The Department of Defense has paid out about $8 billion in
award fees for a portion of its contracts regardless of
whether acquisition outcomes fell short of, met, or exceeded
the department’s expectations, the Government Accountability
Office has said.
It said that despite the payments, DoD has not compiled data
or developed performance measures to assess its belief that
award and incentive fees actually improve contractor
performance and acquisition outcomes.
With the department spending over $200 billion annually to
acquire products and services, the federal government’s
growing fiscal challenges demand better return on investment
and the best value, according to GAO-06-409T.
It said the Pentagon’s use of award and incentive fees is
related to two high-risk areas vulnerable to fraud, waste,
mismanagement and abuse — contract management and weapon
system acquisition.
DoD often cannot assure that it is using sound business
practices to acquire the goods and services that war fighters
need, GAO said, and suggested that the persistent and
long-standing nature of acquisition problems has made a range
of key DoD decision makers complacent about cost growth,
schedule delays, quantity reductions, and performance
shortfalls.
For example, DoD evaluates contractors on award-fee criteria
that are not directly related to key acquisition outcomes,
pays contractors a significant portion of the available fee
for “acceptable, average, expected, good, or satisfactory”
performance, and gives contractors at least one additional
opportunity to earn initially unearned or deferred fees,
according to GAO.
