Defense Dept. Orders New Limits on T&M Contracts The Defense Department has imposed new restrictions on time-and-materials contracts for non-commercial services, requiring that the contracts only be used when “no other contract type is suitable.” A final rule published in the Jan. 24 Federal Register says the same restrictions now apply to all DOD contracts for services, whether they are commercial or non-commercial, including orders under indefinite-delivery contracts. Critics argue that time-and-materials contracts give contractors no incentive to hold down costs, and expose the government to the risk of excess costs. Before a T&M contract can be used, the rule requires a contracting officer to execute a determination and finding “that it is not possible at the time of placing the contract or order to accurately estimate the extent or duration of the work or to anticipate costs with any reasonable degree of certainty.” In addition, the contract must be structured to minimize the use of time-and-materials requirements, such as by limiting the value or length of the T&M portion of the contract or establishing fixed prices for part of the requirement. The Government Accountability Office found last year that the Defense Department used T&M contracts extensively in three categories of services: professional, administrative, and management support services; information technology and communications; and equipment maintenance and repair. “DOD is turning to time-and-materials contracts because they can be awarded quickly and labor hours or categories can be adjusted if requirements are unclear or funding uncertain,” GAO said. But a survey of federal acquisition officials by the consulting firm Grant Thornton found 60% of them believe restrictions on T&M contracts would not improve contracting. The final rule, effective Nov. 24, is DFARS Case 2007-D021.