Buying Capacity: Contractors, Agencies and Outsourcing
Why bought capacity delivers roughly half its invoiced hours in the first quarter, the four deductions that explain it, and when buying is still right.
What one team's bought capacity actually delivered over a quarter
Invoiced as 520 h at contracted rate.
Paid, and consumed the team's time too.
Came out of the permanent team's capacity.
Could not be delegated.
Documentation and transfer.
Fifty-five per cent of the hours invoiced.
Three months of bought capacity added about half its invoiced hours to the account, and some of that came out of the permanent team. The arrangement was still worth it; what was wrong was the plan that counted 520. This is one employer's own reckoning, not a benchmark.
Buying capacity — a contractor, an agency, an outsourced team — adds fewer hours to the account than the invoice suggests, for reasons that are entirely predictable and almost never planned for.
The allocation decision in “Buying Capacity: Contractors, Agencies and Outsourcing” should be made from visible constraints rather than an assumed headcount. Used carefully for workforce analytics software, view the official process description can contribute recent workload context without replacing the documented priority rule or the manager accountable for the trade-off.
The usual first-quarter figure is somewhere near half. That does not make it a bad decision; it makes a plan built on the invoiced hours wrong by the same margin as a plan built on contracted hours.
For an outside reference relevant to “Buying Capacity: Contractors, Agencies and Outsourcing”, consult ProjectManagement.com practitioner resources. Compare the general guidance with the organisation’s own unit, period and decision rights.
The four deductions
Onboarding, which is longer for somebody with no organisational context. Support from the permanent team, which comes out of their capacity. Work that cannot be delegated because it needs internal sign-off. And handover at the end.
Each is ordinary. Together they commonly halve the first quarter and reduce subsequent ones by rather less.
The deduction that lands on the wrong account
Support from the permanent team. The invoice is for the contractor and the cost falls partly on the people the arrangement was supposed to relieve.
A team at capacity that receives a contractor is, for the first few weeks, further behind. Where that is not planned for, the arrangement is judged a failure before it has started working.
The sign-off problem
Some work requires approval, access or accountability that only an employee can hold. Where that is true, bought capacity can prepare work and cannot complete it, and the bottleneck moves rather than clearing.
Identifying which parts of a claim can be delegated, before buying, is a half-hour exercise that occasionally cancels the purchase.
When buying is right
When the work is separable, lasts longer than the ramp, and does not require internal authority. When the alternative is not doing it at all. And when the capacity gap is genuinely temporary.
That last condition is the one most often untrue: permanent shortfalls covered by rolling contractors become expensive and hard to unwind.
Outsourcing a whole function
Different arithmetic. The ramp is longer, the handover is larger, and the retained capacity needed to manage the arrangement is almost always underestimated.
Retained management is typically a real fraction of a person and belongs in the account as a standing claim from the day the contract starts.
Rates, and what they conceal
A contractor rate expressed per day is per invoiced day, not per available hour. Comparing it with an internal cost per available hour compares two different things and usually flatters the purchase.
Converting both to cost per available hour, net of every deduction above, is the only comparison that means anything.
The knowledge that leaves
Work done by bought capacity leaves with it unless something is done. That something — documentation, pairing, review — consumes more of the permanent team's hours and is the deduction people cut when the quarter gets tight.
Cutting it converts a capacity purchase into a future capacity liability, which arrives as the thing nobody can maintain.
Putting it in the account properly
As a separate supply line with its own descent, not folded into the team's figure. Invoiced hours at the top, the four deductions, and the net addition at the bottom.
Keeping it separate also makes the end of the arrangement visible: on that date the capacity leaves, and plans that absorbed it into the team figure will not see it going.
What to tell the people who approved it
The net figure, with the descent, before the first month ends. An approval given against invoiced hours and delivered against net ones produces a conversation about value that is much easier to have early.
The four questions before buying
- Is this work separable from work requiring internal sign-off?
- Is the arrangement longer than the ramp it needs?
- Who in the permanent team will support it, and have their hours been reduced accordingly?
- What happens to the knowledge when it ends?
Four questions, half an hour. The third is the one that turns a plausible purchase into a realistic one, because the answer is always a name and that name's capacity has to come from somewhere.
The second quarter, which is different
The deductions fall sharply once the ramp is behind: onboarding is gone, support drops, and the net figure moves towards seventy or eighty per cent of invoiced.
That makes arrangement length the dominant variable. Three one-quarter contracts cost three ramps; one three-quarter contract costs one, and the difference is larger than most rate negotiations.
The decision that is often better
Where the shortfall is modest and the ramp is long, deferring a claim is frequently cheaper than buying capacity to meet it.
That comparison — the cost of buying against the cost of moving a date — is rarely made explicitly, and the account makes it available in about ten minutes.