In downsizing, contractors at DOE fare better than feds

It's better to be downsized as a government contractor than as a federal employee, at least at the Energy Department. Buyouts for DOE contractors are bigger than those for the typical civil servant at the department, a new General Accounting Office report concludes.

GAO compared DOE's workforce restructuring plans for contractors-which feature buyouts, early outs, enhanced retirement and medical coverage-to similar packages offered by other organizations and the the benefits DOE provides to its civil service employees. While some elements of the plans, such as education assistance and preference in rehiring, were similar throughout the organizations reviewed, GAO found that DOE offered its contractors more lucrative severance options than most.

"Formulas in DOE's workforce restructuring plans allow for potentially more generous benefits than offered in some of the other benefit plans highlighted," GAO said in its report, "Department of Energy Workforce Reduction: Community Assistance Can Be Better Targeted" (RCED-99-135).

For example, feds who accept buyouts are paid a lump sum of one to two weeks of annual salary for each year of service. That benefit is capped at $25,000. While DOE contractors have the same cap, they are often paid much more than $25,000 due to exceptions for base pay and years of service. Half of the DOE packages GAO reviewed between 1997 and 1998 allowed buyouts to exceed the $25,000 cap, including seven workers at one facility whose buyouts averaged $64,907 each in 1998.

Of the 748 DOE contractor employees who accepted buyouts in 1998, 65 percent received payments of more than $25,000, the report said. Early out options were generally better for DOE contractors too, GAO found. Feds who qualify to retire early- before age 55 and with less than 30 years of service-may receive a separation payment, but must take a reduction in annuity. But under one DOE plan, contractors can add three years to their current age or eligibility in order to meet regular retirement standards without any penalties and with a cash payment.

DOE contractors also received better medical coverage under the department's restructuring plans. For the first year after separation, DOE pays for contractors' full medical contribution, and half of that cost is covered during the second year. In contrast, federal workers who wish to extend medical coverage after a separation must pay the full cost plus an administrative fee out of their own pockets.

Energy Department officials disagreed with GAO's report, saying "there is no significant difference in the types of benefits offered to DOE contractor employees through work force restructuring plans and the other classes of employees identified by GAO."

According to DOE, a private consulting firm hired to benchmark the agency's restructuring plans with others in the private and public sector found that DOE's benefit packages are similar to those offered by the Defense Department and private-sector organizations. "Overall, the frequency that DOE contractors offered classes of benefits is not substantially different than the offerings of other employers captured by these surveys," DOE said.