The Government Accountability Office (GAO) released a report earlier this week entitled “GAO-17-291 Defense Contracting: DOD Needs Better Information on Incentive Outcomes”. According to the GAO, ““since 2010, the Department of Defense (DOD) has made changes to its regulations, policies, and guidance and taken other steps to improve its use of incentive contracts. DOD has promoted greater use of objective incentives—which measure contractor performance toward predetermined targets using a formula—through incentive fee contracts, partly to better motivate cost control. These changes are reflected in DOD's increased use of incentive fee contracts and decreased use of award fee contracts, which involve fees paid based on a more subjective evaluation of contractor performance and have not always been linked to acquisition outcomes.”

The GAO went on to say “in fiscal year 2015, DOD spent $274 billion on contracts for products and services. Some of this money was used on incentive contracts to achieve specific outcomes, such as lower costs or tighter time frames. For these contracts, we found that DOD has increased its use of incentive fees (which objectively measure contractor performance toward set goals) and decreased its use of award fees (which are more subjective). However ,DOD does not consistently collect data on the outcomes of these incentive contracts—so DOD can't determine if they are improving contractor performance. We recommended that DOD collect and analyze relevant contract data.”

For additional information on contractual incentives, see our contracting colleagues’ “Incentive Contracting - Incentives, Award Fee, Award Term” ACQuipedia article. For product support-specific information on incentivizing desired outcomes for both government and industry organizations, see our life cycle logistics “Incentives - Motivating Achievement of Desired Product Support Outcomes” ACQuipedia article.