In Defense Of The Full-Time Equivalent (FTE)

By Louis Garguilo, Chief Editor, Outsourced Pharma

Back in the day, I saw how it proved most optimal for my biopharma clients.

Particularly at the time, for those quality-obsessed, relationship-based and close-monitoring Japanese customers I brought into our (U.S.-based) CDMO.

I’m speaking of the full-time equivalent (FTE) model, offered at CDMOs for your drug development (and certain manufacturing) outsourcing needs.

Hooking yourself up to a set number of specific professionals at your CDMO may make as good sense now as it did for us back then.

There Are Doubts

Or does it?

Increasingly, I hear arguments against the use of FTEs. Instead, there’s advocation for targeting  project deliverables (project-completion) contracts, what we still call T&M (time and materials) contracts, FFS (fee for service) arrangements, and also risk-sharing models.

But at the same time, there’s an incessant drumbeat for better “relationships” and true “partnerships” between sponsors and CDMOs.

I ask: What closer relationship than hiring specific professionals at your CDMO to serve as your extended workforce?

They counter with these two points mostly:

• Development projects often require a range of skillsets and expertise. A select number of FTEs may not accurately reflect the nuances of different activities and their respective workloads.
• There can be an element of inflexibility if the scope/needs of the project change. A predefined FTE allocation may result in either understaffing or overstaffing at critical times, and lead to inefficiencies and increased costs.

For certain, ensuring the correct support team and provisioning for flexibility is requisite, and must be discussed between sponsors and CDMOs to mitigate such challenges.

Decisions surrounding the utilizing of full-time equivalents (FTEs) can be difficult:

• How many FTEs do I need initially? What should their specialty/prowess be?
• How much does an FTE cost? Is it a monthly calculation?
• How does the CDMO, for example, provide quality, analytical or regulatory support to the process chemists we hire?
• How long should we originally contract for?
• How do we ramp up, ramp down, add or subtract specific workers (those specializing, say, in scale ups replacing those most proficient in other areas)?
• How will we explicitly define success?

Diving into some typical arrangements, we can quickly ascertain that limiting the timeframe for FTE contracts is important – and part of the allure.

Typical FTE allocations are segmented into months. Attaining certain milestones will automate the wrapping up the FTE relationship. Certain failures will terminate terms of service.

Importantly, the FTE model may bring you to a specific point in the development or manufacturing process, and then can be followed by supply agreements.

So yes, there is a lot to think of when considering the FTE model, but the assertion here is the more you think (and we will below), the more the perceived downsides of FTE arrangements dissipate.

Trust Seems Lacking

Other negatives I hear regarding the FTE model is a broader concern, actually. It amounts to a lack of trust in the CDMO.

There’s the fear CDMOs will (somehow) always maximize FTE hours to increase revenues. CDMOs may consciously focus on the quantity of work hours (rather than the quality of work performed).

However,  any CDMO or individual FTEs exhibiting such behavior will end up losing customers, and suffering reputational harm. A customer dis-service model of such will not stay hidden for long.

Any “relationship” between the individuals in charge of the outsourcing at the sponsor and those FTEs working on their behalf, will be broken irreversibly.

If you do not trust the CDMO you are working with to have your best interests in mind, then should you work with that CDMO under any business model?

Why It Works

Let’s turn our attention to the many advantages a well-instituted system of FTE relationships at a CDMO can offer you.

First and foremost, and countering much of the negative vibe above, is that FTEs provide a standardized system for the estimate and control of costs associated with the labor required for a project.

By defining the number of FTEs needed for various phases of your drug or therapy candidates, you can forecast expenses more accurately.

FTE contracts can also come with associated milestones within timeframes, success measurements, clearly stated objectives, and expected deliverables.

By breaking down your outsourcing into specific tasks and assigning FTEs to each, both sponsors and CDMOs can create detailed timelines and work plans, and directly assign responsibilities to certain people.

Furthermore, I believe this next point is not thought of enough:

Sponsors can judge the efficiency of  FTEs to measure the overall productivity of the CDMO.

Do you want to know if a CDMO is performing as would expect? Are they delivering anticipated value?

Take a good look at the 3 or 4 individuals they have working for you as your extended employees – your FTEs.

“Counting” On FTEs

We also touched on this above, but going a bit deeper:

By pre-specifying the number of FTEs needed for a project (or set of activities), both parties to the contract can ensure sufficient personnel are dedicated to meet timelines, quality, and deliverables.

Let’s be clear: the number of FTEs required for a project, and to a degree the cost per FTE, can be negotiated.

And unlike concerns above over flexibility, within negotiations (or as part of a CDMO’s own FTE policy), there can be an insertion of expectations around flexibility in scaling the workforce up or down, based on evolving project needs.

Finally, your FTEs should be of great assistance for regulatory compliance. They are present for you when you or agencies perform audits and inspections.

You should have access to their explanations of lab and facility documentations, and receive detailed reports on procedures, processes, and the like.

Overall, an FTE relationship can offer a clear means to quantify and measure resource allocation, budgeting, project planning, performance measurement, scalability, regulatory compliance, and risk management.

If CDMOs offer reasonable FTE contracts, then this model can work as well today as it has in the past.