How to handle the "job hunt" professionally

I need some advice on how to handle a minor situation that has cropped up. I love my current job. The people I work with are great and my boss is a great guy. I was initially hired on a six month contract and that contract continues to this day, almost 5 years later. The pay is good (18% lieu of benefits/vacation) but I get no benefits, no sick time, and no paid vacation (okay, I do, but who saves their vacation pay?LOL)

Anyway, they've told me several times that they'd like me to be a permanent employee but they can't really do much as there is a union where I work. All positions must be posted and internal applicants take precedence over outsiders, which technically, I am. About a year ago they told me they'd start putting the wheels in motion to post the job but nothing ever happens on that front and I sometimes feel like work is pushed to me because I'm just "the contract guy".

So in the interest of job security and advancing my career I've started applying for other jobs. I would like to stay in my current position as it provides a wealth of future opportunities. None of that means much though with a contract job.

So yah, I started throwing out the odd resume. Well today I got a call for an interview.

Now, most of the people I work with I consider my friends. Including my boss. So what should I do now? Try to set the interview up on my lunch break (this place is 5 mins walking distance from my current employer) or should I make it known that I have an interview in hopes that enough is enough and I'm moving on unless they can offer me something more secure?

This will sound rude and/or harsh, but your workmates are not your friends. An individual spends a large percentage of their life working, true, and so your environment and coworkers matter, but in the world of IT, people come and go. It's all about having a good time wherever you're working. So I'd say that these people are people you're having a good time with, but I don't believe that they are truly your friends and that you have such an obligation to them.

OK, my opinion out of the way, your career is what's important. So taking that into consideration, you will need to factor in what you think their reaction to news of your job search will be. If you really really want to become a permanent employee there then you will need to let them know in advance that you are indeed searching. They will again dangle a carrot in front of you, but you'll need to make sure that the carrot is tangible. These metaphors are ridiculous, but you get the point.

I say that you should let them know in advance because if you go to this other interview and do get an offer letter and then let your current employers know, then you might end up in a quagmire - the new employers may not want to wait forever for your answer, the current employers may want to wait a whole amount of time for the actual process to kick off. That's why I suggested that you let them know in advance.

And you'll make new friends wherever you go.

I would say too that if you say to them that since nothing is happening you cant wait another 5 years so you will be on the job search. Hopefully they wil either understand and work with you or offer you a position and not take it out in any negative way against you for wanting to become a permenant employee and having to go elsewhere to get it.

Are you prepared to take any reactions they may have? Are you really ready to make a move to a new company? I mean what responsibilites do you have that you may want to take a look at to see if switching jobs will be too risky?

I'm 100% sure my current employer will understand completely so I agree...let them know.
Thanks guys.

Who knows, maybe they will wake up and surprise you. Also, assure them that you will not leave them abruptly if you do find something if they dont make you any real offer when you tell them. You dont want them thinking that they should start looking to replace you already