Deliberating a contract-type based risk mitigation strategy for South African Defense Acquisitions

Abstract

This project explores the possibility of applying a contract-type based strategy to manage acquisition program costs and schedule risks for the South African (SA) Department of Defense (DOD). The hypothesis proposes a strategy that consists of the wide variety of contract types for use within the acquisition process. The emphasis is on the application of incentive fees and award fees. The study analyzed three past programs and one current program from the SA DOD to establish a rationale for considering the application of the incentives and award fee for contract types as a risk mitigation plan. An analysis of three similar U.S. DOD programs that also implemented incentives and award fees based on contract type indicated that from a risk management perspective, the application of contract type is not inconsequential but the risks are manageable. In order to facilitate the application of this strategy, we find it is necessary to adapt regulations such as Preferential Procurement Policy Framework Act (PPPFA) and Public Financial Management Act (PFMA) and directive documents such as A-PRAC-1034. Further recommendation indicates that Earned Value Management (EVM) should be considered by the SA DOD to tie deviations between technical, cost and schedule performance.