ARLINGTON, Va. – Despite a growing movement toward fixed-price contracts to keep a lid on costs, U.S. Navy contracting officers should look to cost-plus contracts if there is a greater element of risk, says Sean Stackley, assistant Navy secretary for research, development and acquisition.
"You had better not be using fixed-price contracts for something that is high risk," Stackley said June 2 during a question-and-answer session following his lunch keynote address during the 2014 Navy Opportunity Forum. In those cases, he says, "Use a cost-plus contract. It’s OK. What we don’t want to be is kidding ourselves."
Generally, he says, contractors have not balked at the greater use of fixed-price contracts. "I didn’t sense any fear of taking on fixed-price contacts, as long as the risk is understood," he said.
What has to be better understood across the board for contracts now, he says, are the requirements.
"The most important thing is getting the requirements right," he says. "When things break down, 90% of the time it’s because we failed to get the requirements right. We’re spending more time in that phase."
The Navy is working with contractors to make sure the requirements are affordable and feasible.
Devoting more time to requirement-setting, he says, should not "bog down industry" because that work is done before requests for proposals (RFPs) are issued. "Once an RFP goes out, that’s where I’m concerned about how long it takes."
There have been recent problems with awarding certain kinds of contracts, he says. For example, technical services contracts take, on average, nine months to a year to award. Some are taking up to two years to award.
"Some of it [is because] we’re putting the RFP out and we don’t have our ducks lined up," he says.
In 2013, he says, the Navy held up on some contract awards because of budget and funding uncertainty.