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SLK Contractor

Reasonable ratio of Indirect Labor to Direct Labor - any comparisons available?

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We have calculated that currently we have 4 Full Time Equivalency (FTE) Indirect Heads and 45 FTE Direct Heads. Total 49 FTE's.

So our current workforce is about 8% Indirect & 92% Direct. (Revenue approx $7M/yr, providing engineering & training services to government customers.)

Is there anywhere I could compare our labor utilization ratios to see how we measure up in this industry? Or does anyone feel comfortable sharing examples?

This analysis is part of our ongoing efforts to be sure we are running as efficiently as we possibly can.

Any input appreciated.

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I'm not in industry, but I'll bet you'll have a hard time finding that information from your competitors. If you're running inefficiently they'll want to keep you that way!

Besides, I imagine comparing ratios might not be that useful. Depending on the scope, the contract type, the nature of work, the geographical area, the skillsets, etc. the ideal ratio may be constantly changing.

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SLKContractor --

It depends.

Some companies like a lot of direct costs with minimal indirect costs. Some companies are okay with more than minimal indirect costs because it makes it easier to estimate future costs. (Because there are fewer direct cost functions for which to develop BOEs.) What is the philosophy of your company in that regard?

I found a write-up that discusses the direct vs. indirect choice. I can't vouch for the knowledge or experience of the author.

http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=837:the-strategy-and-tactics-of-cost-allocation-structures-part-2&catid=1:latest-news&Itemid=55

Hope this helps.

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