Have there been any comprehensive studies done to determine the most 
monetarily efficient way to execute government contracts?  By going 
in-house, e.g. through UNICOR, the goverment eliminates the overhead 
of the bidding and accounting process; however, UNICOR does not 
always provide the cheapest price.  Also, by not awarding contracts 
to non-goverment firms, the feds cannot recoup any taxes that might 
have been collected from that activity.

Some simple math for a simple example contract (warning -- I have 
never taken an economics class):

CU = cost for contract if done by UNICOR
CN = cost for contract if done by non-government entity
HU = overhead with UNICOR
HN = overhead with non-gov.
TN = fed tax rate with non-government contract (corporate, worker 
wages, etc.)
PU = rate of profit to penal system (and hence govt.) with UNICOR

Statement in question:

(PU - 1) * CU - HU >= (TN - 1) * CN - HN

This can be transformed numerous ways to visually isolate 
significant quantities.

This 1st order model does not take into account macroscopic 
differences, like the fact that UNICOR "employees" cannot spend 
their money very freely outside the prison commisary.

I think the question is significant because this issue is germane to 
other government areas, particularly big-dollar defense contracts.


Sourav Mandal

Sourav K. Mandal

Massachusetts Institute of Technology
Department of Physics

"In enforcing a truth we need severity rather than
efflorescence of language. We must be simple, 
precise, terse."

                      -- Edgar Allan Poe, 
                         "The Poetic Principle"


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