DOD to negotiate prices more aggressively

Even sole-source bids are subject to bargaining

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.

Related story:

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.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Tue, Jul 26, 2011 nj

This multiple reopening of RFPs is not the answer. One only has to look to the R23G Contract to see this cost-savings effort is not working. Contractors will market their work to less administratively cumbersome vehicles. There are other ways to be competitive and still enable contractor's to maintain a talented workforce with fair and reasonable benefits and profit. They need to re-think this option and not create a beauractic adminstrative mess that can't support a solicitation in a timely manner.

Tue, May 3, 2011 kp Little Rock

This does seem like an unusual requirement, but there is collusion in the market to drive prices up. The value of what is needed has to be examined in relation to bids, and if it is not there, cancel the request and wait a while (when possible). This is not the time for "nice to have" procurements...especially if the attitude by the contractors is that they can go above market prices because it is the government that is buying (using other peoples money [taxpayers]) and the contracting officials don't really care. This attitude on both sides of the deal has to be stopped. In addition, agencies need to move their contracting budgets to staffing budgets wherever possible. That will create the most overall savings in the long run. You don't need contractors opening mail or doing basic IT maintenance or cooking chow for the troops when a federal employee or soldier can be doing the same thing.

Mon, May 2, 2011 sc

a bit off topic, but looking at the reg how can anyone possibly manage or audit to that chaos. Is it any wonder contracts are overpaid? Pitiful. It's a process - clarify and simplify it for efficiency and effectiveness.

Fri, Apr 29, 2011

More of this administration's not understanding the terrain in which they operate... "We'll just bully them into giving us what we want." If only the same mentality applied to the foreign affairs sphere.

Fri, Apr 29, 2011

We assume DOD did just that on the new Boeing Tanker fleet. Yeah sure they will bully small businesses because the big firms have legions of lawyers to fight back.

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