Thursday, September 16, 2010

PaleoWage Labs #1 Dissection of a Contract

OK -- hypothetically speaking --a certain CRM firm actually pays Service Contract Act Wages previously reported on this blog. Here's how they may have arrived at their applicable GSA rates (taken from one contractor also previously reported):

          Wage      OH       Fee        Rate
        Salary       Profit         Overhead
$15.2189.00%10.00%$31.62   crew$30,420.00$5,749.38$27,073.80
$17.0090.00%10.00%$35.53   chief$34,000.00$6,460.00$30,600.00
$21.8296.00%10.00%$47.04    director$43,640.00$8,553.44$41,894.40
$29.0096.00%10.00%$62.52    PI$58,000.00$11,368.00$55,680.00

The OH is overhead -- the cost of doing business, paying for rent and equipment, benefits and insurance, oh, and corporate officer compensation. This firm checks out with an overhead rate hovering around 90%, so for every dollar paid in salary it costs 90 cents to keep the plant running. The fee is profit and 10% is a fairly standard expectation.

Think that PI actually only makes $58,000 a year? What if said PI was also an owner of the company? In that case, they would be entitled to officer compensations (a component of the overhead) as well as their cut of the profit. What would those numbers look like? Well, assuming a staff of 15 similar positions worked full time for one year, these would be the numbers:

Annual Billings : $5,301,585.30
Annual Overhead Billed: $2,328,723.00 (includes officer compensations, estimated here as 20% = $465,744.60 divided amongst 3 officers = $155,248.20 each)

Annual Profits Earned: $481,962.30 (again split amongst 3 officers = $160,654.10)

So, that PI/business partner earned an annual income of $373,902.30.

Not bad for Archaeology. Sad part is that this 6-figure salary was earned on the back of less-than-$50,000/year employees. This dissection doesn't take into account the quality of fieldwork...that's next time!

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