Money for Nothing

...and Chicks for Free

A report released today by the Government Accountability Office (GAO) found that few federal agencies follow recently revised guidelines set forth by the Office of Management and Budget (OMB) for awarding contract bonus fees, wasting billions of taxpayer dollars per year.

The report, requested by Sens. Tom Carper (D-DE), Bernie Sanders (I-VT), John McCain (R-AZ) and Tom Coburn (R-OK), found that while a few agencies have improved their award fee practices, many others still lag behind. Notably, the Department of Defense (DOD) and the National Aeronautics and Space Administration (NASA) have made progress from simply shelling out bonuses with no cause as they did in the past, but the other top contracting federal agencies, such as the Departments of Energy (DOE), Health and Human Services (HHS), and Homeland Security (DHS) lag woefully behind.

The report evaluated agencies on three criteria:

The actions agencies have taken to revise or develop policies and guidance to reflect OMB guidance on using award fees.
Whether the agencies' current practices for using award fee contracts are consistent with the new guidance.
The extent that agencies are collecting and analyzing information on award fees to evaluate their use and sharing that information within their agencies.

The findings were unsatisfactory, to say the least:

Current agency practices for using award fee contracts often are not consistent with the new OMB guidance.
...

Agencies do not always follow OMB’s guidance on linking fees to demonstrated results.

...

Of the five agencies...reviewed, only DOD collects data on the use of award fees.

...

Agencies generally do not have an effective mechanism with which to evaluate the effectiveness of award fees as a tool for improving contractor performance and achieving desired program outcomes.

Of course, the good news, which is a no-brainer to those of us in the contracting reform racket, is that where agencies implemented strict controls over award fee contracts, the government saved millions of dollars. Now if we could just get these reforms spread throughout government, we could solve the problem and I could move on to ending world hunger.

Image by Flickr user Jacob Whittaker used under a Creative Commons license.

(Gary Therkildsen 06/29/09)

Comments

by Anonymous (not verified) on 07/06/09

I’ve read articles by

I’ve read articles by supposedly knowledgeable reporters on the undeserved “bonuses” paid to Government contractors until I’m frankly sick of it. If you take nothing else from this comment, take this: there is NO SUCH THING AS A BONUS IN A FEDERAL GOVERNMENT CONTRACT! This article purports to summarize the May 2009 GAO Report on award fees paid to Federal contractors. What it really does is pander to Senator Thomas Carper and his call for subcommittee hearings to examine "why federal agencies are inappropriately awarding large bonuses." The GAO the article claims to summarize 60 pages of facts, findings and conclusions and does not use the word bonus even once. I guess “award fee” just didn’t have the shock value required to get the Senator quoted. Or to get anyone to read the article. Here's how an award fee contract really works. The Government determines how much fee the contractor will earn each period based on a subjective evaluation of criteria that it establishes unilaterally, can change at any time and often changes without timely notification. To top that off, the determinations are made in secret, issued as final and without any recourse or appeal. The fees that may or may not be “awarded” are not in ADDITION to other fees or profits, they are IN LIEU of other fees. Does this sound like a BONUS to you? I wouldn’t work under that kind of arrangement. I doubt you would and I’m VERY sure Senator Carper would balk at having his salary unilaterally and retroactively set by his constituents based on a subjective evaluation of his performance. But the idea has merit…

by Brian Ahier (not verified) on 06/29/09

Thank you for providing this

Thank you for providing this information. This is a very important issue that needs much more light shed upon it. Hopefully we will these reforms spread throughout the entire government.