mr. zients to start off. >> thank you. i appreciate the opportunity to appear before you today to discuss the ward/fee contract incurred i hope -- contract. i have prepared a false statement. as you mentioned, i was confirmed last month as the deputy director for management at omb and chief performance officer of the federal government. it is my responsibility to help lead efforts to improve government performance, in other words, to make sure that taxpayer dollars are being used effectively and efficiently, a task that is critical to any administration, but especially in these economic times. a sound acquisition system can play an important role to down play dowcosts. as demonstrated by the president's march 4 memorandum on contracting, it is currently used for more than $500 billion in annual spending last year, omb issued an initial set of guidelines. these efforts are designed to save the taxpayers at least $40 billion per year. the president's memorandum identified as the agency selection of contract type as a key are

mr. zients to start off. >> thank you.i appreciate the opportunity to appear before you today to discuss the ward/fee contract incurred i hope -- contract. i have prepared a false statement. as you mentioned, i was confirmed last month as the deputy director for management at omb and chief performance officer of the federal government. it is my responsibility to help lead efforts to improve government performance, in other words, to make sure that taxpayer dollars are being used effectively and efficiently, a task that is critical to any administration, but especially in these economic times. a sound acquisition system can play an important role to down play dowcosts. as demonstrated by the president's march 4 memorandum on contracting, it is currently used for more than $500 billion in annual spending last year, omb issued an initial set of guidelines. these efforts are designed to save the taxpayers at least $40 billion per year. the president's memorandum identified as the agency selection of contract type as a key area

mr. zients?my instinct is there are situations where they do apply. >> can you give me a list of objective criteria? >> something that is research- focus. if you had a fixed-cost contract, it would be 100%. if you were to take 85%, and put a piece at risk, so if the contractor underperforms, you pay 85%. if, however, the potential is 25%, you routinely paid 25%, then you have not protected the government's interests. when applied correctly, by putting some of this at risk if there is unsatisfactory performance or only satisfactory performance, the government should have protected its interests by paying less than it would have under a fixed-fee contract. i think you want to minimize these in only apply them to situations where you cannot define the objectives of fronts and measure them. i think we have to be careful, because it is easy to default to a contract of this type, so we have to make sure these are only used in these situations where you cannot define objectively up front. >> if i can ad