Inside contracting is the practice of hiring contractors who work inside the proprietor's factory.
It replaced the
putting out system
The putting-out system is a means of subcontracting work. Historically, it was also known as the workshop system and the domestic system. In putting-out, work is contracted by a central agent to subcontractors who complete the project via remote w ...
, where contractors worked in their own facilities. Inside contracting was the system favored by the
Springfield and
Harper's Ferry
Harpers Ferry is a historic town in Jefferson County, West Virginia. It is located in the lower Shenandoah Valley. The population was 285 at the 2020 census. Situated at the confluence of the Potomac and Shenandoah rivers, where the U.S. stat ...
Armories. Since the manufacturing system developed in the armories also became popular (the
American system of manufacturing
The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century. The two notable features were the extensive use of interchangeable parts and mechanization for production, which resulted in more efficient ...
), manufacturers in the early 19th century tended to hire people trained in the armories as managers. They brought with them the practice of inside contracting.
The manufacturer hired inside contractors and provided materials and machinery. Each inside contractor was expected to hire his own employees and meet certain production and quality goals, but everything else was left to him. As a result, the system rewarded ingenuity, but also rewarded local optimization. For example, it was to the inside contractor's benefit to allow machinery to deteriorate toward the end of his contract since maintenance was costly and he might not reap the long-term benefit if he didn't get another contract. The system was eventually replaced with the
factory system
The factory system is a method of manufacturing using machinery and division of labor. Because of the high capital cost of machinery and factory buildings, factories are typically privately owned by wealthy individuals or corporations who emplo ...
, in which everyone was an employee of the manufacturer directly.
See also
*
Independent contractor
Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any oth ...
References
Late modern economic history
Business economics
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