ART - Federal Contracting: Guidance on Award Fees has Led to Better Practices but is Not Consistently Applied 2009

The document is a reprint from the Journal of Public Procurement, Volume 9, Issues 3 & 4, in 2009. It discusses the topic of federal contracting and specifically focuses on the use of award fees. The document highlights that in prior work, it was found that contractors were being paid billions of dollars in award fees regardless of the outcomes of their acquisitions. In response to this, the Office of Management and Budget (OMB) issued guidance in December 2007 to improve the use of award fee contracts. The document aims to identify the actions taken by different agencies, such as the Department of Defense (DOD), the Department of Energy (DOE), the Department of Health and Human Services (HHS), the Department of Homeland Security (DHS), and the National Aeronautics and Space Administration (NASA), to revise or develop award fee policies and guidance in line with the OMB guidance. It also assesses the consistency of current practices with the new guidance and determines the extent to which agencies are collecting, analyzing, and sharing information on award fees. The results of the study show that DOD and NASA have revised their policies to align with the OMB guidance, while the extent to which DOE, HHS, and DHS have done so varies. Many acquisition professionals at these agencies were unaware of the contents of the OMB guidance, and the application of the guidance was inconsistent among and within these agencies. The document also highlights that current agency practices for using award fee contracts often do not align with the new OMB guidance. However, where the revised policies have been applied, there have been significant cost savings and better use of government funds. For example, DOD has achieved savings by limiting the use of rollover and tying award fee criteria to acquisition outcomes. NASA has instructed staff to use award fee contracts only in limited circumstances and has added the management of award fee contracts to its review processes. On the other hand, practices for using award fee contracts varied greatly at DOE, HHS, and DHS. The document concludes by stating that agencies do not always follow OMB's guidance on linking fees to demonstrated results. Only DOD collects data on the use of award fees, which are shared with senior procurement executives. Additionally, the document mentions that agencies generally do not have an effective mechanism to evaluate the effectiveness of award fee contracts. Overall, the document highlights the need for consistent application of award fee policies, better sharing of information among agencies, and the establishment of effective evaluation mechanisms to ensure the proper use of award fees in federal contracting.