The highly secretive National Security Agency may have relied too heavily on the contractor incentives provided in cost-plus award fee contracts, according to a new inspector general report calling into question some $630 million in awards.
A review of 54 contracts awarded using that method in fiscal years 2016 and 2017 showed that more than half “did not have a valid Determination and Finding justifying use of this contract method,” the NSA inspector general said in an April 3 report. Fifty-one of the 54 “lacked the required cost-benefit analysis of the expected benefits versus the additional administrative costs of monitoring and evaluating the contractor’s performance.”
The review was launched “because of the magnitude of the agency award fee contract pools and the significant potential financial risk to the agency and administrative burden associated with effectively managing award fee contracts,” the IG said.
So-called award fee contracts have long been permitted under the Federal Acquisition Regulation for work of a nature that makes it neither feasible nor effective to devise predetermined objective targets applicable to cost, schedule and technical performance, the report noted. Such awards are also appropriate if the likelihood of a company meeting the agency’s acquisition objectives will be enhanced by using a contract that “effectively motivates the contractor toward exceptional performance and provides the government with the flexibility to evaluate both actual performance and the condition under which it was achieved.
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