Federal Contracting: Guidance on Award Fees Has Led to Better Practices but Is Not Consistently Applied: Report to Congressional Requesters [open pdf - 1MB]
"In prior work, GAO found that contractors were paid billions of dollars in award fees regardless of acquisition outcomes. In December 2007, the Office of Management and Budget (OMB) issued guidance aimed at improving the use of award fee contracts. GAO was asked to (1) identify agencies' actions to revise or develop award fee policies and guidance to reflect OMB guidance, (2) assess the consistency of current practices with the new guidance, and (3) determine the extent agencies are collecting, analyzing, and sharing information on award fees. GAO reviewed the Departments of defense (DOD), Energy (DOE), Health and Human Services (HHS), and Homeland Security (DHS) and the National Aeronautics and Space Administration (NASA)--agencies that constituted over 95 percent of the dollars spent on award fee contracts in fiscal year 2008. What GAO Recommends GAO recommends that DOE, HHS, and DHS develop or update implementing guidance on award fees, that DOD promote application of its current guidance, and that all agencies reviewed work together to develop methods to use in evaluating the effectiveness of award fees and sharing successful strategies."
Government Accountability Office: http://www.gao.gov/