McCain’s contracting proposal makes no sense

September 28, 2008 by
Filed under: Congress, Contract Awards, Department of Defense, development program, Federal Budget Process, production program, S&T 

In the first Presidential Debate on Friday, Senator McCain restated one of his favorite reforms of government spending – require Firm Fixed Price (FFP) contracts for all work. Currently FFP contracts are used to buy hardware and services when the price and schedule are known. The contractor agrees to this as they will make profit on each unit sold. Cost Plus contracts are used for development or for things where the cost is not known. During World War II Cost Plus contracts were used almost exclusively and some abuse did occur. For R&D contracts it is hard to do a FFP as the total time and cost required to develop a system or new capability has often proved to be beyond the estimation capability of the best government or contractors can do. Senator McCain’s proposal will not work, as you will have a situation where no one will bid on the work as they know they won’t make any money on it.

See FCW.com for the story.

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