Castle Protects Taxpayers

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September 28, 2006

POGO wants to applaud a good government ally.  Representative Mike Castle (R-DE) was outraged when he learned from the GAO that defense contractors are getting paid multi-million dollar bonuses, or award fees, even when they botch their work. What is the incentive to do a job well, if you know you�ll get the bonus anyway?

GAO released two reports detailing waste in the DoD�s incentive/award fee program and placed the programs on the government�s high risk list.  The GAO stated in its March high risk report (pdf) that �DOD cannot ensure that the more than $200 billion it spends annually is used wisely and results in weapon systems and capabilities delivered to the warfighter as originally promised, or that its business practices, such as the fees paid to its contractors, promote good acquisition outcomes.�  DOD responded with a new policy memo on March 29, 2006 stating that �award fee contracts must be structured in ways that will focus the government�s and contractor�s efforts on meeting or exceeding cost, schedule, and performance requirements.�

GAO also published a report (pdf) that stated that the Comanche helicopter, F/A-22 and Joint Strike Fighter aircraft, and the Space-Based Infrared System High satellite system, have experienced billion dollar cost increases, technical problems, and development delays, but the contractors have �respectively received 85, 91, 100, and 74 percent of the award fee made available to date (adjusted for rollover), totaling $1.7 billion.�

Rep. Castle was able to insert and have Congress approve legislation that will prevent contractors from receiving award fees when their performance doesn�t merit a payment.  Section 9016 of H.R. 5631 (the DoD Appropriations Act of 2007; pdf), prevents the payment of award fees to any defense contractor for performance that does not meet the requirements of the contract.  It is ridiculous to think that such a provision is necessary.  In the real world, however, Rep. Castle and many of us have learned that the Defense Department has paid bonuses to its contractors in instances when the job was not done.

Last week, Rep. Castle suffered two small strokes and isn�t in Washington D.C. to receive the accolades that he deserves.  We wish him a speedy recovery and thank him for stopping the government�s practice of rewarding contractors even when they screw up.

Authors: Scott H. Amey, J.D.

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