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I don't know why this is getting downvoted. This is pretty much exactly why the government (mostly DOD) uses cost-plus in some cases. The pendulum in government acquisitions tends to swing along multiple axis: sometimes the trend is towards the government do the integration itself, sometimes the trend is towards contracting out the integration to a prime contractor; sometimes the trend is towards cost-plus, sometimes the trend is towards firm-fixed price. Even though one way of doing things might be more popular at any given time, the other options are always considered and often used. The choice of reimbursement structure (which is not just binary "cost-plus" or "fixed-price," but rather an entire continuum) is based on risk projections. If you insist on fixed price for a very risky project, contractors will bake that risk into their bids, pricing everything for the worst-case scenario. If you don't get the worst-case scenario, you'll still end up paying for it, in which case you would have been better off under a cost-plus contract. Conversely, if you pick the lowest bidder and they didn't bid conservatively enough, and then you do get the worst case scenario, they might very well run out of money, in which case you have a choice of either granting them more money or cancelling the project and eating the sunk costs when the contractor collapses. So, for high-risk projects, cost-plus is generally the best way to go. I think that the swinging of the pendulum is due in part to a succession of over-corrections: "We used cost-plus too much and contractors wasted money! Lets use fixed-price as much as possible from now on!" Followed by "We used fixed-price too much and ended up paying too much on most contracts! Lets use cost-plus as much as possible from now on!" and then back the other way. However, I think that it's also driven by cycles of technological development: a lot of technology tends to go through phases where one generation of equipment really pushes the edge of what's feasible, and then the next generation mostly just matures and refines the technology used in the previous generation (e.g. Windows Vista and Windows 7). During those "pushing the edge" phases, risk is higher and so cost-plus gets used more; during the "mature and refine" phases, risk is lower and so fixed-price gets used more. |