Award Term Incentive Contracting: An Investigation of United States Air Force Strategic Purchasing

This research explored implementing a best commercial practice of establishing strategic purchasing relationships within the Department of Defense (DOD) procurement environment. The research was sparked by Air Force Material Commands (AFMC) instituting a commercial style acquisition strategy using an award term incentive on several programs. The award term incentive provides for extensions or reductions to the term of the contract based on contractors level of performance. Forthcoming implementation of Air Force FAR supplement 5317.7X Incentive Term Extension will likely increase the number of acquisitions using an award term incentive. Research findings indicate that management should consider expanding the AFMC award term guidance to include the model developed from this research which identifies decision criteria for selecting the award term incentive strategic purchasing method. Findings indicate that the acquisition professionals may not have the expertise or related purchasing skills necessary to establish strategic purchasing relationships for commercial type performance based services and that training is needed. The researcher also uncovered evidence that instability and reductions in the DOD workforce affects acquisition professionals ability to maintain currency with the changing legal environment. Further workforce instability and reductions may influence the implementation of strategic contractual relationships. The research concludes that implementing the award term incentive affects the DOD competitive market.