Letter: Where there is high risk, fixed-price contracts don't fit

Regarding "McCain wants to end cost-plus contracting":  Sen. [John] McCain's decision to put a stop to cost-plus contracts and to only use firm, fixed-price contracts shows his lack of understanding of the FAR and government contracting in general.

I retired from [the Defense Department]  in 2003 and became a Defense contractor. In DOD, I developed and managed many information technology support services contracts. The reason there are cost overruns on weapon systems is because there are many unknowns. In Contracting 101 you learn that when there is low risk you are able to use a firm, fixed-price contract.

When there are many unknowns as in a research and development contract there is much more risk. With high risk the government must assume that risk and issue a cost type contract. Use of incentive fee or award fee can provide the contractor assurance that when there is a problem they will be compensated for their work to resolve the problem. It should also be known that the government frequently does not define their requirement which brings significant risk to the effort. If the government goes to only firm, fixed-price contracts,  the contractors have no option but to bid high to cover their risk or to no bid.

You know what they say, "you get what you pay for."

Anonymous


What do you think? Paste a comment in the box below (registration required), or send your comment to letters@fcw.com (subject line: Blog comment) and we'll post it.

Featured

  • Defense
    Ryan D. McCarthy being sworn in as Army Secretary Oct. 10, 2019. (Photo credit: Sgt. Dana Clarke/U.S. Army)

    Army wants to spend nearly $1B on cloud, data by 2025

    Army Secretary Ryan McCarthy said lack of funding or a potential delay in the JEDI cloud bid "strikes to the heart of our concern."

  • Congress
    Rep. Jim Langevin (D-R.I.) at the Hack the Capitol conference Sept. 20, 2018

    Jim Langevin's view from the Hill

    As chairman of of the Intelligence and Emerging Threats and Capabilities subcommittee of the House Armed Services Committe and a member of the House Homeland Security Committee, Rhode Island Democrat Jim Langevin is one of the most influential voices on cybersecurity in Congress.

Stay Connected

FCW INSIDER

Sign up for our newsletter.

I agree to this site's Privacy Policy.