Changes Afoot

By Sebastian Sprenger / July 29, 2009 at 5:00 AM

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.

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