Supplemental bills address award fees

Congress is working to restrict award fees for contractors’ work.

The House passed its fiscal 2009 Supplemental Appropriations Act (H.R. 2346) on May 14 with a provision that would not allow the Defense Department to spend its money on award fees to defense contractors unless DOD judged their work using set criteria.

The bill would boost the importance of the guidance on award fees in the fiscal 2007 National Defense Authorization Act. That law required the defense secretary to write rules on how DOD should appropriately link award fees to acquisition outcomes. The law bolstered checks on what is good contractor performance worthy of the extra money.

In particular, the authorization law required, among other things, guidance on how to judge performance, determine if a contractor should get even a percentage of the award for satisfactory work, and analyze whether award fees actually work to improve contractors' work.

Also on May 14, the Senate Appropriations Committee also approved its version of the supplemental bill (S. 1054) that has a similar provision that would restrict award fees.

The provisions align with a March 4, 2009, memo from President Barack Obama designed to stop the use of cost-reimbursement contracts, including ones that would pay for contractors’ cost plus an award fee for reaching certain performance measures.

“We will end unnecessary no-bid contracts and cost-plus contracts that run up the bill that is paid by the American people,” Obama said at a press conference in March. Obama predicted his reforms would save the government $40 billion each year.