In a major change of recent policy trends, NASA has decided to allow any bidders on the project to deorbit ISS to have the choice of working under either a fixed-price or a cost-plus contract.
In a procurement notice posted Dec. 5, NASA announced it would allow companies the choice of using either firm fixed price or cost plus incentive fee contract structures for both the design and the production of the U.S. Deorbit Vehicle (USDV).
When NASA issued the original request for proposals (RFP) for the vehicle in September, the agency gave bidders a choice. They could propose to develop the vehicle using a cost-plus contract and then produce it under a fixed-price contract, a so-called “hybrid” approach. Alternatively, they could propose doing both development and production under fixed-price contracts.
The revised approach now adds an option to perform both the development and the production under cost-plus contracts. NASA, in both the procurement notice and a blog post, did not disclose the reason for the change.
In recent years NASA had been shifting more and more to fixed-price contracts, because it works. It either forces discipline on companies, making them get the job done at cost and on time, or it reveals that the company is incompetent (as in the case of Boeing and its Starliner capsule), valuable information for future bidding.
I suspect that Boeing’s recent decision to refuse to sign any fixed-price contracts played a hand in this decision. For the last decade or so there have been many government officials who like to treat Boeing as their best friend, despite its recent failures. By doing so they increase the chances the company will hire them as consultants when they retire from their government job. Also, politicians tend to bow to this big company due to its large footprint in many congressional districts.
The result is this shift back to cost-plus. This will also mean that this project will likely go overbudget and behind schedule, as such contracts routinely do. The winning bidder will have no incentive to rein in costs. In fact, the nature of the contract will encourage just the opposite, as any cost overruns will be picked up by the government.
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