FOREWORD The Manpower Utilization Subcommittee during the past few years has emphasized the need for the Department of Defense to curb the excessive use of tax money for advertising and other costs incidental to the recruiting of engineers and scientists by private industry. Based on this subcommittee's interest, the three military departments, in 1957, studied personnel recruiting costs of a selected number of contractors. These studies indicated that, in general, companies predominantly with Government contracts were spending more to recruit engineers and scientists and also had a higher separation rate than did those companies doing predominantly commercial business. With this information, top management in the Department of Defense took several steps working to the end for a more effective control of this aspect of defense costs. These steps included a revision of procurement policy by the Department of Defense. Each of the military departments issued revised and more stringent regulations. The departments, we understand, reviewed defense contractor costs and in some instances where routine examinations indicated questionable areas detailed examinations were made to determine the reasons for higher personnel recruiting costs. It is understood that as the result of these efforts, considerable progress was made in controlling this particular item of contractor expense. The Armed Services Procurement Regulations, however, have never attempted to establish quantative standards as a means to govern the allowability of recruiting costs. Instead the subcommittee has noted the continued use by the Department of Defense of the term "reasonableness" in allowing such costs as the recruitment and pay of professional personnel. The subcommittee felt this year that it was both necessary and timely to have a more recent report from the Department of Defense on the effectiveness of the current procurement regulations concerning this particular item of expense. The subcommittee, therefore, requested the Secretary of Defense in January of this year to make a sample check of both defense contractors and other companies with predominantly commercial business. The information has now been provided to the subcommittee and is being presented in the following summary and tables: SUMMARY The data on recruiting costs for engineers and scientists by private industry for fiscal year 1959 is in response to a request by the Manpower Utilization Subcommittee of the House Committee on Post Office and Civil Service. There were 102 private industry firms in the sample used by the Department of Defense to determine these costs. Of this number, 76 are classified as "Government contractors" in that more than 50 percent of their business during 1959 was with the Federal Government. In turn, the remaining 26 of the 102 firms in the sample are classified as "commercial contractors" since less than 50 percent of their business in 1959 was with the Federal Government. The firms were selected by the military departments and the Office of the Secretary of Defense under the general criteria established by the subcommittee. Significant aspects of the data as presented by the Department of Defense to the subcommittee are: (1) In general the contractors with predominant Government business spent more to recruit engineers and scientists than did those firms working predominantly on commercial business. (2) The separation rate of engineers and scientists from the sample of 102 firms, except for the Army "Government contractors" was considered pretty much in line with current separation rates, both in private industry and in the Federal Government. The following table reflects the separation rate and cost per new hire of the sample of 102 firms. Comparative data—Government contractor and commercial companies on engineers and scientific personnel (3) New hires of engineers and scientists by the 102 firms in the sample exceeded in general the rate of separation of the engineers and scientists. In turn, it was noted that the companies with predominate Government business hired a relatively larger number of engineers and scientists during the year than did those companies predominately working on commercial products. This fact is reflected below: (4) There were 4 firms, 3 classified as "Government contractors," that spent an average in excess of $2,000 per individual new hire, and 11 firms that spent between $1,500 and $2,000 to recruit each new scientist or engineer. All but one of the 11 firms were classified as "Government contractors." (5) An analysis of the data reveals several items that have been questioned by the subcommittee. A letter to the Department of Defense concerning these questionable items has been placed in the report, page 6. Personnel recruitment costs of selected defense contractors for the last fiscal year ended prior to Jan. 1, 1959 1 Contractor advised that large help-wanted advertising cost was the result of a "crash" program of national advertising for qualified engineers needed to handle increased business load. Contractor advised that its major operations were almost completely terminated in latter part of 1958, resulting in dismissal of engineering and scientific personnel. Increased business in 1959 required vigorous recruitment program. Contractor conducted an extensive recruiting drive during 6-week period ended after the year reported. A total of 18 people were hired in this period at a cost per hire of $826. Recruitment accomplished through employment agencies; hence no help-wanted advertising. Data refers to engineering aids, draftsmen, and technicians, as well as engineer-scientist personnel, because of inability to segregate costs. High turnover caused by fact that work locations are scattered throughout the country. • Because of small volume of Government work, these data are based upon discussions with contractor and represent estimates. 7 Details of "all other recruiting expenses" are readily available in some instances. Because these expenses are relatively significant, we are submitting some of these details, as follows: |