Outsourcing and Contracts

There are a number of different types of contracts: You can spend (and I have spent) many hours studying the niceties, but in very short terms,  each type varies in the amount of risk borne by the contracting agency (the City) versus the contractor:

The contractor obviously prefers the Cost Plus Fixed Fee (CPFF).  You promise a fixed base price (the "fee"), the contractors compete on offering the lowest base price, and then the winner can submit charges for costs (and change orders) ad infinitum without competition.

And a lazy government also prefers it, since it requires the least amount of work, assuming there is plenty of money to throw around.

You want it bad, you get it bad. This form is one that can result in huge overruns and waste unless managed very carefully.

At the opposite end is the Firm Fixed Price (FFP): What you see is what you get.

It is the hardest type, for both government and contractor. Both have to sharpen their pencils (or spreadsheets, if you prefer) very carefully, because there is little margin for error. If the contractor underbids he has to eat the loss or else renegotiate (and recompete) the whole enchilada. If the Government under-estimates then they get a sow's ear, not the silk purse they wanted. So, for both, the Specifications and Statement of Work (SOW) are critical items and a virtual minefield.

On the other hand, for relatively simple tasks (pave x-number of miles of streets, chop y-number of trees, etc.) that have been done over and over again, the city and the contractor already know, or certainly should know, almost exactly what it will take to do the task.

My opening remarks (numbers 2, 3, 4,.and 5 on outsourcing) support this kind of contracting.

The slide offers ample Google fodder. For example:

http://www.acq.osd.mil/dpap/ccap/cc/jcchb/Files/Topical/Contract_Type_Comparison_Table/training/Cont...

http://www.captureplanning.com/articles/85709.cfm

Please examine it, think about it, and let me know what you think. 

We all win or we all lose.

Right now, we're all losing.