With Gary out today, I thought I'd post something that might interest you.
What's a cost-plus contract? From Wiki:
A cost-plus contract is a contract framed in such a way that when the contractor finishes the agreed-upon work, they receive compensation equal to their expenses plus some bonus (which can be either a fixed amount or proportional to the expenses).With this kind of contract, what motivation does a contractor have to control costs? From Halliburton Watch:
Even if the contractor suffers cost overruns, they will still receive full compensation plus their expected profit.
A typical contractor earns a base fee of 1 percent of the estimated contract cost and an "incentive fee" of up to 9 percent of the cost estimate based on the contractor's performance in a number of areas, including cost control.
The upshot: The contractor will never spend $1 million to do a job when it can spend $10 million and thereby earn a higher fee. So, contractors actually earn more money by wasting taxpayer money.
I'm not familiar with Halliburton Watch, but a Google search will show that cost-plus contract abuses are not the product of the tinfoil-hat crowd. There's more information on the subject in this piece from The Center for Public Integrity titled "Katrina Contracts Worth $2.4 Billion Offer Profit Guarantees."
UPDATE: I forgot to include the link to the Project on Government Oversight's Federal Contractor Misconduct Database.
Federal Contractor Misconduct Database (from Project on Government Oversight)
5 comments:
I hope Gary is back, soon.
"no adult supervision" is one of your tags for this post. Kinda sums up the last 7+ years.
Contracts are legal agreements between two are more parties. Both parties attempt to create an agreement that provides them the greatest benefit. “Cost-plus” contracts should only be used in extreme time sensitive situations where getting the job done in a timely manner takes priority over getting the job done cheaply. Usually there is a penalty if the deadline is not met. The penalty should be proportional to the possible profit. Work can be done well, cheaply or fast, but usually not all three at the same time.
Revolving door between Congresscritters, Lobbyists, and CorporateContractors means everyone wins.
Everyone---
Except the average American Joe Shmoes and Jane Does.
The sucker reborn every minute is the American taxpayer/voter.
Good Lord, corvus, I hope my post wasn't that boring!
I'm not that hurt. Much. I'm just kidding; I'm looking forward to his return on-air as well.
Anyway, the reason I posted that nugget was two-fold:
1. I wanted to put something up for discussion while Gary's out and
2. A lot of people tend to blame the "other guys" for runaway government spending. I wanted to suggest that we have systematic problems that aren't unique to either party.
When it's our tax dollars paying for this stuff, shouldn't we know about this stuff?
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