Agencies play it safe with contract types

The federal government pulled away from awarding risky time-and-materials contracts and turned to cost-reimbursement contracts more often in fiscal 2009 compared with 2010, according to a new report.

In 2009, agencies awarded $31.31 billion in time-and-materials contracts, or 6 percent of the government’s $554.5 billion in spending. In 2010, they awarded $28.41 billion, or 5 percent of the $535.8 billion in federal spending, according to a report from the Office of Federal Procurement Policy (OFPP), which was released July 11.

Meanwhile, cost-reimbursement contracts climbed from $163.1 billion, or 29 percent, in 2009 to $162.2 billion, or 30 percent. Read the report.


Related stories:

New procurement rules put limitations on cost-reimbursement

Creative contracting means better contracts


OFPP Administrator Dan Gordon said the increase came as agencies decreased their use of time-and-materials contracts, a point driven home by the Obama administration. Agencies still were caught in situations where a contract’s requirements had enough uncertainty to prevent officials from negotiating a contract with a fixed price.

“Some increase in spending through cost-reimbursement contracting was expected,” he wrote in the report.

A cost-reimbursement contract holds less risk for the government than the time-and-materials contract, Gordon wrote.

Under cost-reimbursement contracts, companies are reimbursed based on allowable costs instead of the delivery of a completed product or service.

Time-and-materials contracts provide for acquiring supplies or services on the basis of direct labor hours at a set rate. The rate includes wages, overhead, general and administrative expenses, and profit. It also includes the actual cost for materials. This has been the least favored type of contract for some time because it doesn’t give contractors an incentive to control costs.

The most favored contract type, the fixed-price contract, stayed generally steady over the past two years. According to the report’s figures, 63 percent of federal spending in 2009 was awarded through fixed-price contracts, and 62 percent in 2010.

About the Author

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

Featured

  • Telecommunications
    Stock photo ID: 658810513 By asharkyu

    GSA extends EIS deadline to 2023

    Agencies are getting up to three more years on existing telecom contracts before having to shift to the $50 billion Enterprise Infrastructure Solutions vehicle.

  • Workforce
    Shutterstock image ID: 569172169 By Zenzen

    OMB looks to retrain feds to fill cyber needs

    The federal government is taking steps to fill high-demand, skills-gap positions in tech by retraining employees already working within agencies without a cyber or IT background.

  • Acquisition
    GSA Headquarters (Photo by Rena Schild/Shutterstock)

    GSA to consolidate multiple award schedules

    The General Services Administration plans to consolidate dozens of its buying schedules across product areas including IT and services to reduce duplication.

Stay Connected

FCW Update

Sign up for our newsletter.

I agree to this site's Privacy Policy.