feasibility studies, preliminary engi- neering tasks, and construction su- pervision. This distinction caused signifcant confusion for several years, particu- larly after a 1966 General Accounting Ofce (GAO) audit incorrectly con- cluded that the 6 percent statutory fee limitation applied to all A-E ser- vices. The matter remained unclear until 1982, when the Ofce of Gen- eral Counsel informed the GAO that its interpretation was incorrect. This letter clarifed that the statutory limi- tation applies only to the architectural or engineering frm’s costs specifcally for producing and delivering plans, designs, drawings, and specifications. Despite this clarification, deter- mining which costs should fall under the statutory fee limitation remains a point of discussion among acqui- sition professionals. A-E frms have raised concerns that the 6 percent statutory fee limitation makes cost recovery challenging, especially for smaller projects. The expenses as- sociated with specialized labor and overhead signifcantly reduce proft margins on these projects, making them fnancially unattractive to many frms. This also creates concerns for the government, as it may require in- creased quality oversight to ensure contractors deliver quality work while operating under fnancial constraints that could reduce resources allocated to projects. The fee limitation also reduces market competition. Smaller A-E firms often find it difficult to enter
The expenses associated with specialized labor and overhead signifcantly reduce proft margins on these projects, making them fnancially unattractive to many frms.
the government market because the smaller projects they qualify for ofer limited fnancial returns. These smaller frms typically cannot com- pete for larger, more proftable con- tracts due to capacity limitations, yet the smaller projects present too much fnancial risk given the tight margins. As a result, larger frms with greater risk tolerance and fnancial resources tend to dominate even the smaller government projects, further consoli- dating the market. Driving Factors Behind the Change Modern military infrastructure projects have grown exponentially complex, now demanding excep- tional expertise in technical designs, detailed plans, and precise specifca- tions. This complexity stems from increased requirements for sustain- ability, resilience, and technological integration. For years, professional organizations like the American In- stitute of Architects and the Society of American Military Engineers ad-
vocated for fee increases to address these challenges. Their persistent ef- forts fnally paid of with the statutory fee increase included in the FY 2024 NDAA, demonstrating congressional recognition of the issue and validating the concerns raised by the organiza- tions calling for change. The prevalence of design prob- lems in complex A-E projects is well- documented. The Fort Bliss Hospital Replacement Military Construction Project (William Beaumont Army Medical Center) stands as a notable example. According to the DoD Of- fice of Inspector General Report (DODIG-2018-125), this project gen- erated 978 contract change requests during construction, including 132 that ultimately were canceled. These requests included 453 engineering changes, encompassing design errors and omissions. These defciencies re- sulted in $165.6 million in costs, pri- marily due to time delays—represent- ing approximately 66 percent of the project’s $251.3 million budget. Examples like this fueled the need to increase the statutory fee limitation. A 10 percent fee limitation instead of 6 percent could have potentially re- duced the number and severity of de- sign errors and omissions in the Fort Bliss Hospital Replacement project by allowing for more thorough design work, better coordination, and more comprehensive quality control. The higher fee cap would also likely at- tract more highly qualifed personnel and specialized frms with expertise in complex healthcare facility design that might otherwise fnd commercial
36 | DEFENSE ACQUISITION | September-October 2025
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