In late February 2004, the Army announced that it was canceling plans to build a radar-evading helicopter called the Comanche, a project that was nearly three years behind schedule and more than $3.5 billion over budget. Those problems, however, didn't stop an Army panel a few weeks later from granting the Boeing Co.-Sikorsky Aircraft Corp. partnership running the program a $33.9 million "award fee" for their work on the helicopter, part of more than $200 million in such fees paid to the partnership over four years.
Award fees are meant in theory to motivate defense contractors with extra money for performance. But a recent Government Accountability Office study found that the fees are often paid regardless of whether a project is on schedule and within its budget.
Instead of encouraging efficiency, the GAO found, award-fee payments have become routine in some major weapons contracts, built into company expectations and paid almost as a matter of course.