Evidence of cost growth under cost-plus and fixed-price contracting

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As defined by the US Department of Energy (DOE), privatization refers to a shifting of responsibilities for the completion of projects from a cost-plus Management and Operations (M and O) contract, to incentive-based contracts with the private sector. DOE`s new vision is to arrange cleanup work around incentives-based contracts, which are won via competitive bidding. Competition in awarding cleanup contracts can make use of market incentives to lower project costs and reduce slippage time. Fixed-price contracts encourage contractors to minimize schedule delays and cost overruns once the scope of a project has been negotiated. Conversely, cost-plus contracting offers weak incentives ... continued below

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35 p.

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Scott, M.J.; Paananaen, O.H.; Redgate, T.E.; Ulibarri, C.A. & Jaksch, J.A. September 1, 1998.

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Description

As defined by the US Department of Energy (DOE), privatization refers to a shifting of responsibilities for the completion of projects from a cost-plus Management and Operations (M and O) contract, to incentive-based contracts with the private sector. DOE`s new vision is to arrange cleanup work around incentives-based contracts, which are won via competitive bidding. Competition in awarding cleanup contracts can make use of market incentives to lower project costs and reduce slippage time. Fixed-price contracts encourage contractors to minimize schedule delays and cost overruns once the scope of a project has been negotiated. Conversely, cost-plus contracting offers weak incentives for contractors to select cost-minimizing production and management approaches. Because privatization explicitly allocates more risk to the contractor, it forces the government to better define its goals and methods. This study summarizes actual cost experiences with government contracts performed under cost-plus and fixed-price incentive structures at all levels of government. The first section provides some background on the problem of making contractor activity more cost-efficient. Following this are sections on the measurement of performance and the costs of projects, limitations on measurement, and findings of similar studies. The study concludes with appendices discussing the details of the performance measurement methodology and the project data sets used in the study.

Physical Description

35 p.

Notes

OSTI as DE98058972

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  • Other Information: PBD: Sep 1998

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  • Other: DE98058972
  • Report No.: PNNL--11984
  • Grant Number: AC06-76RL01830
  • DOI: 10.2172/665982 | External Link
  • Office of Scientific & Technical Information Report Number: 665982
  • Archival Resource Key: ark:/67531/metadc706179

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Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

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  • September 1, 1998

Added to The UNT Digital Library

  • Sept. 12, 2015, 6:31 a.m.

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  • April 6, 2016, 2:17 p.m.

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Scott, M.J.; Paananaen, O.H.; Redgate, T.E.; Ulibarri, C.A. & Jaksch, J.A. Evidence of cost growth under cost-plus and fixed-price contracting, report, September 1, 1998; Richland, Washington. (digital.library.unt.edu/ark:/67531/metadc706179/: accessed May 27, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.