The Pentagon has doled out about $8 billion in award and
incentive fees from 1999 through 2003 regardless of
acquisition outcomes, the Government Accountability Office
has said.
After studying 597 contracts that were active during that
time and had at least one action valued over $10 million,
GAO said the power of monetary incentives to motivate
contractors to improve acquisition outcomes is diluted
by the way the department structures and implements incentives.
The Pentagon needs to specifically tie fees to acquisition
outcomes for new award-fee and incentive-fee contracts,
work to maximize contractor motivation to perform, and
collect data to evaluate the effectiveness of fees, according
to GAO-06-66.
It said, “Despite paying billions in fees, DoD has little
evidence to support its belief that these fees improve
contractor performance and acquisition outcomes.”
The department lacks the data, analysis and performance
measures to evaluate the effectiveness of the fees, and even
when contracts have utilized different fee strategies to
improve outcomes, contracting officials stated that DoD has
few mechanisms to share lessons learned and innovative
practices outside the local level, the report said.
