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

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

  • FCW PERSPECTIVES
    sensor network (agsandrew/Shutterstock.com)

    Are agencies really ready for EIS?

    The telecom contract has the potential to reinvent IT infrastructure, but finding the bandwidth to take full advantage could prove difficult.

  • People
    Dave Powner, GAO

    Dave Powner audits the state of federal IT

    The GAO director of information technology issues is leaving government after 16 years. On his way out the door, Dave Powner details how far govtech has come in the past two decades and flags the most critical issues he sees facing federal IT leaders.

  • FCW Illustration.  Original Images: Shutterstock, Airbnb

    Should federal contracting be more like Airbnb?

    Steve Kelman believes a lighter touch and a bit more trust could transform today's compliance culture.

Stay Connected

FCW Update

Sign up for our newsletter.

I agree to this site's Privacy Policy.