Stimulus law requires fixed-price contracts

Congress included language in the stimulus law (H.R. 1) that requires the government to spend money from the new law under fixed-price contracts as much as possible. A fixed-price contract has a price that isn't subject to adjustment.

The provision is another step in a congressional crackdown on contracts that give companies rewards for their work. The fiscal 2009 National Defense Authorization Act, which became law in October, includes provisions that restrict the use of cost-reimbursement contracts and incentive-based contracts.

The House Appropriations Committee included the fixed-price provision in its version of the stimulus bill, but the Senate had no such language. As representatives from the House and Senate worked out the details of the final bill, they added the short provision.

Meanwhile, the provision has upset some.

“When are they going to stop telling me how to do my job?” a contracting officer said after hearing about the provision. The officer, who requested anonymity because the officer isn't authorized to discuss the legislation, said those officers thoroughly understand the procurement process, more so than any member of Congress. Legislators shouldn’t limit contracting officers from entering contracts that may more appropriately suit the circumstances, the officer said.

The provision also includes another oversight requirement. Contracts without a fixed price and awarded without competition for the work must be posted in a special section of Recovery.gov, according to the law signed by President Barack Obama today. Recovery.gov is a portal to key information on how the government is spending the stimulus money.

“This is your money. You have a right to know where it’s going and how it’s being spent,” the site states. The Web site has no special section for the contracts.

Congress passed the stimulus bill Feb. 13.

The exact language of the law reads, "To the maximum extent possible, contracts funded under this act shall be awarded as fixed-price contracts through the use of competitive procedures. A summary of any contract awarded with such funds that is not fixed-price and not awarded using competitive procedures shall be posted in a special section of the Web site established in section 1526."

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Wed, Jan 20, 2010 T. Greene Washington, DC

Fixed price, performance based contracts are supposed to be the preference. It takes the risk away from the Government and places more on the contractor to perform the job efficiently. If you (as a contractor) bids a fair and reasonable price for the supplies or services, then what is the problem?

Mon, Dec 14, 2009 Virginia

Having spent much of the past 30 years in federal contracting as part of large and small firms, I think one thing must be pointed out in the matter of FFP contracts. They can and sometimes do work well, but only if the requirements and risks are rigorously and completely spelled out in the procurement document. Only in this way can the prospective bidders accurately estimate their levels of effort on which a FFP can be based. My experience has been that the government contracting process has a very difficult time getting to this level of detail in in its procurements. When they do not, all the bidders build their risk into their bids so the government is likely to spend much more than it should or would in an alternative contracting mode. As a consultant, I have always advised my government clients to use the Request for Information (RFI) to elicit the best and most effective ideas from the vendor community: then build a procurement on what they learned. This more often than not, generates better systems and lower costs for everyone.

Mon, Mar 9, 2009 Northern Virginia

FFP has the potential to create accountability on the part of the Government. Requirements will necessarily go through a more thorough evaluation of the need before contracting for a broad brush description. Vendors should know what is required verse evaluating the need. A large part of contracts involves a clear definition of the need for approval by the Government. This seems like a very good direction and places responsibility for definition on the requestor.

Thu, Feb 19, 2009 David Arlington, VA

Fixed price presumes the Govt knows what it wants. Strict adherence to FP practice also means that there is no--or at least minimal--pricing of contingencies in the total FP. Far too often, the Govt has no sense of what it wants, beyond the gross generic statement, even when a detailed SOW is provided. "I can't describe it, but I'll know it when I see it," has been the recourse of many Govt customers. Thus, a contractor is foolhardy to agee to a fixed price under such circumstances, except they do so with the expectation that they can get a change order later in the process to help straighten out what wasn't right in the first place.

Thu, Feb 19, 2009

FFP tends to shift risk to the private sector while allowing managers to blame COs and contractors for program failures, i.e., lack of sufficient support. The bill increases cost, reduces competiition and encourages in-house performance.

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