Study of Overhead Rate Behavior at a US Air Force Base in the Context of A-76 Competitions

In an effort to generate funds for force modernization, the Air Force is looking toward the private sector to gain efficiencies and save money. To decide whether it can reduce costs by outsourcing an activity, the Air Force develops a bid for comparison to those of potential private- sector providers. Current policy for estimating the overhead component of its bid is to multiply the direct labor costs of the activity by 12 percent (.12). This policy is controversial because there is doubt as to its accuracy and because it has altered the outcome of a significant number of competitions. This research analyzed overhead rate behavior on a U.S. Air Force base (i.e., Travis AFB) to: (1) determine the accuracy of the 12 percent rule, (2) develop an automated procedure to estimate overhead savings that will result from outsourcing a commercial activity, and (3) identify policies that would increase overhead savings if a commercial activity is outsourced. A brief summary of some of the most significant findings and policy implications is below.Air Force Inst of Tech Wright-Patterson AFB OH is the author of 'Study of Overhead Rate Behavior at a US Air Force Base in the Context of A-76 Competitions', published 1999 under ISBN 9781423540939 and ISBN 142354093X.