Fulfilling the Fixed-Price Promise

President Obama will inevitably be scrutinized on the number or percentage of campaign promises he keeps now that he’s in office. But with the stimulus package’s explicit preference for fixed-price contracts, he may make progress on one of his wonkier pledges.

The federal management plan Obama laid out in September included a promise to minimize or eliminate the use of noncompetitive and cost-plus contracts in favor of fixed-price or incentive-based contracts.

The new president is using the stimulus as an opportunity to stress that agenda.

“Agencies should emphasize the importance of selecting a contract type that supports requirements for meaningful and measurable outcomes consistent with agency plans for, and the goals of, the Recovery Act,” OMB Director Paul Orszag wrote in guidance to agencies. “Fixed price contracts provide maximum incentive for the contractor to control costs and perform effectively and impose a minimum burden upon t he contracting parties. These contracts expose the government to the least risk.”

But things are never quite that simple. If fixed-price contracts were universally the best deal for the taxpayers, then they would be universally used. But the goal and type of the program must be the driving factor in deciding what type of contract to use. By listing non-competed and non-fixed price contracts in a special section of Recovery.gov, the administration is sending the message that these types of contracts are inherently bad.

There is obviously tension between what is best for the government and what’s best for the contractor, but Professional Services Council President had it right when he said “The question really isn't fixed-price versus cost-type. It's the appropriate use of the appropriate contract in the appropriate environment ... Acquisition strategy should identify the contract type that makes the most sense for each individual circumstance.”

That’s just good common sense.