Where contractors grew out of control. (Photo by flickr user pingnews, used under a Creative Commons attribution license)

Every day, thousands of people stream in and out of the World Bank’s fortress-like headquarters on Pennsylvania Avenue in downtown Washington, working on projects meant to fight poverty and inequality around the globe.

But in its ranks, the bank harbors its own form of inequality.

Not everyone who works in the building is a bank employee, with the cushy benefits and pension that come with a staff badge. Roughly half of them are consultants, brought on for fixed contracts that often end up being renewed over and over again. Across the bank’s offices worldwide, there are currently 19,608 contract workers who make up 8,225 full-time equivalent positions, compared to 15,551 employees, according to the Bank’s staff association.

Outsourcing core functions to non-employees is increasingly a common practice in corporate America, which seeks to minimize costs by hiring contractors when they have extra work, and shedding them when they don’t.

Here’s the part that’s troubling staff and contractors alike: The bank has seen an unusual surge in its “non-standard” workforce in recent years, spurred by an organization-wide restructuring led by Bank President Jim Yong Kim that has at times made it very difficult to bring on new staff. So managers have hired consultants in place of full-time employees, raising concerns that their labor might be exploited.

Now the World Bank is reexamining its practices. Sean McGrath, the World Bank’s vice president of human resources, says the institution plans to quit contracting out ongoing, essential work on a short-term basis. For the first time, after a period of financial turmoil, the bank is starting to budget in three-year cycles rather than one -- which could help bring some stability to its workforce as well.

We really have to challenge ourselves to make sure they’re truly short term,” McGrath says. “The idea that you do the same job year in and year out as an STC is going to be a thing of the past.”

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The relative growth of consultants and bona fide employees at the World Bank. (Graphic by the World Bank Staff Association)

The use of short-term consultants began decades ago. The World Bank, an international financial institution that underwrites infrastructure and social welfare projects particularly in developing countries, needed specialists to advise on projects in places where it might lack the knowledge necessary to finish the job.

Gradually, that category of non-regular staff expanded into a “long-term contractor” position. By 1998, there were so many consultants on indefinite contracts that the bank’s director eliminated all of them.

Many became employees. Some signed short-term contracts, which were only supposed to take 180 days in a given year. Again, the category ballooned, fed by older staff who would retire and return to work as consultants, collecting per diem rates as well as full pensions. In 2006, another director cracked down again, by cutting the number of days a contract could last from 180 days to 150.

“The intention was to make sure staff were working elsewhere, and didn’t become dependent on the bank,” says Daniel Sellen, the current president of the World Bank’s staff association.

That didn’t work for long either. The number of consultants — both “short term,” who provide more professional services, and “temporary,” who do administrative work —  escalated sharply during the recession, from about 16,500 in 2007 to more than 20,000 in 2014. The headcount dropped slightly in 2015, but the number of days worked overall continued to rise. Hundreds of consultants work for years on end, seeing their contracts renewed as soon as the agreements run out.

“It’s this group that we’re most worried about,” Sellen says, “because they’re doing the structural work of the bank.”

According to the World Bank, the increase was driven by sudden demand, for which they couldn’t hire staff quickly enough.

The number of people working on short-term contracts (as opposed to the number of full-time equivalent positions). (Graph by World Bank Staff Association) The number of people working on short-term contracts (as opposed to the number of full-time equivalent positions). (Graph by World Bank Staff Association)

"This period was marked by three crises, the financial, food and fuel crises, resulting in a tripling of our lending to meet our clients’ needs,” spokesman David Theis says. "Given these factors, and that our needs to meet the crises were short-term in nature, our reliance on contingent staff escalated significantly.”

Recent surveys conducted for two internal groups upset with the status quo paint a different picture. One, sponsored by the bank’s staff association, and another by an ad hoc organization of bank consultants, provide a rare window into what happens when a large institution separates into two classes of people, many of whom are doing the same kinds of work, but getting much less in return.

The survey conducted by the staff association found that 66 percent of team leaders said they hire short-term consultants for longer term projects. Forty-four percent of those said they do so because it was very difficult to bring on full-time employees. That situation grew particularly bad during the bank’s reorganization over the past couple years, as hiring freezes were imposed; there were also no performance evaluations for a couple years, leading to a lack of accountability.

“Hiring an STC was like buying a box of printer paper. There were no restrictions,” says Paul Cadario, a former senior manager who retired from the bank in 2012 and now is a fellow at the University of Toronto’s Munk School of Global Affairs.

Cadario said the reliance on short timers could prove troublesome when contracts ended, and work was interrupted. Managers also took advantage of the process to circumvent policies meant to foster diversity in the workplace.

“In Washington, there would be a bias toward the hiring of Americans, people with green cards, and possibly to the hiring of people with G4 visas because they were married to World Bank staff," he said.

Some managers found a way around the 150-day limit, by allowing part-time consultants to effectively work full time, and sometimes coaxing them to put in time off the clock. Sixty-three percent of respondents to the staff association’s survey said they essentially volunteered more than the number of days stipulated in their contracts.

“Some worked for bosses who said ‘I expect you to be here all the time,’ ” Cadario says. “And there were some managers who said 'If you don’t work 170 days, I’m not going to renew your contract.’”  

That situation is particularly pronounced for foreigners on G4 visas, who are barred from working for anyone else. But for most consultants, the bank is functionally their employer; 90 percent of them say they rely on it as their main source of income.

Largely because of that, they make substantially less. According to the Bank’s published salary structure, “professionals” and “senior professionals” -- who compose the majority of the staff -- make $101,806 and $139,957 respectively, on average, plus more than half as much again in benefits. Although consultant rates are not published, according to reports on the salary website Glassdoor.com, they make about $44.29 an hour, which comes out to $53,148 for a 150-day contract, with no benefits.

But it’s not just the money. Often they are left with a sense of general professional disrespect.

"Even though the work is done by the STC, most of the time, credit is taken by the staff,” said one consultant, who requested anonymity in order to avoid putting her job at risk. “Thus, it is not motivational to work as an STC sometimes. Unless you work with someone who is caring and can push you to be staff, you are buried.”

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By all accounts, the World Bank’s consultants love their work, and prefer even their tenuous employment to another job where they couldn’t feel like they were making some kind of positive difference.

But viewed another way, their situation mirrors that of contingent workers throughout the economy, who according to the Government Accountability Office have lower pay and fewer benefits than the standard employees whom they may even sit next to. Companies often offload work to contractors because it’s cheaper, especially when job-seekers don’t have many options.

“In these business models, efficiency is variability,” says Sara Horowitz, president of the Freelancers Union, which advocates and provides services for contractors of all types. “The problem is, all the risk is borne by workers.”

The staff association’s survey found that 73.9 percent of male consultants and 81.1 percent of women are paid less than market rate for their services, meaning that the bank is getting them on the cheap. According to a survey by another group of consultants, fully a third of STCs have no health insurance at all. Ninety percent feel stress about the uncertainty of their employment when contracts run out.

McGrath thinks that handing out longer term contracts may allow the bank to attract stronger talent, and the best short-termers may be rewarded with an actual job.

But only the best.

“What we want to do is lock in our talent going forward based on the skills we have,” McGrath says. “I want to make sure that it’s really hard to get into the organization.”