Monsters in the Closet:

Report Number: NPS-AM-07-019

Series: Acquisition Management

Category: Outsourcing

Report Series: Proceedings Paper

Authors: Timothy S. Reed, Jenine Cowdrey, William Pike

Title: Monsters in the Closet:

Published: 2007-04-01

Sponsored By: Acquisition Research Program

Status: Published--Unlimited Distribution

Research Type: Other Research Faculty

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Keywords: A-76 Process, Labor Cost Growth, Collective Bargaining Agreement (CBA), Wages


Federal Government agencies convert in-house positions to contractor positions via the A-76 process in order to save money. During an A-76 conversion, stable future labor cost growth is assumed. This assumption is faulty in cases wherein the contractor workforce subsequently unionizes. Unionization may lead to unanticipated increases in cost, threatening the savings projected during the A-76 process. This study seeks to: 1) compare the rate of labor-cost growth for military, civilian, and contract employees and 2) compare current labor costs for a sample outsourced activity (fuels) to labor costs for the military requirement based on manpower standards. The study finds that overall, annual collective bargaining agreement (CBA) wages increases were typically 1-2% higher than Service Contract Act (SCA) wages increases. However, we found no evidence that contractors performed functions in our sample functional area at a higher cost than in-house. The actual cost of contractors averaged ~40% less than the cost derived from the military manpower standard. The actual in-house cost averaged over 20% higher than the cost derived from the manpower standard. Our results indicate that for the fuels functional area, A-76 actions remain economically advantageous to the government, despite increases in contract labor cost.