April Fools Award Fees and the Army Corps of Engineers

Since nobody has mentioned it thus far I thought I would draw your notice to a Department of Defense Inspector General's report. As it was dated April 1 perhaps people thought it was an April Fools joke. Alas, it was not.

The aim of the report, "U.S. Army Corps of Engineers' Use of Award Fees on Contracts in Iraq and Afghanistan" was to determine whether award fees paid by the U.S. Army Corps of Engineers Transatlantic Programs Center (TAC) to contractors in support of operations in Iraq and Afghanistan were justified.

You can probably already guess the answer.

The report found that:

TAC contracting and award fee officials did not properly manage and oversee the award fee process for the 15 CPAF [Cost-Plus-Award-Fee] task orders reviewed, valued at $116.4 million. Specifically, officials did not:

Develop adequate award fee plans for incentivizing and evaluating contractor performance,

Adequately conduct oversight and evaluation responsibilities, or

Adequately document and support award fee ratings.

This occurred because USACE did not have policies and procedures for administering award fees consistently and in accordance with Federal Acquisition Regulation (FAR) requirements. In addition, USACE did not adopt Army best practices documented in the Army Contracting Agency (ACA) Award Fee Contracts Handbook.

How TAC could not "have policies and procedures for administering award fees consistently and in accordance with" FAR requirements is an interesting mystery. Admittedly the FAR is not easy reading. Okay, it is mind numbing. Still, assuming one had one's morning coffee it is an easy click down to "Subchapter C--Contracting Methods and Contract Types"

Anyway, the bottom line was that "As a result, TAC contracting officers and award fee personnel awarded fees, totaling approximately $20.6 million, without sufficient support, justification, or assurance that contractors were paid award fees commensurate with their level of performance."

For those without a calculator that means almost 18 percent of the total task orders award fees value was without "sufficient support, justification, or assurance that contractors were paid award fees commensurate with their level of performance."

I wonder if that is the sort of value various industry trade associations have in mind when they proclaim contractor cost-effectiveness. I'm just asking, mind you.

This is not to blame the contractors. They can only follow the procedures that exist and the procedures were AWOL.

As the report notes:

TAC contracting officials did not develop adequate AFPs [Award Fee Plan]. Specifically, TAC contracting officials did not develop criteria to evaluate contractor performance that were tailored to the individual circumstances of the procurement, as required by AFARS. Instead, TAC contracting officials established criteria that were vague and not measureable. For example, TAC established criteria that were intended to evaluate the contractors' efforts to control cost; however, the criteria that TAC established did not address acquisition outcomes such as meeting cost goals. The cost control criteria were overly general and included undefined terms such as "effectiveness," "timeliness," "completeness," and "reasonableness."