WP: Big Rewards for Defense Firms

[Pirate Smile]

Big Rewards for Defense Firms
Extra Fees Paid Regardless of Performance, GAO Finds

By Charles R. Babcock
Washington Post Staff Writer
Monday, April 17, 2006; Page D01

In late February 2004, the Army announced that it was canceling plans to build a radar-evading helicopter called the Comanche, a project that was nearly three years behind schedule and more than $3.5 billion over budget. Those problems, however, didn't stop an Army panel a few weeks later from granting the Boeing Co.-Sikorsky Aircraft Corp. partnership running the program a $33.9 million "award fee" for their work on the helicopter, part of more than $200 million in such fees paid to the partnership over four years.

Award fees are meant in theory to motivate defense contractors with extra money for performance. But a recent Government Accountability Office study found that the fees are often paid regardless of whether a project is on schedule and within its budget.

Instead of encouraging efficiency, the GAO found, award-fee payments have become routine in some major weapons contracts, built into company expectations and paid almost as a matter of course.

Current practices "undermine the effectiveness of fees as a motivational tool and marginalize their use in holding contractors accountable," the GAO concluded. Defense contractors are paid award fees for work that is simply "acceptable, average, expected, good, or satisfactory."

http://www.washingtonpost.com/wp-dyn/content/article/2006/04/16/AR2006041600608.html

[rodeodance]

1. $33.9 million AWARD for being not on schedule and overrun costs!