Ahem. Pssst: An Award Fee is NOT a Bonus!

What a Maroon!

Found this article, Hidden Bonuses Enrich U.S. Government Contractors via Instapundit, and it totally P***** me off. The article, as of the time of this posting refers to something called a contract 'bonus' or 'bonuses' a minimum of seventeen times in the article.

Show me where any of those contracts have a 'bonus' clause.

Betcha ya' can't.
As I wrote to Prof Reynolds after reading the article at the source:

I followed the link and read the article, since I've worked on government contracts (on both sides) for the better part of 3 decades and had never heard of the 'Bonus' clauses. What I found confirmed my suspicions - the use of the term 'Bonus' is most disingenuous. What the author is referring to is commonly known as Award Fees. They are used in contracts structured such that typically the contractor makes no profit at all unless some percentage of the Award Fee is granted. I've seen contracts where the contractor made no real profit unless 90% of the potential Award Fee was granted. This type of contract structure is most useful when the Customer wants to manage the risk involved by setting specific goals for the contractor within each Award Fee period: an 'inchstone' management of milestone objectives. This is very useful on contracts where it is not known with certainty that the exact objectives can be met, such as in the development of new weapon systems, development of new infrastructures, etc. The article is essentially a cry against 'profit'. The only thing in the article that is what I would call 'accurate', is that very often, a better job could have been done in setting Award Fee criteria, and usually that is known only in hindsight.
Scandalous, eh?

Prof Reynolds must have moved on, and I noticed that Bloomberg now has a 'corrected' label added to the article, so no telling how many times they might change the article in the future -read it while you can.