What a contracts department actually costs

Every small federal contractor eventually reaches the same question. The proposals keep coming, the awards need administering, and the work is landing on people who were hired to do something else. Somebody says the obvious thing: we should just hire someone.

Then a salary figure gets quoted, everyone weighs it against the cost of outside help, and the decision gets made on that comparison. It is the wrong comparison, and it is wrong by a wide margin. The salary is not what the seat costs. It is not even close.

The number everyone quotes is about two thirds of the real one

The Bureau of Labor Statistics measures what employers actually spend on people, not what appears on the offer letter. For private industry workers in management, professional and related occupations, which is where all five of these seats sit, the March 2026 figures are unambiguous.

Read that the way a buyer has to read it. Benefits are 32.6 percent of the total, which means they add just under half again on top of the salary itself. Offer someone $100,000 and the seat costs you roughly $148,500 before anyone has equipped it, supervised it, or replaced it.

Where the other third goes

It is worth seeing the components, because three of the four are not negotiable and the fourth is the one people forget.

Legally required benefits are not a policy choice. Insurance is only a choice if you are willing to lose candidates to firms that offer it. Retirement is the same. The only line a small firm can genuinely economize on is paid leave, and cutting it is how you acquire a turnover problem, which as we will see is the most expensive line of all.

You buy 2,080 hours and receive about 1,840

Here is the part that never appears in the hiring conversation. A salaried year is 2,080 hours, and that is what you pay for. It is not what you get.

The BLS paid leave figure lets you work out the gap precisely. Paid leave costs 13.1 percent of wages per hour actually worked, which means for every hour worked there is a fraction of an hour paid and not worked. Run the arithmetic across a full year and roughly 240 hours, about six working weeks, are holiday, vacation, and sick leave.

That figure is generous, too. It counts every worked hour as productive, which no one believes. It excludes training, it excludes the internal meetings every employee attends, and it excludes the weeks after someone resigns and before a replacement is at full speed.

The honest way to price a seat is therefore total employer cost divided by hours actually worked, not by 2,080. Done that way, the numbers stop looking like salaries and start looking like rates.

Five seats, priced properly

A firm that wants proposal capability and post-award capability under its own roof is not hiring one person. Below is the full bench, at current market salaries, loaded at the BLS multiplier and divided by hours actually worked.

Two thirds of a million dollars a year, and that is before a single subscription, certification or supervisor. It is also a floor rather than a ceiling, because it assumes you recruit at the market average, nobody leaves, and every seat is filled every week of the year.

The costs that never reach a salary line

Four more categories sit outside the table above, and they are the ones firms discover in year two rather than in the budget meeting.

• Tools and intelligence. Opportunity tracking, contract writing or management software, and market research subscriptions. These are per-seat, annual, and they do not scale down when the pipeline is quiet.
• Certification and continuing education. NCMA certification, FAR and DFARS updates, and agency-specific training. The regulation changes whether or not you have budgeted for it.
• Supervision. Five specialists need someone accountable for their output. That is either a sixth hire or a slice of an executive's year, and the executive's hour is the most expensive one in the building.
• Recruiting, ramp-up and turnover. The search, the empty seat, the months before a new hire is fully productive, and the institutional knowledge that leaves with them. This is the largest of the four and the only one that recurs unpredictably.

The mismatch underneath all of it

Even if every figure above were affordable, the structure would still be wrong, because a salary is a fixed cost carried against a workload that is anything but fixed.

Federal work does not arrive evenly. Three solicitations can close in the same fortnight and then nothing for a quarter. Award activity clusters before the fiscal year ends and thins afterwards. A protest can freeze a pursuit for months. Payroll ignores every one of these rhythms, and a quiet quarter costs exactly what a busy one does.

That is the real argument against building the function, and it holds regardless of the numbers. The question is not whether you can afford $676,000. It is whether your pipeline will reliably consume 9,200 hours of specialist capacity every year, and for most small firms the honest answer is no.

When hiring is the right answer

It sometimes is, and a firm that tells you otherwise is selling rather than advising.

Hire when the volume is genuinely continuous, when a single agency relationship demands someone embedded full time, when your contract portfolio has grown past the point where an outside party can hold the whole picture, or when the work is so specific to your technology that no consultant will ever know it as well as your own people. If your pipeline reliably consumes a full year of specialist attention, an employee is cheaper than any alternative and you should hire.

What is not a good reason is the assumption that a $100,000 salary costs $100,000.