Cost-plus contracts structurally reward contractor overspending

Evidence

The work KBR performed under LOGCAP also reflected the Pentagon’s frequent use of “cost-plus” contracts. These reimburse a company for its expenses and then add a percentage of the costs on top of that as the company’s fee. In other words, as the Congressional Research Service explains, “increased costs mean increased fees to the contractor,” and therefore there is “no incentive for the contractor to limit the government’s costs.” As one Halliburton official bluntly told a congressional committee, the company’s unofficial mantra in Iraq became, “Don’t worry about price. It’s ‘cost-plus.’” — David Vine, Base Nation_ How U.S. Military Bases…, 696

Categorization

• SEED: An essay on how incentive structures in procurement predict waste could use cost-plus as the central case study.
• XREF: connects to: Surrogate performance measures entrench incumbents and block reform through the reward structure — Michael Lipsky, Street-Level Bureaucracy: Dilemmas of…, 1638