In this report, we show that the prevalent methods for comparing contractor employees with government employees, in terms of overall cost, are generally inadequate. Too often,government labor rates are directly compared with the cost of procuring a service from a contractor. Needless to say, such comparisons fail to account for the full range of costs. Part of the problem is that a comprehensive, standardized methodology to compare costs has yet to be articulated. We contend that a meaningful analysis must occur in a multi-dimensional space that includes the following factors: direct costs, indirect costs (i.e., overhead), the military or government civilian rotation base, contractor agility and scalability, and the benefits from competition. At present, however, the make-or-buy decision that leaders regularly face is based,it seems, on little more than intuition or preconceived bias.
School Authors: William Lucyshyn