Analysis of Cost Growth in U.S Air Force Base Support Function Contracts

The United States Air Force USAF has outsourced a significant portion of their activities defined as commercial activities and plans to aggressively outsource more in the future. The USAF outsources its commercial activities in the form of multi-year contracts to the private sector. Cost growth either negative or positive has been experienced by most of these contracts. This research effort performed a review of current literature and used statistical analysis to clarify the issue what are the causes, and extent of cost growth in USAF base-support-function contracts. From the literature, it can be concluded that changes to the statement of work or performance work statements and Department of Labor DOL mandated wage rates are the primary causes of cost growth in USAF as well as other government service-type contracts. It can also be concluded that cost growth in the construction industry is similar to cost growth in USAF base-support function contracts. With respect to the statistical analysis of extent and various factors MAJCOM, contract function, contract type, and award year of contract, the following can be reasonably concluded. Cost growth in USAF contracts is widely variable. The median value of cost growth for all contracts was 4.56 percent, and the inner-quartile range value of percent cost growth was 13.63 percent. None of the variables within factors were statistically different at the 0.05 or 0.10 significance level except for the factor contract type.