DOD backs off controversial changes to contract payments

Faced with a barrage of criticism from industry and Capitol Hill, the Pentagon has walked back a proposal that would have changed how contractors are paid.

Trade groups such as the Professional Services Council and the National Defense Industrial Association led the charge against DOD’s proposal to cut progress-based payments to 50 percent from 80 percent.

In pulling back the policy, Deputy Secretary of Defense Patrick Shanahan said that its release was premature and “absent of full coordination.”

The proposal stemmed from a section of the 2017 National Defense Authorization Act.

“The department will continue to partner closely with Congress and industry to examine all reform opportunities, ensuring we provide the best value to taxpayers and critical capabilities to military personnel who defend this great nation,” Shanahan said in his statement.

PSC and NDIA both released statements praising Shanahan’s action.

“DoD and industry need a broader discussion about what performance -- from both sides -- is desired, how it will be measured, and what incentives can be used to improve that measured performance,” PSC president and CEO David Berteau said.

The proposed rule didn’t address any of those issues, he said.

NDIA said that DOD is right to want a better return on its contracting expenditures but the proposal was the wrong way to do it.

"The Pentagon’s message to the contracting community on the preferred balance between seeking innovation and cutting costs contradicted Congress’ original intent (in the NDAA)," NDIA President and CEO Hawk Carlisle said.

DOD had scheduled a public meeting Oct. 10 to discuss the proposal. No word yet on whether the meeting will be canceled now that the policy has been pulled back.