Contracting changes how businesses do business

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New ways of contracting with the government are forcing companies to change how they operate, procurement experts say.

Performance-based contracting demands that companies adjust how they have bid on contracts in the past, particularly in upfront planning, said Carole Dunn, Red Team Consulting’s president and principal consultant, at a recent panel discussion on contracting. Companies in the early stages of building bid proposals should research an agency’s needs, not try to promote the company.

The innovative contracting style is a staple in government acquisitions. Contracts are often structured so that companies are paid for accomplishing certain performance benchmarks or penalized for failing to meet the mark.

Businesses “really need to be in front of what the government is trying to do or accomplish well before you would normally have to do that” in traditional contracting, Dunn said.

Companies should play an active role in proposing performance guidelines, she said. The benchmarks are the basis of the contract and lead to the shared accountability between industry and agencies. Too many companies’ market research for a project bid aims to bolster their business to the agency, she said. The research instead can help the government understand how other agencies have approached similar situations.

It is incumbent on contractors to maximize the time they spend talking to agency officials. “The information is there and the people are there that you can ask questions of” to get more details about the acquisition, Dunn said.

Because of the performance factor, agencies must be exact in describing their needs, and industry must analyze what agencies want, said Michael Sade, director for acquisition management and procurement executive at the Commerce Department.

Knowing the customer is critical to performance-based contracting, said Army contracting officer Joann Underwood. Companies need to find out the agencies’ requirements and the acceptable risks.

“Performance-based [contracting] allows you to come in with a lot more inventive approaches,” but budgets and risk still constrain agencies, Underwood said. She recommended that companies learn what an agency sees as risk and decide if the agency can accept the risk their solution proposes.

Program managers often want companies to back their solutions with potential profits, Underwood said.

“I want to see you bring some skin to the table,” she said, quoting a colleague.

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