary if a candidate we find is hired
- Instalments: Pay the commission over 6 months
- First payment: We know contract commencement is an expensive time and many people don’t have a line of credit or deep savings so your first payment isn’t due for TWO months after contract comencement
- Commission: 20% of first year salary if a candidate we find is hired
- Instalments: Pay the commission over 6 months
- First payment: We know contract commencement is an expensive time and many people don’t have a line of credit or deep savings so your first payment isn’t due for ONE month after contract commencement
For more information on Federal Foundry Staffing EMAIL US