DOD to negotiate prices more aggressively
Even sole-source bids are subject to bargaining
- By Matthew Weigelt
- Apr 28, 2011
Defense Department officials have told acquisition employees to fight for lower prices on contracts, even when there's only one bidder.
In an April 27 memo, DOD officials gave more guidance to their acquisition offices on bargain for lower prices, as the department aims for more competition and lower spending in general. One area to find that savings is by negotiating lower prices from a contractor.
The initiative started last November, when defense officials told contracting officers to cancel a solicitation if it’s been in the market for less than 30 days and only one bid has come in. After the cancellation, they have to send out another solicitation for an additional month. If there’s still only one bidder, the contracting officer has to work to get a lower price than proposed.
Game changer: DOD rewrites its book on acquisition strategy
Shay Assad, director for defense procurement and acquisition policy, wrote in the new memo that officers should not pay the contractor’s proposed price, even if the cost seems reasonable based on market research and having hosted a fair competition.
Instead, Assad wants officers to make sure the final price, which both sides agree to, is fair and reasonable in and of itself. He tells them to do careful analysis of the price and cost. Then the government needs to bring their analyses to the negotiating table to discuss pricing. Read the Federal Acquisition Regulation on contract pricing.
However, the new order means finalizing contracts will take more time, despite overly busy acquisition offices.
“I recognize that implementation of this policy may have the unintended consequence of increasing the contracting community’s workload, but given today’s scarcity of resources we need to ensure effective competition to the maximum extent possible,” Assad wrote at the end of the memo.
DOD officials have been under heavy pressure to make spending cuts. In 2010, Defense Secretary Robert Gates and Ashton Carter, undersecretary of defense for acquisition, logistics, and technology, issued a 23-point memo on acquisition reforms.
Competition for contracts is one of the key points of Gates and Carter's reforms, along with controlling growth in costs, improving acquisition workforce's know-how of buying services, and launching affordable projects.
Matthew Weigelt is a former FCW senior writer who covered acquisition and procurement.