Federal agencies are still not using awards fees as intended despite new guidelines said a group of Senators Monday. Speaking at the Senate Homeland Security Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security's hearing on "Eliminating Wasteful Contractor Bonuses", Chairman Sen. Tom Carper (D-Del.) said that he was disappointed that federal agencies are still paying billions in awards fees to contractors that provide less than satisfactory work.
"This situation has caused many of us to question how, during a time when households around the country are tightening their budgets, federal agencies can continue to award extra profit to companies as if it is expected and earned," Carper said.
Though he is a "strong believer" that appropriate incentives lead to better performances, Carper said it simply did not make sense to award bonuses for below standard work.
"It's as if you were at a restaurant and your waiter or waitress forgot your order, spilled your food on you and charged you for items you didn't get. Most of us wouldn't give that person a very big tip. But agencies are giving contractors who perform just as poorly everything they want," he said.
Monday's hearing took place two months before the Office of Management and Budget publishes its final guidelines for awards fees. During his testimony before the subcommittee, Deputy Director for Management at the OMB Jeffrey Zients said that 95% of all awards fees handed out by federal agencies were given by the Department of Defense (DoD), NASA, Department of Homeland Security (DHS), Department of Energy (DoE) and Department of Health and Human Services (HHS). Zients added that although some of these agencies, especially the DoD, had made progress, there is still a long way to go.
"I think by DoD’s leadership on this, we know that change can happen and happen quickly," Zients said. "By having those five agencies work closely together to share best practices, best processes, I believe we can quickly improve the situation."
John Hutton, Sourcing Manager at the Government Accountability Office, testified that the method being used to apply award fees is still the biggest concern.
"We have seen the cost plus award fee contracts applied in a way that's not in best interest of tax payers. We found that even in cases were they performed "satisfactorily," one could get 85-90% of award fees. In those situations, what’s left to really incentive contractors' performances?" asked Hutton.
Sen. Tom Coburn (R-Okla.) said that the whole system of awards fees needed to be reassessed rather than just regulated. He said he could not understand how agencies could justify giving "roll overs" in awards fees to contractors even if their previous work had been substandard.
"That's like saying my dog ate my homework but I come back tomorrow and get an A even though i didn't perform the first day," Coburn said.
Senate Looks To Clean Up Wasteful Gov't Spending On Contractor Bonuses
Federal agencies are still not using awards fees as intended despite new guidelines said a group of Senators Monday. Speaking at the Senate Homeland Security Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security's hearing on "Eliminating Wasteful Contractor Bonuses", Chairman Sen. Tom Carper (D-Del.) said that he was disappointed that federal agencies are still paying billions in awards fees to contractors that provide less than satisfactory work.
"This situation has caused many of us to question how, during a time when households around the country are tightening their budgets, federal agencies can continue to award extra profit to companies as if it is expected and earned," Carper said.
Though he is a "strong believer" that appropriate incentives lead to better performances, Carper said it simply did not make sense to award bonuses for below standard work.
"It's as if you were at a restaurant and your waiter or waitress forgot your order, spilled your food on you and charged you for items you didn't get. Most of us wouldn't give that person a very big tip. But agencies are giving contractors who perform just as poorly everything they want," he said.
Monday's hearing took place two months before the Office of Management and Budget publishes its final guidelines for awards fees. During his testimony before the subcommittee, Deputy Director for Management at the OMB Jeffrey Zients said that 95% of all awards fees handed out by federal agencies were given by the Department of Defense (DoD), NASA, Department of Homeland Security (DHS), Department of Energy (DoE) and Department of Health and Human Services (HHS). Zients added that although some of these agencies, especially the DoD, had made progress, there is still a long way to go.
"I think by DoD’s leadership on this, we know that change can happen and happen quickly," Zients said. "By having those five agencies work closely together to share best practices, best processes, I believe we can quickly improve the situation."
John Hutton, Sourcing Manager at the Government Accountability Office, testified that the method being used to apply award fees is still the biggest concern.
"We have seen the cost plus award fee contracts applied in a way that's not in best interest of tax payers. We found that even in cases were they performed "satisfactorily," one could get 85-90% of award fees. In those situations, what’s left to really incentive contractors' performances?" asked Hutton.
Sen. Tom Coburn (R-Okla.) said that the whole system of awards fees needed to be reassessed rather than just regulated. He said he could not understand how agencies could justify giving "roll overs" in awards fees to contractors even if their previous work had been substandard.
"That's like saying my dog ate my homework but I come back tomorrow and get an A even though i didn't perform the first day," Coburn said.