DOD toughens checks on risky contract type

Defense acquisition regulators have toughened the Defense Department’s rules on time-and-materials (T&M) contracts, requiring proof that the risky type of contract is the only viable option, according to a Federal Register . The Defense Federal Acquisition Regulation was amended Nov. 24 to change its review and documentation requirements that pertain to T&M contracts for buying non-commercial services, or services not typically purchased in the commercial marketplace. The rule sets the same level of review for both commercial and non-commercial T&M contracts, according to the notice. Under T&M contracts, contractors are paid based on the number of labor hours billed at hourly rates and on other direct costs. In justifying a T&M contract, contracting officers must show their market research and give reasons why no other type of contract works. They must also describe how they plan to minimize using that contract type for future purchases. Also, contracting officers must justify their decision for a T&M-based task and delivery order, when placed against an indefinite-delivery, indefinite-quantity contract, according to the revised DOD rules. The Federal Acquisition Regulation, the set of governmentwide rules, requires a contracting officer to prepare a determination and findings before using a T&M contract, proving that no other contract type is suitable for the acquisition. The defense rules were amended to match the governmentwide rules, according to the notice. The rule change was based on from the Government Accountability Office. In 2007, the GAO recommended DOD contracting officers to justify their use of the controversial contract type so it doesn’t become the contract used by default.