Government Contracting

With over 2 million civilian employees globally, the US Federal Government is the largest employer in the United States. Despite this, there are a lot of things the government doesn't do. When the government doesn't want to do something, it is able to outsource the work to private companies. Usually, this comes by way of requesting bids for the good or service. Once the bids are received and evaluated one company will be awarded a contract for that task.
Initially, this sounds pretty good. Contracting some duties to outsiders saves the government money. If a special skill is needed for a limited amount of time, contracting allows the government to get someone with the required skills into position quickly. Money gets saved when a person with those skills isn't need for long periods. Once the job is complete, the government releases the contract and life goes on. After the life of the contract, no additional funds are required. This is in contrast to a government employee who gets a pension and other benefits all the way into retirement. Contractors can also be brought on board to transfer their knowledge to government employees. In addition to people, contracts can also be awarded for tasks or services. For example, if a federal building in Oklahoma floods, the government can hire firms to clean up the mess and restore the building.
Contracting has been around for a long time. One of the easiest examples to think of is NASA. NASA didn't build the space shuttle. The Army doesn't build the helicopters it uses. The Navy doesn't build it's ships. These are all great examples of the benefits of contracting. The government doesn't have to maintain the construction facilities for these different tools. Instead, they get to take advantage of existing private infrastructure and corporate efficiency. This makes sense. If it wasn't done, the government would have to build and maintain construction facilities and engineers capable of designing everything it required. Through contracting, the government is able to say "I need a ship capable of x, y, and z." and then sit back and wait until it arrives.
Contracting comes with several downsides. One is the reliance it creates on outside companies and the lack of control over those companies. Depending on the way a contract is written, the government can have very little control over the implementation. One common contracting method is called "cost plus". In a "cost plus" contract, all expenses incurred by the contractor are reimbursed by the government plus some set profit margin. These types of contracts don't encourage cost savings because the government agrees to pick up the bill. That can result in tremendous waste. That lack of control can manifest itself in other ways, too. Often, contracts for professional services (like information technology) don't come with supervisory rights. That is, people working on those contracts aren't supervised by the government employees needing the service. Instead, they work for their company. If problems with the work develop, the government has to go to the company to fix the problem rather than the individual. In a fast paced environment, this can take entirely too long.
Other risks of contracting include the associated costs. When the government pays for a contractor, they are paying for a finite period of time. Then that finite period of time is extended over multiple years, the cost savings associated with contracting dissolve. For example, if an IT contract costs $250,000 a year it might be a good deal. The government has a critical need for that (specialized) skill for only a short period of time. However, if that contract is extended for 5 years, that contract has now cost $1,250,000. Had the government hired or trained someone for that job during the first year and canceled or reduced the contract for the subsequent years, a cost savings would have been realized. Government employees cost money too, but their costs can be spread over their entire period of employment. Retirement may seem expensive, but if calculated across all years of service it becomes cheaper. When a workforce which is flexible and trainable is developed, employees can be retrained as different requirements develop. In the long term, those "floating" employees can be used to reduce the number of long term contractors and costs associated with them.

Planning for retirement as a 25 year old

Without a doubt, I'm the oldest 25 year old I know.
I'm really excited about retirement! Not just because I want to sit around on my ass all day and do nothing. I'm excited because I get to plan for it. I'm excited because when I turn 57, if I'm still with my current employer, I can retire. At that point, I'd have more than 30 years of service under my belt. As creepy and intimidating as that sounds, 30 years isn't all that uncommon at BuCorps.
What does retirement mean though? When I turn 57, I can check out of work and still get paid. At 57, I will qualify to get 30% of my "high 3" salary. That means that if, assuming my average income works out to $120,000 a year (my "high 3"), I would bring in $36,000 a year for doing nothing. In addition to my annuity, when I turn 59 and a half, I can withdraw from BuCorps' IRA. BuCorps' IRA has a 5% dollar-for-dollar match for IRA contributions. If I were to make $80,000 a year for the rest of my 30 years of service and contribute the full 5% I'm on the hook for, that account would have $240,000 in it, without investment gain. Historically, the funds the IRA invests in earn about 10% interest a year. If those formulas hold, the IRA would have over $2,400,000 in it when I was ready to retire. At that point, if I were to cash out of the account I would earn $48,000 a year for the next 50 years before I depleted the balance.
In addition to those benefits, I'd also qualify for social security at some point. Based on a salary of $80,000 a year until I'm ready to retire at 57, I would pull in $1,100 a month.
So, where does all that put me? From those three programs alone, my retirement income from ages 57-62 would come out to about $36,000 a year. After age 62, when I can withdraw from my IRA without a tax hit, I would pull in $84,000 a year. That's all independent of whatever else I might have setup.
This is AMAZING! How are people not pumped about that? And, really, how much would you miss that 5%?