Are there US Federal or State Government programs financing R&D for software companies serving government customers?

 As in  worked in Information Technology. We hired contractors because the government did not have people with up-to-date technical skills. Why? Because the government was rooted in the bureaucratic systems of the past with no significant funding to recruit and train employees in the emerging technologies. The government does not usually move fast.

While there are many good, dependable government employees, in critical projects it is difficult to limit the exposure of the few not so good employees. Uniform treatment and opportunity is baked into the system. If it costs more to fix the work of a poor employee that it did to pay them, that doesn’t make sense. It’s easy to replace contractors, and negative production employees occur in both government employment and from contractors.

For political reasons, the government often operates under employment ceilings. When there is a shortage of needed staff, hiring contractors is an easy workaround.

As for cost, it is more expensive per hour to hire technically qualified contractors than to use skilled government employees. Contractors may cost significantly more per hour because the government has to pay for the contractor’s overhead and profit. The government pays its employees on a common pay scale; a very productive government employee in a particular slot gets paid the same as a not so productive employee in the same slot. Contractors can pay what their employees are actually worth.

For unskilled contractors, it may be less expensive to hire contractors willing to work at common labor. Government employees often have additional responsibilities beyond the common labor task and therefore, cost more per hour.