Have feds cheapened contract bonuses?

Oversight officials still unhappy about companies' expected performance fees

A formula for managing cost-plus-award-fee contracts

The Environmental Protection Agency’s Office of Inspector General, which criticized the agency’s use of cost-plus-award- fee contracts, has recommended three ways the agency could improve its use of those agreements.

  • Improve the documentation of performance ratings. The IG said EPA needed to fully explain and justify bonus fees and performance ratings in its post-contract documentation.

  • Assess whether cost-plus contracts are worth their associated costs. The IG said EPA needs to perform a cost/benefit analysis to determine if cost-plus is the correct contracting method to use.

  • Avoid using contractors’ evaluations to determine award fees.


The IG said contractor self-evaluations should be either eliminated or the agency must justify the need for them.

— Wade-Hahn Chan

Federal agencies might be too generous in rewarding contractors, according to oversight officials who have examined agencies use of use of cost-plus-award-fee contracts.

Some members of Congress recently criticized the Census Bureau’s handling of a contract for the automated data collection portion of the 2010 census. The bureau gave two award fees to Harris, the prime contractor on the Field Data Collection Automation (FDCA) contract. Harris is supplying handheld computers that Census plans to use when it sends census-takers into the field to survey households that do not respond to mailed surveys.

Commerce Secretary Carlos Gutierrez told the Senate Homeland Security and Governmental Affairs Committee that he and Census officials gave Harris the award fees because they were pleased with the company’s work. However, the bureau now is considering scaling back its plans to use handheld computers and possibly reintroducing paper-based field surveys.

Cost-plus contracts remain controversial with Congress and other oversight officials. The contracts are intended to reward contractors for above-average performances in terms of timeliness, quality of work, technical ingenuity or savings. However, agencies often use shaky justifications when rewarding contractors.

“That’s a concern,” said Sen. Tom Coburn (R-Okla.) at a recent hearing held by that committee.

Agencies have awarded bonus fees so frequently that administration officials recently chided them for the practice. Paul Denett, administrator of the Office of Federal Procurement Policy, issued a memo in December to remind agencies that award fees should be used only to reward contractors that have met specific objectives.

Award fees are not to be used to reward contractors for effort the agency believes the company put into the contract, he said.

Establishing those objectives has been a problem for Census officials managing the FDCA contract. The bureau has given Harris several updated objectives, the latest of which it issued in mid-January.

Those objectives “should have been defined and validated soon after award, not two years later,” said David Powner, director of information technology management issues at the Government Accountability Office.

The oversight agency recently placed the 2010 census on its high-risk list.

Oversight officials recently reprimanded another agency for its overly generous use of award fees. In a February report, the Environmental Protection Agency’s Inspector General’s Office raised questions about EPA’s practice of giving cost-plus contractors consistently high performance ratings and award fees. Among 32 contracts the IG sampled, all the contract-holders received at least satisfactory ratings.

The majority of them received “exceeds fully successful” and “outstanding” ratings.

“Satisfactory” ratings seemed to carry a negative connotation to EPA’s Performance Evaluation Board, according to the report, which states that “award fees are more of an expectation for contractors rather than a factor that motivates excellence.”

The report also states that EPA did not justify the ratings it gave in its documentation.

For example, some contractors received higher ratings than their interim grades, and EPA’s post-contract documentation does not explain why. The IG asked EPA to conduct a cost/benefit analysis before awarding contracts.

The IG found that most cost-plus contracts required the agency to spend extra time and resources evaluating the contracts.

The 2015 Federal 100

Meet 100 women and men who are doing great things in federal IT.

Featured

  • Shutterstock image (by venimo): e-learning concept image, digital content and online webinar icons.

    Can MOOCs make the grade for federal training?

    Massive open online courses can offer specialized IT instruction on a flexible schedule and on the cheap. That may not always mesh with government's preference for structure and certification, however.

  • Shutterstock image (by edel): graduation cap and diploma.

    Cybersecurity: 6 schools with the right stuff

    The federal government craves more cybersecurity professionals. These six schools are helping meet that demand.

  • Rick Holgate

    Holgate to depart ATF

    Former ACT president will take a job with Gartner, follow his spouse to Vienna, Austria.

  • Are VA techies slacking off on Yammer?

    A new IG report cites security and productivity concerns associated with employees' use of the popular online collaboration tool.

  • Shutterstock image: digital fingerprint, cyber crime.

    Exclusive: The OPM breach details you haven't seen

    An official timeline of the Office of Personnel Management breach obtained by FCW pinpoints the hackers’ calibrated extraction of data, and the government's step-by-step response.

  • Stephen Warren

    Deputy CIO Warren exits VA

    The onetime acting CIO at Veterans Affairs will be taking over CIO duties at the Office of the Comptroller of the Currency.

  • Shutterstock image: monitoring factors of healthcare.

    DOD awards massive health records contract

    Leidos, Accenture and Cerner pull off an unexpected win of the multi-billion-dollar Defense Healthcare Management System Modernization contract, beating out the presumptive health-records leader.

  • Sweating the OPM data breach -- Illustration by Dragutin Cvijanovic

    Sweating the stolen data

    Millions of background-check records were compromised, OPM now says. Here's the jaw-dropping range of personal data that was exposed.

  • FCW magazine

    Let's talk about Alliant 2

    The General Services Administration is going to great lengths to gather feedback on its IT services GWAC. Will it make for a better acquisition vehicle?

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above