Predicting contractor financial stability: New insight for source selection

Abstract

Although a relatively small percentage of the total number of contracts awarded by the Federal Government, contracts terminated for financial reasons can be very costly to the government. This study investigated the feasibility of developing a reliable contractor bankruptcy prediction model. This report begins with a brief discussion of the source selection process, followed by a discussion of the need for a contractor bankruptcy prediction model. A reliable model was developed and validated with real world cases. We conclude that significant cost savings can be realized if our model is utilized during the source selection stage of contracting. Keywords: Source selection; Bankruptcy prediction, Terminations for default, and Pre-award survey