Fixed-price contracts increase under stimulus law

Federal agencies have significantly increased their use of fixed-price contracts funded by the economic stimulus law in the last three months, according to a new report from Input, a market research firm in Reston, Va.

To date, the federal government has awarded 48 percent of the value of reported contract obligations by using fixed-price contracts, Input said in its Nov. 5 report. Fixed-price contracts totaled $8 billion out of $16.5 billion awarded.

The pace of fixed-price contracting rose dramatically in the most recent three months. From June to October, fixed-price contracts made up 58 percent of the total value of contracts, or $7.2 billion out of $12.6 billion in contracts awarded during that period.

That is a reversal from the trend that occurred from March to June, when only 18 percent of the value of the contracts awarded was fixed. A total of $696 million in fixed-price contracts was awarded out of $3.9 billion in contracts during that period.

The economic stimulus law called for federal agencies to use fixed-price contracts and competitive procedures as much as possible.

The use of competitive contracts has remained high, Input said. From March to June, those contracts comprised 89 percent of the whole, and from June to October, 88 percent. A chart on the federal Recovery.gov Web site shows that agencies have spent about $7.8 billion on noncompetitive or non-fixed price contracts.

At the same time, the use of pre-existing contracts is decreasing. Those contracts represented 94 percent of total contracts from March to June, but the percentage decreased to 70 percent overall from March to October, the report said.

“It is not surprising to see a reduction in the use of existing contracts as more time passes since enactment of the legislation. Federal contracting officials need time to plan and conduct new procurements,” Input wrote.