Defense Authorization Act Targets Award Fees, Ethics The Defense Department must link award fees to results under a provision of the 2007 Defense Authorization Act signed by President Bush Oct. 17. Congress adopted many recommendations by the Government Accountability Office to limit payments of award fees to underperforming contractors. GAO reported last year that the department routinely paid award fees for “satisfactory” performance, although its own regulations said “the purpose of these fees is to motivate excellent performance.” The auditors said some contractors received the incentive fees even if their projects were behind schedule and over budget. Under Section 814 of the Authorization Act, the secretary of defense is directed to develop new regulations that link award fees to acquisition outcomes, “which shall be defined in terms of program cost, schedule, and performance.” The law stops short of prohibiting award fees for performance that is graded “satisfactory,” as GAO recommended. In a March 29 James Finley, deputy undersecretary of defense for acquisition and technology, said DOD would continue to pay for “satisfactory” work, but would “pay considerably less than [for] excellent performance.” The law directs DOD to commission an outside assessment of how to evaluate contractor performance. The assessment is to be made by a federally funded research and development center, such as Rand Corp. The Authorization Act requires contractors on projects costing more than $10 million to report the names of their employees who formerly worked as DOD contracting officials. The requirement is aimed at the “revolving door” between the Pentagon and its contractors. The Act also directs DOD to rely primarily on fixed-price contracts in projects requiring the development of new technology, a restriction opposed by industry.