Federal agencies have been overusing cost-reimbursement contracts, spending $136 billion on them in 2008, up $16 billion since 2003. 

The GAO report (pdf) noted that of 92 contracts evaluated, 30 percent did not include documentation or rationale for why a cost-reimbursement contract was favored over a fixed-price one.

Jeffrey Zients of the Office of Management and Budget told lawmakers earlier this week that chief acquisition officers should consider hybrid contracts that use some fixed price and some cost-type contracts. OMB issued memos this week that set a 10 percent goal for reducing the cost-type contracts by the end of 2010.  

"Cost-reimbursement contracts, as well as time-and-materials and labor-hour contracts, provide limited direct incentive to control costs," OMB's memo states.