Letter: Cost-plus contracts have a role

Regarding '"McCain wants to end cost-plus contracting"

Although the military services, Department of Homeland Security and NASA have used cost reimburseable contracts to excess, doing away with them altogether is paramount to throwing out the baby with the bath water!

Defense contractors have found through the past 20 years that they either have to have a cost plus or an over-funded firm-fixed price (FFP) contract vehicle for research and development of uniquely military devices, equipment and vehicles. Under FFP, 100 percent of the risk is borne by the contractor. If they have underestimated the task, they bite the bullet; if they have over estimated the task they reap the benefits.

With research and development jobs no one knows exactly what one might run into, making cost-plus contracts a preferable type. Otherwise so much cost has to be built into an FFP to mitigate risk, the cost of development may become prohibitive.

Bill Hemphill
Siemens Building Technologies

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