Incentive Contracts:

Examination of Fixed-Price Incentive Contracts

NSIAD-88-36BR: Published: Nov 3, 1987. Publicly Released: Nov 3, 1987.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

In response to a congressional request, GAO examined the federal government's practice of using fixed-price incentive (FPI) contracts to share cost risks with its contractors, to determine its cost-effectiveness.

GAO reviewed 573 FPI contracts at 6 Department of Defense (DOD) purchasing offices and found that: (1) DOD had given final pricing to 62 contracts; (2) of the 62 contracts, 2 achieved the target price, 33 overran the target price, and 27 underran the target price; and (3) none of the 6 purchasing offices exceeded their cumulative target price by more than 1.76 percent. GAO also found that: (1) there was no relationship between the cost-sharing ratio and achievement of a contract's target price; (2) although the FPI contracts did not always achieve the desired goal, they enabled the government to share financial risks with contractors and limited its financial liability; (2) government contractors often refuse to accept firm-fixed-price contracts because of the associated risks; and (3) the government would have to use cost-type contracts if it could not partially share risk through FPI contracts.

Sep 22, 2016

Sep 21, 2016

Sep 19, 2016

Sep 12, 2016

Sep 8, 2016

Sep 7, 2016

Sep 6, 2016

Aug 25, 2016

Looking for more? Browse all our products here