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GAO: DOD Must Assess Impact of Fixed-Price-Incentive Contracts on Major Acquisition Programs

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The Government Accountability Office (GAO) has released a report stating that the Department of Defense (DOD) must evaluate its use of fixed-price-incentive (FPI) awards for major programs including the procurement of key weapons systems.

GAO said Wednesday that the DOD’s FPI contract awards, which offer a profit incentive to contractors for performance and cost control, increased significantly since fiscal year 2010. FPI contracts represented almost half of the $65 billion in obligations for major defense acquisition programs (MDAP) for FY 2019, the report states.

According to GAO, the DOD has not analyzed the extent of the FPI contracts’ contribution to achieving cost, schedule and performance goals.

The Pentagon must evaluate FPI use and assess contract elements such as Better Buying Power acquisition initiatives that help achieve program goals, the watchdog noted. GAO analyzed the DOD’s contracts for 101 MDAPs in FY 2010 through 2019 as part of the study.