Public Sector Services: What a ‘Person Year’ is and Other Work-Hour Quirks for Government Contracting

In writing up government contracts for services instead of goods, companies have to calculate the hours of work to be done, and that requires estimating an employee’s full-time equivalent (FTE) hours.

And because public sector contracts can last years, the language often must be given in “person years,” the amount of work a person can do in a year.

It seems simple, but as Public Spend Forum reveals in its look at the issues, it can get complicated in a hurry. Factors that complicate the calculation include holidays, sick time, vacation time, reserve duty, jury duty and family leave. And that’s not listing all the variables.

“Humans are unpredictable, but unfortunately, contracting officials get saddled with predicting their actions in order to draw up a reasonable contract,” the PSF article states.

So in the article you’ll learn more about FTEs, person years, options for calculations and, finally, how many hours should be in a person year.

Look over this paragraph from the article to see how the total hours for a year of work aren’t really what they seem:

“2,080 hours in a person year is equivalent to one person, working 40 hours a week for 52 weeks in a year. To be even more accurate, perhaps even to an annoying degree, 2,087 hours would take into account leap years. While ideal, this is, of course, unrealistic because it doesn’t take into account any of the time off that employees will expect to receive throughout the year. 2,000 is a bit more reasonable, taking into account the 10 national holidays, but it still leaves no room for vacations, or sick, emergency, and pregnancy leave. 1,920 would be even better, as it leaves room for not only two weeks leave for holidays, but also 2 weeks to fulfill any other needs for time off. Something even lower, like 1,860, could also be used to take into account more of the variables listed above. One survey suggested that most service industries, even outside of government contract work, required employees to bill at least 31 hours per week, which would whittle the figure of person hours per year down to 1,612 — which does not include holidays or vacations. With holidays and vacations included, this figure would become 1,519.”

Now that you can see how difficult it can be to narrow down, the article delves into how many hours you should put into the contract language. A lot of factors go into that decision too.

Read the full article here, and check out GovShop to find suppliers for the public sector market.  

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Voices (2)

  1. Nick deVries:

    The average service provider responding to a public sector RFP can be confident the productivity of its staff is twice that of the public sector entity, i.e. what a public sector employee takes 2,000 hours to do can be done in 1,000 hours by the service provider. This is due partly to higher skills of provider staff but in main part due to a lack of organizational accountability on the part of public sector employees. What this means for proposals is that even in cases where the public sector entity wants to multiply your hourly rate by a lowball annual number (like the 1880 above), that means you should staff (and generate your project cost structure) for only 940 hours. That 940 hours will deliver 1880 hours of public sector equivalent work. This is exactly the amount of work that the public sector entity would have completed on its own, plus your profit margin is legitimately protected.

  2. Steve Williams:

    I recently observed a spreadsheet that used 2030 as the hours to divide the salary to get an hourly rate. That hourly rate then was burdened with fringe, overhead and margin to achieve a fully burdened rate. However, when the proposal was evaluated, the client multiplied the hourly rate by the standard 1880 which obviously resulted in the lower bottom line. Should the proposal have multiplied the fully burden rate by the original 2030 and then divided by 1880 to get the available hours to bill for the year?

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