May 7, 2018
As part of a broader effort to speed up its acquisition of major weapons systems, the Pentagon says it wants vendors to take no more than two months to develop their final proposals. But to do that, officials say they need to reduce the volume of detailed, written pricing justifications they demand from those same firms.
Defense acquisition officials have set a goal of reducing the acquisition process for major systems to a year, down from the current average of 2 1/2. First though, DoD says it needs Congress to provide some relief from the Truth in Negotiations Act. Under that law, most acquisitions worth more than $2 million require contractors to submit certified data about their underlying costs and prices to help the government assess whether it’s getting a good deal.
It’s a paperwork-intensive process, and it takes time. Too much time, said Shay Assad, DoD’s director of procurement and acquisition policy.
“Presently, we have one major weapon system that’s taken 21 months to get to a proposal,” he said at a recent contracting conference hosted by the Association of the U.S. Army. “I don’t know how you can do anything quickly if it takes 21 months to get a proposal. So what we’ve asked Congress to allow us to do is to tailor the TINA requirement. What we want to be able to do is sit down with a company and say, ‘OK, let’s talk about whatever it is we’re buying. Tell me about the actual information or data that you have, the estimates that you have related to this particular product, and let’s agree on that data set as being the cost and pricing data that you’re going to have to certify.”
Assad said the government wants contractors to submit their entire proposals — complete with the agreed-upon cost and pricing data — within 30 to 60 days.
“It’s going to be a huge change in culture for these companies, because they’re going to have to take some risk, and they’re not used to taking risk,” he said. “They have to be risk-averse to a certain degree, because they’ve got to report their earnings to the penny on a quarterly basis. But we’re going to have to work together, because we want to radically change the way we’re doing business.”
Congress has already made some changes to the Truth in Negotiations Act in recent years. In last year’s National Defense Authorization Act, lawmakers increased the threshold for procurements that require certified cost and pricing data from $750,000 to $2 million, and also gave DoD the discretion to waive the data requirements altogether on foreign military sales contracts if it believes it already has enough information to conclude that prices are fair and reasonable.
Another provision attempts to prod the Defense Contract Audit Agency into using more commercial standards and more private auditors in an effort to eliminate DCAA’s backlog of incurred cost audits by 2020.
DCAA is the same organization that audits vendors’ cost and pricing data, and Assad said accelerating that process is key to meeting DoD’s goal of faster contract awards.
“We’re going to commit to them: ‘You submit your proposal in 60 days, we’re going to get it audited in 60 days, and we’re going to get to the table quickly,’” he said. “We can’t be asking them to do things in 30 to 60 days and then take a year on our side.”
Also on the government side, Assad said the Pentagon is urging its acquisition workforce to add more options to their contracts that would allow the military services to extend them over multiple years, potentially eliminating the need to enter into new negotiations each time the military needs to buy more of the same equipment.
buy, but then, if they think they have a pretty good deal, we want them to go negotiate options right then for the follow-on years, and oh by the way, to also put unspecified [foreign military sales] options in those contracts,” he said. “The Army has just done that on two different programs, and the same organization negotiated a multi-year in three days. It’s so it can be done, the tools are there to do it. But it takes program executive officers and program managers to have confidence in their teams.”
As one demonstration of that confidence, Assad said PEOs and PMs need to be willing to dismiss vendors’ requests that they personally intervene in ongoing negotiations between their firms and contracting officers, when, for example, the contracting officer is taking a negotiating position with which the company is unhappy.
“What I’m asking our senior procurement executives to do — when that phone rings from a senior industry person — is to simply say, ‘No, we’ve got a contracting officer. I don’t negotiate contracts, you can call him or her. They’re authorized to negotiate, and whatever they think is fair will be fine with us,’” he said. “And then there needs to be an alignment with the PEO and the program manager and that contracting officer, because ultimately it’s the PEO and program manager’s program. They need to be in on the business deal in terms of defining success or failure.”