Tool 02 · Staffing TCO
Engineering staffing agency vs. CAD/FEA outsourcing TCO calculator
Four delivery models, one landed cost each: a US staffing agency, a dedicated offshore CAD/FEA bureau, a vetted freelance marketplace and a turnkey US product development firm. The model includes temp-to-perm buyout fees, internal QA overhead and the Section 174 treatment of foreign R&E.
01The four landed-cost formulas
Offshore rates follow the discipline: $14/hr for 2D drafting and BIM, $18/hr for 3D CAD and PCB/controls CAD, $26/hr for FEA and CFD. The § 41 credit on US contractor spend assumes the contract leaves you the substantial rights and the financial risk; see the funded-research note on the R&D calculator.
02Worked example: three mechanical engineers for 12 months
Defaults: $60/hr base, 52% markup, no conversion, work qualifies as R&E.
| Model | Gross | Adjustments | Landed |
|---|---|---|---|
| US staffing agency | $569,088 | − $29,224 § 41 credit | $539,864 |
| Offshore 3D CAD FTE | $103,680 | + $18,662 QA + $21,047 § 174 drag | $143,389 |
| Freelance marketplace | $424,320 | − $21,789 § 41 credit | $402,531 |
| Turnkey US NPD firm | $1,029,600 | − $52,870 § 41 credit | $976,730 |
The offshore route is cheapest on paper by about $396,000, but only if the work can be specified tightly, redlined within the 18% buffer and kept clear of export-control limits. ITAR-controlled technical data cannot go to foreign persons without authorization, which removes the offshore option entirely for many defense programs; see the aerospace and defense playbook.
03Temp-to-perm conversion fees
Set a conversion month to see the fee. Agency MSAs commonly charge 20%-25% of annualized base salary if you hire the engineer before a threshold, often 520 or 1,040 billed hours. The calculator applies 22.5% before 1,040 hours and switches the engineer to a direct cost of base × 1.3 (benefits and payroll burden) after conversion.
| Converted at | Billed hours | Typical fee |
|---|---|---|
| Month 3 | 520 | $28,080 (22.5%) |
| Month 5 | 867 | $28,080 (22.5%) |
| Month 7 | 1,213 | $0 if the MSA steps down at 1,040 hrs |
The negotiation target is a sliding fee printed in the MSA that reaches zero by 520-1,040 hours. See the staffing MSA audit for the clause list.
Benchmarks are typical 2025-2026 market ranges compiled by Engineer Aid, an independent desk not affiliated with the vendors named. Quotes vary by region, volume and timing; nothing here is legal, tax or engineering advice. Revised 2026-11-06.
Questions buyers ask
What is a normal engineering staffing agency markup?
Engineering markups usually run 45% to 62% over the engineer's base pay. At $60/hr base and a 52% markup, the bill rate is $91.20/hr, about $189,700 per full-time year.
Why add 18% to offshore CAD costs?
Offshore drawings still need US senior engineer or PE review. Without redline SLAs and QA checklists that overhead runs 15%-25%; 18% is the planning figure for a well-run engagement.
How does Section 174 change offshore engineering cost?
Domestic research and experimental spend is deductible in year one under Section 174A, but foreign R&E must be amortized over 15 years, with only 3.33% deducted in year one. At a 21% tax rate that is a year-one cash cost of about 20.3% of the foreign spend.
Can I claim the R&D credit on agency or freelance engineers?
Generally 65% of US contractor spend can count as qualified research expense if you keep substantial rights to the results and bear the risk of failure. Foreign contractor spend does not qualify.