Using Award and Incentive Fees Appropriately
In December 2005, GAO reported on the Department of Defense's (DOD) use of award and incentive fees and recommended ways to strengthen the link between these monetary incentives and acquisition outcomes and to increase accountability of DOD programs and contractors. GAO found that DOD programs routinely engaged in award-fee practices that did not hold contractors accountable for achieving desired outcomes, undermined efforts to motivate contractor performance, and served to waste taxpayer dollars.
The Office of Federal Procurement Policy (OFPP) issued a memo in December 2007 to chief acquisition officers (CAO) and senior procurement executives citing these findings and asking the CAOs to review and update agency guidance on incentive fee contracting practices. This was to ensure that incentive fees are linked to cost, schedule, and performance results and are not earned if the contractor's performance is judged to be below satisfactory or does not meet the basic requirements of the contract. Based on the results of GAO's work at DOD, dollar savings have occurred. For example, Congress reduced the Joint Strike Fighter's budget one year by almost $65 million because of unpaid fees that the program office had rolled over to subsequent fee periods. Additional dollar savings across government are possible with sustained and concerted leadership across civilian agencies to appropriately implement OFPP guidance on award and incentive fees.
^ Back to topKey Reports
- NASA Procurement: Use of Award Fees for Achieving Program Outcomes Should Be Improved
- GAO-07-58, January 17, 2007
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 34 pages) Accessible Text Recommendations (HTML)
- Defense Acquisitions: DOD Has Paid Billions in Award and Incentive Fees Regardless of Acquisition Outcomes
- GAO-06-66, December 19, 2005
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 55 pages) Accessible Text Recommendations (HTML)
