Avoiding Terminations, Single Offer Competition, and Costly Change Orders With Fixed-Price Contracts

Abstract

Fixed-price contracts offer the promise of controlling costs but are less likely to succeed when there is uncertainty regarding requirements. While these broad principles are uncontroversial, disagreement rages regarding the practical question of how widely they should be used. This study tests a variety of hypotheses regarding what contract characteristics are associated with better performance under fixed-price contracts. Here, performance is measured across three dependent variables: (a) the Number of Offers Received for competed contracts, (b) whether the contract was terminated, and (c) the extent to which change-orders raised the contracts cost ceiling. The study team has created a Bayesian network, populated by completed, publicly reported DoD contracts from FY2007 to FY2013 to address this research question. The public purpose of this process also includes facilitating future acquisition research on a range of topics. To support future research, all analytical data and codes developed and/or used are posted on the CSISdefense GitHub (Sanders, 2015). This resource addresses two vexing issues that bedevil a wider use of the Federal Procurement Data System (FPDS) by academia, government, and industry researchers, namely (a) the data-selection barrier to using the FPDS and (b) the difficulty of deriving performance outputs from FPDS.