Press Releases

Sens. Carper and Sanders: Federal Agencies Award Contractors Billions in Bonus Payments

GAO Report Released Today Shows Pentagon and Federal Agencies Wasting Billions

Jun 29 2009

WASHINGTON -- A Government Accountability Office (GAO) report requested by Sen. Tom Carper (D-Del.) and others released today found federal agencies are not following rules and requirements when awarding contractors billions of dollars in bonuses.

The GAO report shows that while the bonus payments are designed to incentivize high-quality work, the Pentagon and other large federal agencies routinely award contractors for less than satisfactory work and services. And, agencies continue to give contractors second and third chances at missed bonuses, despite poor performance.

The GAO report was requested by Homeland Security subcommittee Chairman Carper, along with Sens. Bernie Sanders (I-Vt.), John McCain (R-Ariz.) and Tom Coburn (R-Okla.).

“There are certainly times when agencies should provide incentivizes for contractors who perform well or go above and beyond the call of duty. But I am concerned that many agencies are relying on these poor performing contractors simply because the federal government does not know what it wants or needs or how services should be delivered,” said Sen Carper.

Sen. Carper plans to hold a hearing in the coming weeks to examine the reasons why federal agencies are inappropriately awarding large bonusesand to determine how to save money in future government contracting.

Sen. Sanders, noting that the Pentagon and other large federal agencies routinely award contractors for less than satisfactory work, said, “The Pentagon and other federal agencies seem to live in a world where every contractor is above average. It’s like they live in Lake Wobegon, where ‘all the women are strong, all the men are good-looking, and all the children are above average.’”

The four senators asked GAO to prepare the report, titled, “Federal Contracting: Guidance on Award Fees Has Led to Better Practices, But Is Not Consistently Applied,” which outlines how, if agencies effectively implemented current and proposed rules governing cost-plus award fee contracts, the government could save billions of dollars. For instance, the GAO found that when contract officials followed the rules on 50 contracts within Department of Defense (DOD), along, taxpayers would have saved $450 million.

The GAO identified $42 billion is at risk of being wasted within the Departments of Defense, Health and Human Services, Homeland Security, Energy, and National Aeronautic and Space Agency. In 2005 alone, the GAO estimated that the DOD had inappropriately paid $8 billion in bonuses.

In addition, the vast majority of award fee bonuses are not overseen and tracked by agency senior management. According to GAO, only the DOD collects award fee data, but fails to use the information to inform decision making about future contracting.