This article examines the efficacy of central attempts to influence the use of specific types of contracts, namely, cost-reimbursement versus fixed-price contracts, by individual departments within a decentralized procurement system. We draw five years of data (Fiscal Years 2004–2008) from the Federal Procurement Data System to examine the contract type decisions of three US federal agencies: the Department of Health and Human Services, the Department of Defense, and the Department of Homeland Security. The results of our analysis suggest that while departments have discretion to purchase products that meet their mission requirements, there is relative uniformity in the reliance on cost-reimbursement versus fixed-price contracts.

Points for practitioners

The driving factor in the use of one contract type over the other is not the department in question, but rather what the department buys. Following central regulatory guidance, the three departments in our sample tend to use cost-reimbursement contracts for complex products and fixed-price contracts for simple products. The practical implications for central policymakers is that focusing guidance on what departments buy may be more effective in maintaining overall budget control rather than focusing on how the department buys products.