White House Office of Management and Budget Director Peter Orszag today announced a change to the Federal Acquisition Regulations aimed at cutting back on the use of cost-reimbursement contracts.
Compared with fixed-price contracts, these types of contracts allow companies to bill the government for all incurred costs. This could turn out to be a bad deal for Uncle Sam because companies have no incentive to keep their costs down.
Upcoming changes in the FAR will address under what circumstances cost-reimbursement contracts are "appropriate" and the necessary government "acquisition workforce resources" required to oversee them, Orszag wrote in a memo to agency leaders.
According to the document, the change will come "soon." It includes no specific date.
The Obama administration wants to reduce the use of cost-reimbursement and other high-risk contract types by 10 percent in fiscal year 2010.