Problems with award-fee contracts in the Department of Defense
Ricks, Shemeka S.
Robertson, Tony I.
Jolliffe, Dennis D.
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Award-fee arrangements are a valuable contractual approach for the Department of Defense (DoD) when used properly. Award-fee contracts provide incentives to motivate contractor performance in areas critical to program success that are susceptible to judgmental and qualitative measurement and evaluation. The award-fee process allows the DoD to evaluate a contractors performance, appropriately recognize accomplishments, and provide a reward. The DoD has the flexibility to develop criteria to evaluate both the performance levels and the conditions under which these levels were achieved during the evaluation period. An award-fee arrangement rewards satisfactory or better performance, provides incentives for the contractor to improve performance, and records the assessment of the contractors performance. While it is DoD policy to use objective criteria whenever possible to measure performance, there are times when only an incentive based on subjective criteria will achieve the desired objectives. However, subjective evaluations may raise concerns that some award fees are paid but not earned. Lack of DoD acquisition workforce training and experience in utilizing award fee type contracts, coupled with subjective evaluations, may contribute toward award fees being paid even when the contractor does not achieve the desired objectives for which incentives were offered.
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