Time Means Money

In a long overdue change, Pentagon procurement folks will have to justify their use of time and materials contracts.

Those are the deals in which contractors get paid by the hours they claim. The payouts on such contracts often grow far beyond original estimates.

The change was meant to put the Defense Federal Acquisition Regulations in line with the Federal Acquisition Regulation. Both now will require acquisition folks to demonstrate that they have no alternative to a T&M contracts before deciding to use one.

Matthew Weigelt at Federal Computer Week wrote about the change this week.

The Pentagon's use of T&M contracts has soared since the late 1990's, outpacing overall spending. A GAO report last year said, "DOD's reported obligations under time-and-materials contracts have nearly doubled, from almost $5 billion in fiscal year 1996 to about $10 billion in 2005. This increase was at a somewhat greater rate than the overall rise in DOD's spending on services."

And that doesn't include massive amounts of spending through schedules.

It probably won't surprise anyone that the GAO says such contracts are used for convenience, not for protecting taxpayer interests or getting the best deals. Most of the time, Defense used them for "professional, administrative, and management support
services; information technology and communications; and maintenance, repair, and rebuilding of equipment." They're also used to supplement the federal workforce.

Oh, and by the way, contractors hired through T&M deals often made extra profit by charging the government for their higher hourly rates, even when they had subcontracted work to a firm that pays workers significantly less.

By Robert O'Harrow |  November 28, 2008; 2:19 PM ET
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