Government Contracts Monitor

The New Disfavoring of Cost-Type Contracts

February 27, 2009

The Obama Administration announced its intent to reform Federal Contracting and Acquisition in the 2010 budget proposal (“Proposal”) released yesterday. Specifically, in an effort to “make sure that taxpayers get the best deal possible for Government expenditures,” the Administration will “review the use of sole source, cost-type contracts.”

The Proposal noted that cost-type contracts are particularly vulnerable to waste because they provide no incentive to control costs. The Proposal observed that cost-type contracts increased more than 75 percent under the Bush Administration, and that total Federal spending on contracts more than doubled from approximately $208 billion in 2000 to more than $423 billion in 2006.

This emphasis in the Proposal is consistent with provisions in the new stimulus bill requiring agencies to enter fixed-price contracts to the maximum extent possible. In fact, any stimulus funds used for contracts that are not fixed-price must be posted on a website maintained by the Recovery Accountability and Transparency Board, the formation of which is mandated by the stimulus bill. Both the Proposal and the stimulus bill evidence the Obama Administration’s focus on ferreting out fraud and waste in the Government’s spending, which it intends to accomplish by evaluating and minimizing the use of cost-type contracts.

 

Gail D. Zirkelbach is responsible for the content of this post.