A frequent mistake made by project managers and/or their organizational sponsors is not appropriately valuing the cost and time requirements for personnel necessary to complete project work. If personnel time is not appropriately valued, either the PM or the sponsor can grossly underestimate the budget required for personnel needs throughout the project. Along the same vein, a frequent source of conflict is that one or the other of the sponsor or project manager will greatly undervalue personnel time. Often, consultants will estimate that a full-time employee will only have approximately 1300 to 1600 hours available for billing (billable hours), although the full-time employee must be paid for 2080. Similarly, consultant labor costs need to account for benefit costs, overhead, profit, and downtime. In part because of these differences, project managers can often be surprised by the cost/hour charged by a consultant for labor.

Assume that the project has a need for 1500 hours of environmental specialist time. If you hired someone onto your team, you believe you could hire a reasonably qualified applicant by offering approximately $70K base annual salary.

First, set up and explain a calculation and associated inputs which you could use to get to an appropriate hourly rate for estimating the cost of this internal environmental specialists time. Assume that the project duration is one year, and the required environmental specialist time can be spread evenly throughout the year. That is, assume you dont need to worry about resource-leveling.

Second, if a contractor could provide a qualified ES and would charge you $100/hour for those 1500 hours, would you recommend bringing on someone as an employee within the project team, or would you prefer to seek contractor-provided personnel support for ES tasks?

Explain factors you might consider. Feel free to create reasonable situations at your hypothetical organization which might justify one approach or another. As you might have guessed, this isnt a one-size-fits-all consideration with a definitive answer, and different project managers and/or organizations will arrive at different conclusions with regard to whether to hire or use contractor support.