Ernst: No More “Bogus Bonuses” for Federal Contractors

The Senator’s bill would prohibit bonuses to federal contractors for projects that are over budget or behind schedule

WASHINGTON—U.S. Senator Joni Ernst (R-IA), a tireless advocate for cutting wasteful government spending, is continuing her efforts to make Washington squeal, this time introducing legislation to rein in excessive bonuses to contractors of federal projects that do not meet outcome standards.

“Over budget, behind schedule, and millions of dollars’ worth of bonuses? It’s hard to believe, but federal contractors rake in millions in bonuses even for projects that go nowhere. That kind of unaccountability is simply ridiculous,” said Senator Joni Ernst. “My bill would ensure Iowa taxpayers know where their money is being spent by preventing the federal government from awarding bonuses for work that doesn’t meet the requirements of a contract. When hard-working Iowans set out on a task, they see to it that the job gets done. Federal contractors need to do the same.”

Senator Ernst’s Bogus Bonus Ban Act would prohibit the payment of bonuses to government contractors for unsatisfactory performances and outcomes, including projects that are over budget or behind schedule, and require public disclosure of bonuses that are awarded.

Background:

Many federal projects provide an “award fee,” or bonus, that a contractor can earn in addition to other payments. While federal regulations state that an award fee “shall not be earned if the contractor’s overall cost, schedule, and technical performance in the aggregate is below satisfactory,” federal agencies continue to award bonuses to contractors for unsatisfactory performance.

The Bogus Bonus Ban Act requires new government contracts using award fees to link the awarding of bonuses to outcomes, defined in terms of program cost, schedule, and performance.

It directs every federal agency to:

  • Set standards for determining which agency officials are authorized to approve  the use of award and incentive;
  • Establish the circumstances in which contractor  performance may be judged;
  • Establish standards for determining the percentage of the available award fee which contractors should be paid;
  • Collect data on award and incentive fees paid to contractors on a regular basis;
  • Set performance measure to evaluate the effectiveness of award and incentive fees;
  • Return any funds set aside for bonuses that are not paid due to the contractor’s inability to meet the established criteria to the U.S. Treasury.

Examples include:

  • The Department of Defense (DOD) Inspector General reported the Pentagon has been paying out hundreds of millions of dollars in unearned bonuses to contractors, including $10.6 million to a contractor that failed to provide the necessary parts purchased for fighter jets, which is creating “a life and safety concern” for airmen.
  • NASA’s Inspector General reported the space agency has been paying massive bonuses totaling more than $500 million to the contractors of the next manned moon mission, which is likely to be billions of dollars over budget and years behind schedule as a result of those contractors’ “poor performance.”

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