Letter: T&M contracts not necessarily risky

Regarding "DOD toughens checks on risky contract type"

The choice of titles for this article showed a narrow — one could say one-sided — perspective that misrepresents the subject to some extent.

Time and materials contracts are not necessarily inherently risky unless the entity contracting for the product or service does not understand its requirement and/or cannot effectively articulate it to the contractor. This is all too often the case for the government, particularly the Defense Department. In this case, T&M can be risky for contractors as well, since there is significant scope and other associated impacts.

In my opinion, T&M is unpopular today mostly because the government cannot absolve accountability for its constant changes and poor vision. If T&M is deemed risky to the government because the contractor doesn't understand the requirement, this should be evident in proposal reviews where the requirement is solidly defined,  in which case the risk to government should be minimized already.

Anonymous

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Reader comments

Wed, Aug 29, 2012

As an experienced VA COTR now operating under an almost impossibly burdensome contracting bureaucracy self-imposed by VA,what I see is that KOs and COTRs no longer have the time to do important work like market and vendor research because the paperwork and redtape burden is suffocating (no matter what the contract type). A contract with a poorly defined SOW and vague deliverables isn't fair to either party. And now that VA has decided to force all contracts (and I mean all) to small business this coming FY to satisfy some high level political browny point, it will be truly impossible to find the best vendor at the best price for the taxpayer. Astonishingly, everything over $2500 will likely have to go this route. Try to run a private business that way- there aren't enough KOs in federal service to pull that off in a timely manner.

Wed, Apr 25, 2012

How about both sides - government and contractor - FORMALLY approving (yes an actual documented artifact)those requirements so that everyone is ON BOARD and scope creep is eliminated!

Tue, Feb 7, 2012 Ed Dayton

To reply to the letter above - the reason the government's vision is poor and what it wants to do is constantly chaning is because the budget for what it can afford shifts every year (if it is lucky and avoids CRAs) and the government's vision is as many faceted as their constituent's opinions. Given that the nation seems to be split into 2 different beliefs about oerall direction, is it any wonder that the government of that nation vacillates about what they want to do when it comes to particulars. Add more layers of ability to say no and nearly instant scruitiny of every decision without waiting for the outcome of that decision to manifest itself and it's no wonder we are in the mess we are in.

Tue, Feb 7, 2012 Ed Dayton

T&M contracts are supposed to be one end of a continuum of contracts - where the government takes on risk to avoid paying extra for possibilities that may not occur or to incentivize the contractor to take risk they might not otherwise take on. The questions one has to ask when a T&M contract is awarded is whether either of these actually apply. The problem is when a T&M contract is used because someone "doesn't want to know" the real cost or someone decides (usually after the fact) that the government should not have taken on the risk that a T&M contract implies. As an agency, the DoD is looking for something better than their adversaries to reduce battlefield loss - so the DoD will always be on the leading edge of technology - so many of their contracts are "do this, if it is possible" and it's risky (read expensive) to prove the negative. If it is possible and it wins a war, saves a city, or saves x number of people, it was worth it no matter the cost. The problem is knowing what the benefit is when you can't predict what your adversary has. I'm not saying the DoD's budget should be infinite, but the cost if the DoD fails has to be part of the calculation. This applies just as much to warehousing equipment versus supply-chain management as it does to choosing contracts. It's hard to penalize your vendor for late delivery if neither party exists because you didn't have what you needed to defend the country.

Tue, Dec 7, 2010 Pat DC

Totally agree. It's like Cost Plus Award Fee being viewed as bad. People have written poor award fee plans and instead of providing training/guidance on how to improve the plans and the management of the contract, the reaction is to make it harder to justify using an award fee contract in the first place.

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