Big Rewards for Defense Firms - Extra Fees Paid Regardless of Performance, GAO Finds

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Award fees are meant in theory to motivate defense contractors with extra money for performance. But a recent Government Accountability Office study found that the fees are often paid regardless of whether a project is on schedule and within its budget.

Instead of encouraging efficiency, the GAO found, award-fee payments have become routine in some major weapons contracts, built into company expectations and paid almost as a matter of course.

Current practices "undermine the effectiveness of fees as a motivational tool and marginalize their use in holding contractors accountable," the GAO concluded. Defense contractors are paid award fees for work that is simply "acceptable, average, expected, good, or satisfactory."

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