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Department of Defense

Reduce total % Overhead/admin costs on contracts/subcontracts

Publish, by company, the avg % of overhead/admin and profits charged on government contracts, to include admin costs for sub-contracted support. Include % of cost over-runs.

 

Publish a set of goals for desired % of overhead/admin, and profits - that is, based on best business practices and add to contracting toolbox to use for comparisons and assessing historical performance of company. Include a risk factor based on past performance metrics (delta between best practice and company's overhead/admin costs and profit, cost overruns, missed deadlines, unanticipated costs). This risk factor could be used in the contract review process to calculate real costs of contracts. If the metrics are published, companies will have to reduce overhead/admin costs and move toward the benchmark to be competitive. This idea shouldn't require significant costs to government to implement. Overhead costs can run up to 35% on some contracts and adminstrative costs for sub-contracts and additional 25%. It would be a significant savings given the billions of dollars the government spends on contracts today.

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Idea No. 13619