Letter: Application of contract types doesn't replace knowledge

Regarding "McCain wants to end cost-plus contracting" Certainly the Department needs to be more "budget efficient" and must better control costs but contracting is just a piece of how to accomplish this.

In addition to firm, clear requirments, there is a need for greater cost precision, predictabilty and control. We regularly see a optimistic cost estimates, insufficient understanding of cost drivers and a poor linkage between the functional and technical aspects of a project and the cost.

Cost realism must be improved. Functional and technical expertise and insight must exist and be leveraged for proper cost management. Cost management isn't just for the cost team to deal with.

What needs to change in contracting is a more appropriate use of the contract types to match and align with the risks elements of projects (i.e risk-based contracting). Fixed-price contracts are not a solution to poor cost understanding and control. Used improperly, they create a false sense of control (contract value is within budget)that ultimately unravels.

The government must know, regardless of contract type, what it wants, what it should cost and how to manage to that. Similarly industry must be capable of predicting and managing to cost, and avoid the tempataion of "pricing to sell." All too often this is not the case. And policies on contract types won't fix this.

Robert M. Rhea

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