The Office of Management and Budget is expected to issue guidance shortly on how to compare the cost of contract services with services provided by federal employees.

Sen. Claire McCaskill, D-AR, chair of the contracting oversight subcommittee, said she expects the guidance within 60 days.

Industry groups have long complained that the government’s cost comparisons underestimate the price tag for federal employees’ benefits and overhead.

McCaskill said studies of the issue have been inconclusive because there’s no widespread agreement on how to calculate fully burdened costs. “Assuming that contractors cost less and that federal employees cost more doesn’t help this discussion, because frankly we don’t have any idea whether that assumption is true or false,” she said at a March 29 hearing.

In a statement filed with the subcommittee, the Professional Services Council said agencies should share their cost analyses with affected contractors and provide a mechanism to appeal insourcing decisions.

Sen. Rob Portman, R-OH, a former OMB director, complained, “We don’t have the kind of data-driven analysis that we need to make these decisions wisely.”

McCaskill said contracting has “gone wild,” with contract costs growing 79% over the past decade while spending on federal employees increased by only 34%.

The Defense Department has led the way in contracting out services. McCaskill said DOD service contract spending has grown by 137% in the past 10 years. That increase was driven in part by the army of contractors in Iraq and Afghanistan.

“As somebody who has had a 50-yard line seat watching contracting…I know that anybody who believes we can’t find savings in Department of Defense contracting doesn’t know the issue,” she said.

In 2009 the Defense Department estimated it could save 40% by insourcing work performed by contractors. Jay Aronowitz, deputy assistant secretary of the Army, testified that the figure was “budget-driven,” not based on analysis. Then-Defense Secretary Robert Gates later said the anticipated savings had not materialized and pulled back on the insourcing initiative.

Aronowitz said the Army’s savings have ranged from 16% to 30%.