Half of stimulus contract spending falls into risky categories

Despite the Obama administration's stated preference for competitively awarded, fixed-price contracts, at least $7.8 billion of the more than $16 billion in federal contracts awarded under the stimulus falls outside these categories, according to data posted on Recovery.gov.

In the initial Recovery Act implementation memorandum released on Feb. 18, Office of Management and Budget Director Peter R. Orszag stated, "To the maximum extent practicable, contracts using Recovery Act funds shall be awarded as fixed-price contracts using competitive procedures."

Contracts that did not meet this criteria were to be posted on a special section of Recovery.gov. The list there shows that, as of Sept. 9, $7.8 billion in noncompetitive, nonfixed price contract awards had been made under the stimulus. While the total contract spending was updated on Oct. 15, the list of risky contracts was not.

OMB spokesman Tom Gavin said the majority of these contracts, awarded by the Energy Department, were not conducive to fixed-price arrangements.

"Fixed-price contracts are most useful when the scope of work is a known commodity," Gavin said. " However, for these contracts (primarily environmental management and clean-up), the final scope of work is not known, and the department has moved forward with cost-plus contracts for these projects."

Gavin said the administration remains firm in its effort to significantly limit nonfixed price contracts and to implement contracting reforms governmentwide.

Thus far, the noncompetitive, nonfixed price section of Recovery.gov lists only the awarding agency, contractor name, cost of award and date the contract was signed. OMB has stated that a full summary -- including a description of the required products or services -- will be posted as well. Ed Pound, spokesman for the Recovery Accountability and Transparency Board, said within the next week, what is now a small PDF file will be broken out into a Web page and each entry will contain a detailed view of the contract.

OMB has stated that when agencies choose to use "riskier contract types," they must take a number of actions to mitigate the government's exposure. When choosing other than fixed-price contracts, for example, agencies are to ensure all alternatives have been considered and qualified employees are available to monitor the contract.

"Fixed-price contracts provide maximum incentive for the contractor to control costs and perform effectively and impose a minimum burden upon the contracting parties," Orszag wrote in the February memo. "Using other than a fixed-price contract may be appropriate, but requires agencies to pay special attention to ensuring that sufficient qualified acquisition personnel are available to perform contract administration to mitigate the government's risk."

The memo also advised agencies to review internal procurement policies to ensure they are promoting competition "to the maximum extent practicable."

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