Skip Ribbon Commands
Skip to main content
SharePoint
 

The Fix Isn't In: Fixed-price contracts for low-rate production of weapons systems haven't proven to be a significant cost saver compared to the cost-plus arrangements the Defense Department has been migrating away from, said Frank Kendall, acting Pentagon acquisition boss. "The data I've seen suggest that you don't get a different result significantly between cost-plus and fixed-price," he stated during a Center for Security and International Studies-sponsored address in Washington, D.C., on Monday. The Pentagon has been embracing the fixed-price arrangements—where the contractor assumes the risk for cost overruns—in the expectation of saving funds. Under cost-plus deals, the government covers overruns. Kendall said, based on the data, "maybe that's not where we should be trying to put our effort." Part of the reason there's no significant cost difference may be that industry "is doing its best, in general," to secure full-rate production for their product, so there's "already some inherent motivation . . . to perform reasonably well," regardless of contract type, he said. Plus, in today's budget environment, cancelation looms for poor-performing programs. "That's about as much motivation, I think, as you can get," he said. (CSIS' transcript of event)