What Should Be Included in Overhead Costs?
Prison costs comprise: • Direct operations costs, such as staff salaries, inmate food, medical care, and other services. • Indirect (overhead) costs, such as regional and central office supervision, computer services, planning, and budget development. With respect to overhead costs, different approaches by the two research groups led to different findings. Basing its analysis on the extent to which the government actually provided resources to support the Taft operation, Abt concluded that only a bare minimum of support was provided. Therefore, the Abt analysis reported a 100-percent savings of indirect, overhead costs for Taft during the time period in the study. BOP, on the other hand, assumed that most overhead costs (planning, auditing, and other central and regional operations) could continue to be incurred by the government, even if a private company was operating the prison. Therefore, the BOP researchers applied a 10–12 percent overhead rate (the average for BOP prisons during
