Analysis of Air Force Award Fee and Award Term Contract Implementation
Abstract
The use of incentive contacts, particularly award fee and award term contracts, has increased significantly in recent years. This research examined concerns that these incentives were not being implemented as originally intended. Specifically the research answered whether or not changes are necessary to improve the effectiveness of these tools and whether they actually incentivize the wrong behaviors in industry. Research was conducted by reviewing background information from government regulations and professional organizations to document the history of these incentives. Prescriptive guidance was then compared to actual application of these contracts in an attempt to identify disconnects. Actual application was determined by reviews of numerous published audits and guides, as well as personal interviews with government and industry personnel. The research concluded that the contracts were not being implemented as intended, and improvements need to be made to procedures and processes used by government agencies. Additionally, the research concluded that award fees do actually incentivize the wrong behavior in industry by motivating them to increase their risk through lower proposed profit margins. However, the effects of the above conclusions were less detrimental than anticipated. It was concluded that the improvements to procedures used in administration of award fee contracts would improve efficiency, not necessarily effectiveness. Also, the increased risk was mitigated by complex award processes and the award fee process itself. Therefore, the increase in risk did not point to a clear increase in contract failures as a result of incentivizing the wrong behaviors.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 01, 2002
- Accession Number
- ADA407144
Entities
People
- Thomas J. Snyder
Organizations
- Air University