Why is contract work so expensive?

Relative newcomers to the software industry, as well as a lot of people looking to get software done often ask some variant of the question “why does it cost so much to contract a developer?”  It might be disguised as “Why would I pay that much for a 3rd party component?” or “I can hire a junior programmer for a year for what they want for this!” but it always boils down to a misunderstanding of a value equation.


If a contractor quotes you $80 and hour you might be quick to say “that’s about $160k a year!  Screw that!” but that misses a lot of things.  Leave out the fact that the contractor has to pay insurance, workers comp, FICA and all the overhead of a business.  Lets focus on what you’re buying. 


You’re not just buying an hour of that person’s time.  You’re buying the years of experience doing other work they have.  They’re going to have seen far more problems and srewed up applications than a junior programmer will see in even their first 2 years.  You’re buying access to a portfolio of base code they can draw from that is largely tested and true.  You’re buying the late nights that they spent on past project pulling out their hair so that pitfalls are quickly avoided on your project.  Essentially you’re paying for a much better ability to control the cost and schedule of your project.


So you’re still thinking “it still seems expensive” are you?  Well face it, you can’t sell an hour more than once.  If the contractor is selling you a product, you’re getting a pro-rate on the hours spent developing the product because you’re sharing the development hour with all of the other people buying the product.


Does it always make sense to contract out?  Of course not, but next time you’re project has shot past a delivery deadline or gone overbudget and think about the experience base you have working on it then ask yourself “would having this project where the GANTT chart says I should be be worth the cost of a consultant?”

1 thought on “Why is contract work so expensive?”

  1. You’re right, a lot of people out there just see the dollar value for example the $160k/year as opposed to $60k a year for a junior person. What they don’t understand is, it usually won’t take an experienced person a year to complete a project (of course that depends on the project) but will usually take half or a quarter of the time. When the project is complete the customer can have the confidence they will have many years of experience behind the completed project. As opposed to a junior programmer, it will usually take longer, will learn along the way and won’t have the experience behind the finsihed work. What I mean from experience is architecture, design, maintainability etc. Don’t get me wrong I’m not putting down junior people (even I was junior at one time) but companies have to be willing to pay for experience and knowledge.

    I find companies looking to hire only look at the money value and don’t look at the business value. Think about it…if they hire a senior consultant, hopefully the other employees on the team can feed off the consultant and hopefully learn from the consultant to help the project/business and thier own careers. This would hopefully improve team moral, participation etc. I think that alone justifies a high rate.

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