The Return of the Fixed-Price Development Contract

Case in point, the next iteration of the Small Diameter Bomb, the SDB II, will be have a fixed price development contract.

This represents a welcome change in philosophy:

The theory is that technologies should be mature enough (technology readiness level 6, or tested in an operationally relevant environment, in Pentagon parlance) to enable accurate cost and schedule estimates by industry bidders competing for a development contract. This approach shifts more responsibility to contractors to keep their proposal promises. For the Pentagon, however, there is also risk. Requirements must be well-articulated and not altered in order to reap the benefits of a fixed-price contract. Once change orders are requested, leverage over contract price is lost.

I would actually go further, and make cost and schedule unalterable requirements statutorily, and prohibit, and possibly criminalize, any effort made by contractors and procurement personnel from changing this.

The article notes that this change is, "Raising questions among some industry executives about how much risk they will have to assume as they compete for Defense Dept. business," but this is not surprising.

Defense contracting under Bush and His Evil Minions^™ was an exercise in all reward, no risk, for defense contractors, which resulted in skyrocketing costs, horrendous schedule slips, and a dearth of solutions for the Marines and soldiers on the ground.