Apr 11, 2012

Hope Lane

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Cost-Conscious Contractors Needed at DoD

As reported in the Federal Times, Austin, Texas — DoD Contractors will be asked to provide more information about costs when bidding on contracts as the Defense Department looks for more “cost-conscious” contractors, said Shay Assad, the department’s pricing policy chief.

Contracting officers are being told to analyze more thoroughly the costs companies propose and to justify the contract decisions they make, Shay Assad told about 250 federal and private-sector contract managers at the National Contract Management Association aerospace and defense conference here.

“The reality is we’re stepping up the game,” Assad said.

DoD is not looking to suppress contractors’ profits, Assad said. The goal is to make contracting officers more informed about what makes up a program’s cost and how to drive down those costs without affecting profit, he said.

That means contractors have to be more aware of the financial aspects of their proposals than they have been in the past, he said.

“We will get a better deal if the skill level on both sides of the table increases,” Assad said.

The Defense Acquisition University has reworked its training program to include more topics about cost and pricing, Assad said. He asked the NCMA to also hold more training sessions on identifying and negotiating costs.

DoD now has 29,000 contracting officers, an increase of about 5,000 over the last three years, but it may take time to grow and train the workforce, Assad said.

Contracting officers also need to work more closely with program managers and program executive offices to better articulate the technical trade-offs they are willing to make on a contract, Assad said.

In the past, DoD agencies have said they will consider vendors with technically superior proposals, but they have not done a good job of defining how technical superiority is measured, Assad said. So it may look like the agency simply decided to award the contract to the company with the lowest-price proposal, he said.

The process should improve as agencies do more contract peer reviews, where representatives from the program office and contracting office analyze what the agency is seeking from a contract and how bids will be evaluated, Assad said.

“It’s going to be much more transparent to you, in a best-value trade, how the government is making that trade-off,” Assad said, addressing contractors. “We’ll try to get some of that mystery out of the best-value equation.”