Fixed-price contracts required by stimulus law

Contractors are likely to see more fixed-price contracts for work that comes out of the stimulus law. The law (H.R. 1) requires the government to spend the stimulus money under fixed-price contracts as much as possible.

The provision is another step in a congressional crackdown on contracts that give companies rewards for their work. The fiscal 2009 National Defense Authorization Act, which became law in October, includes provisions that restrict the use of cost-reimbursement contracts and incentive-based contracts.

The House Appropriations Committee included the fixed-price provision in its version of the stimulus bill, but the Senate had no such language. As representatives from the House and Senate worked out the details of the final bill, they added the short provision.

Meanwhile, the provision has upset some.

“When are they going to stop telling me how to do my job?” a contracting officer said after hearing about the provision. The officer, who requested anonymity because the officer isn't authorized to discuss the legislation, said those officers thoroughly understand the procurement process, more so than any member of Congress. Legislators shouldn’t limit contracting officers from entering contracts that may more appropriately suit the circumstances, the officer said.

The provision also includes another oversight requirement. Contracts without a fixed price and awarded without competition for the work must be posted in a special section of Recovery.gov, according to the law signed by President Barack Obama today. Recovery.gov is a portal to key information on how the government is spending the stimulus money.

“This is your money. You have a right to know where it’s going and how it’s being spent,” the site states. The Web site has no special section for the contracts.

Congress passed the stimulus bill Feb. 13.

The exact language of the law reads, "To the maximum extent possible, contracts funded under this act shall be awarded as fixed-price contracts through the use of competitive procedures. A summary of any contract awarded with such funds that is not fixed-price and not awarded using competitive procedures shall be posted in a special section of the Web site established in section 1526."

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Thu, Feb 19, 2009

Concur with submitted comments. Fixed price contracts are the most expensive contract type available to Federal procurement officers. While cpff, cpaf, and cpif get a bad wrap, they are the least expensive and most flexible for government officials to get what they want. Time and material contracts are somewhere in the middle. And then, the inability to sole source also works to the benefit of large companies and works against your small, disadvantaged contractors - the firms likely to be struggling the most in this economy. I never realized how complex the Federal procurement process was until working as a senior manager in both large and small Fed contracting firms. Of all the things to regulate, why focus on Federal contracting - especially without understanding it?

Wed, Feb 18, 2009

The legislators who enact this legislation should be schooled in the world of Government Contracting - I would be willing to bet that most have no direct experience with procurements. Ultimately, fixed-price contracts, whether competitive or sole-source, cost the Government more money in the long run. Because of the risk to the contractor in a fixed-price situation, it is necessary for the contractor to offset that risk with a higher price for the "just in case scenarios" - especially in a development or integration type contact where there are many unknowns. In addition, in order to mitigate the risk to the contractor, the scope of a fixed-price contract must be so specific, any flexibility or changes to the original scope require ECPs and Change Orders, often resulting in a much higher end cost to the Government than if they had issued a cost-reimbursable contract initially. I am afraid they will learn the hard way here...

Wed, Feb 18, 2009

of all the stupid...when your car has problems that are not easy to diagnose, do you insist on a fixed price, or do you end up paying by the hour? Some requirements are not well known. Insisting on fixed-price simply trys to transfer risk to the business, which will then charge us a premium for it. When are these idiots going to stop screwing around with things they do not understand?

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