In the debate, Sen. McCain said he wanted to ‘do away with cost-plus contracts’ and claimed to understand how to get defense contract cost overruns under control.
He said, "I think that we have to return -- particularly in defense spending, which is the largest part of our appropriations -- we have to do away with cost-plus contracts." He claimed, "I know how to do that".
His suggestion is simplisitc and dangerous and his claim, nonsense.
The problem is not that cost-plus Government contracts exist. The problem is that the contract type has been given to the wrong contractors on the wrong programs.
Cost-plus contracts are required for US Government funded programs where the complexity of the requirements, the urgency of need or the required technologies part of the contract. The Space Shuttle development was a cost-plus contract. When that contract was awarded, NASA did not have a detailed design for the spaceship and did not have a firm schedule. NASA needed contractors to develop many the technologies that went into the program.
The example Sen. McCain cited as cost-plus contracting abuse was the Littoral Combat Ship. That program was a U.S. Navy’s concept demonstration for a small, fast, maneuverable ship that would meet multiple roles. The Navy envisioned one ship for anti-submarine warfare, mine countermeasures, anti-surface warfare, intelligence, surveillance and reconnaissance, homeland defense, maritime intercept, special operations, and logistics -- an awful lot for one ship. After the ship contracts were awarded, the Navy’s specifications and requirements changed and grew – they call it scope creep. Consequently the costs grew and the schedule slipped. The cost overruns were not the fault of the cost-plus contract type or the contractors. The cost overruns were caused by ill-defined specifications and Navy mismanagement.
Sen. McCain’s suggestion to ‘do away with cost-plus contracts’ is a simple-minded, knee-jerk reaction and demonstrates a lack of understanding. If adopted, his suggestion would ham-string government funded technology development in defense, aerospace, and space. Without cost-plus contracts, no company would have accepted contracts for the Space Shuttle, the Littoral Combat Ship demonstration, the Stealth Fighter, GPS satellites or the Mars Rover.
The problem with cost-plus contracts is that they have been given to contractors for programs that are neither complex nor technologically difficult. Halliburton was awarded a no-bid, cost-plus contract to provide troop support services to our uniformed men and women in Iraq. Halliburton abused their cost-plus contract and ripped off the US taxpayer for billions. The fault wasn’t the contract type. The fault was an incompetent, corrupt executive branch.