frankkendallThe Pentagon’s head of acquisition, Frank Kendall, has released the Defense Department’s first comprehensive report on what works and what doesn’t in buying weapons.

The biggest surprise, said Kendall, undersecretary of Defense for acquisition, technology and logistics, is that fixed-price contracts, touted for much of the last five years as major tool in combatting cost overruns, aren’t as useful as thought.

Kendall did an interview yesterday with the semi-official American Forces Press Service. Here’s an excerpt:

One major finding from the report is that “a lot of the things we thought were important may not be as important as we believed,” he said. “Fixed-price versus cost-plus contracting, for example.”

Fixed-price contracts are let at a set price for the work, while cost-plus contracts reimburse the contractor’s expenses and also add other funds, which can include award, incentive and performance fees.

Statistics for the two kinds of contracts were more similar than he expected, Kendall said. He added he’s never thought fixed-price contracts were “a panacea,” and while conventional wisdom is that fixed pricing solves a lot of problems, “I don’t think that’s the case, and the data shows that.”

OSD Acquistion Report 2013

Comments