One of the keys to effective incentives involves recognizing... then acting on... the private sector's chief motivator: profit. It is a simple fact that companies are motivated by generating return for their investors. One contractor was heard to say, "You give us the incentive, we will earn every available dollar."

The real opportunity is to make that work to the government's advantage. For example, link the incentive program to the mutually agreed-to contract performance measures and metrics. Then, incorporate value engineering change provisions (VECP) or share-in-savings strategies that reward the contractor for suggesting innovations that improve performance and reduce total overall cost. Put more simply: Set up the acquisition so that a contractor and the government can benefit from economies, efficiencies, and innovations delivered in contract performance.

If the incentives are right, and if the contractor and the agency share the same goals, risk is largely controlled and effective performance is almost the inevitable outcome. This approach will help ensure that the contractor is just as concerned -- generated by self-interest in winning all available award fees and award terms -- about every element of contract performance, whether maximizing operational efficiency overall, reducing subcontract costs, or ensuring the adequacy of post-award subcontractor competition and reasonableness of prices, as is the agency. --->