Report Faults Performance Bonuses for Contractors

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By Steve Vogel
Washington Post Staff Writer
Monday, July 6, 2009

Federal agencies have awarded billions in bonuses to contractors regardless of whether the work was deemed satisfactory, according to a Government Accountability Office report released last week.

Government-wide guidance issued in 2007 by the Office of Management and Budget recommended that agencies link award fees to results and prohibit payments for poor performance. That policy has saved hundreds of millions of dollars, the GAO reported.

But the office found that many officials at several major agencies, including the departments of Energy, Homeland Security, and Health and Human Services, were "unaware" of the guidance. Others, including the Pentagon and NASA, have done more to make changes, but they have done so inconsistently, according to the GAO report, released June 29.

An Air Force contracting official told GAO investigators that a contractor "has to do a pretty bad job to receive a rating of 'good' " -- a rating that pays in excess of 85 percent of the award fee.

"These evaluations provide little motivation for improved performance despite fee determination letters that consistently noted that the contractor had room to improve," the GAO report noted.

"The Pentagon and other federal agencies seem to live in a world where every contractor is above average," Sen. Bernard Sanders (I-Vt.) said in a statement after the report's release.

The Office of Science at the Energy Department uses a scoring system that allows for payment of as much as 84 percent of an award despite a performance below expectations, according to the GAO report.

A Homeland Security contractor received a bonus despite an evaluation that described the contractor's communication as "egregious."

The contractor, who maintained aircraft for Customs and Border Protection, switched to a costlier method of disposing hazardous waste without notice. Homeland Security viewed that action as a "questionable use of taxpayer funds for parochial interests without the coordination and consultation of government representatives," the GAO report said.

But the agency paid an undisclosed bonus anyway, reasoning that eliminating the award for poor communication would ignore the contractor's performance in other areas.

Agencies often give poor-performing contractors second and third chances at missed bonuses, the report said. A Homeland Security contractor that missed its bonus on the first go-round earned 100 percent of the award in a subsequent period.

"There are certainly times when agencies should provide incentives for contractors who perform well or go above and beyond the call of duty," said Thomas R. Carper (D-Del.), who as chairman of a Senate Homeland Security and Governmental Affairs subcommittee requested the GAO report. "But I am concerned that many agencies are relying on these poor-performing contractors simply because the federal government does not know what it wants or needs or how services should be delivered."

Carper's office said his subcommittee will hold a hearing to examine "why federal agencies are inappropriately awarding large bonuses."

Where the revised policies have been adopted, hundreds of millions of dollars have been saved, according to the GAO. The Defense Department will save more than $450 million from 2006 through 2010 by limiting second chances at unearned fees in eight programs, the agency estimates.

The GAO report recommends that the secretaries of Energy, Health and Human Services, and Homeland Security update their policies on using award fees. The agencies told the GAO they will comply with the recommendations.


© 2009 The Washington Post Company

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