Chair Daniel Akaka: Mr. Baker, with the of CoreFLS, the Committee learned that the contractor was still paid a bonus due to contractural obligations. Are bonuses being used to encourage contractor performance? And how are they structured?
Roger Baker: Sir, to answer the first question, I'm sure that there still are incentives in our contracts to encourage the contractors to do what -- what we want them to do. Uh, my experience from both the private and the government side is there are frequently cost-plus incentive fee sort of contracts. And I expect that we would use those where appropriate. The issue that you frequently see is when a contractor does exactly or close to technically what the contract asked them to do and the project still fails for either reasons that they didn't contribute to or decisions that weren't contemplated in the contract. And I think the government has fairly, traditionally continued to pay those incentive fees when contractually required in those.
Okay, we're going to stop here. Kat's blogging about the hearing at her site and one of her complaints (valid) is that there was too much computer jargon used and not explained. I'd agree with her. There was also economic jargon used. And there, you're lucky, you got me.
That's what I was getting my degree in. (And I'm not a freshman like it says on my profile. I haven't updated my profile since I started my site in 2005. I dropped out to campaign for Hillary in the Democratic Party primary -- and I'm glad I did to this day and think she would have made the best president. C.I. gave me a job where I handle her stocks and that pays great and I did two summer sessions this summer so I'm close to having my economic degree -- b.s.)
Cost-plus incentive fee?
You may be asking what is that?
The real question that should be asked is why the government is paying that?
The government shouldn't be.
The government has a project. Let's toss out the government a second. You have a project. You want a deck built. You take bids on it -- just people saying "I can build it for X." From those bids, you pick the most qualified person at the least cost.
Now you hire me, you say, "I'm giving you $3,000. And I need it to be out of redwood lumber and I need you to use ___ nails and ___."
That's clear. I need to buy materials you listed and build the deck (and hire anyone I need to help me) out of that $3,000.
Now let's pretend that instead of hiring me that way, you hire me to build your deck on a cost-plus incentive fee. In this case, you're telling me the $3,000 is for the job but if I bring it in at $3,000 you'll give me ___ extra as an incentive fee and if I bring in the project at $2500, you'll give me ___ extra as incentive fee, etc.
We agreed on a price for a job.
The job was for me to build you a deck.
I built you a deck. I did the job you hired me for.
Why the hell would then try to pay me more money?
Did you hire me thinking I might not do the job?
Did you say, "Oh, that Wally, he's drunk by noon every day. He'll never finish the job. So to make sure he does, let's give him a bonus just for finishing."?
Do you see how insane that is. My job was to build you a deck. If I did it, great. I did my job. Why do I need extra money for doing my job.
And, in fairness, you might want to do that. You might be a generous person or something else. And that's well and good with your own money.
But the government isn't just spending your money, it's spending our money. And we need to do with all these 'bonuses' being handed out to contractors who do their jobs. If you were hired for a job, you should be able to complete it and completing it is just doing the job, it's not doing anything extra and it doesn't warrant a bonus.
We're going back to Roger Baker now, "The issue that you frequently see is when a contractor does exactly or close to technically what the contract asked them to do and the project still fails for either reasons that they didn't contribute to or decisions that weren't contemplated in the contract. And I think the government has fairly, traditionally continued to pay those incentive fees when contractually required in those."
Okay, you either do the job or you don't. And Roger Baker knows that. Don't give me that "close to technically what the contract asked them to do" nonsense. Close to?
Let's go back to the deck as the example. You hire me to build you a deck and then you go on vacation. You come home and I'm in your backyard. You walk around and see me finishing up a bigger patio. You say, "Great patio, where's my deck?" I say, "Oh, I thought a patio was technically close to a deck."
You're not going to pay me extra. In fact, if I don't go out and get materials for a deck and start building it for you, you're probably going to sue me.
There's no such thing as "technically close to" what you were hired to do. You do what you were hired to do or you don't.
It really is that simple. And if Barack wants to cut costs, that's where to start. Stop rewarding contractors for almost doing the job they were hired to do and stop giving them bonuses for doing the job they were hired to do.
And now here's C.I.'s 'Iraq snapshot:'