That is not quite correct. Cost-plus specifies how charges are priced, it does not specify budgets.
I could sell you pencils at cost-plus. How many pencils you buy is up to you, not I.
Agreed that cost plus for something comparatively cheap like a new army rifle is probably different.
If there is an unanticipated issue contractors will often try and get a contract modification because they consider it new scope of work or something like that.
Most government projects are structured and paid for in phases and there is no assurance that phase 2 starts at the end of phase 1. No approval to proceed means the project just "ends when it ends".
Contractors will be extreme sticklers about their requirements on a project. So that if anything starts look off-plan or may impact something like a schedule delay they will say "nope, that's outside of our scope of work we need an extension/additional funding".
Yup, change orders are how deal with these issues when it comes to fixed-costs contacts. For better or worse, its almost impossible for a project to be perfectly specced out ahead of time. And anything that even comes close to looking like it conflicts with the spec becomes a change order.
> About that “plague”: NASA has traditionally procured technology from industry using cost-plus contracts, which allow contractors to charge the agency extra for extensions and changes to their plans.
From my experience, the author of that article has no idea what they are talking about.
It varies. Sometimes the cost of imposing a penalty specified by the contract would be so destructive to the project, and the project delayed but finished would still be worth more than switching vendors (if that's what the penalty would imply, due to bankrupting the original vendor) that the penalty gets waived.
Besides, what happens when a cost-plus project hits a delay? Answer: we pay more and more and more and the project is delayed more and more and more.
That's why these contracts go to large companies, as opposed to small ones.
If a small company loses interest in finishing a fixed-cost project, they might go bankrupt, and leave the government up crap creek without a paddle.
If a big company loses interest, they'll keep struggling along, because they can get hit with the stick of 'you'll never get another contract from us ever again.'
It is an extreme and rare measure for an agency to ban a large contractor for lack of performance and in the rare cases it has happened to large contractors have almost always had the ban lifted upon appeal to the GSA. In most cases where there has been a failure to deliver substantial or primary responsibility can be laid at the feet of the government agency.