Army vows to get aggressive in pursuit of purchasing discounts

writing a check

Officials from the Army Medical Command are requiring contracting officers to ask vendors to reduce prices when an order goes above $150,000, and to check that the Veterans Affairs Department’s federal supply schedules sales are the best procurement approach or if they might find better prices in the open market.

In a recent letter to the Defense Department’s inspector general, Herbert Coley, chief of staff for the Army’s Office of the Surgeon General, wrote that the command will begin refresher training courses for contracting officers, focusing on problems surrounding costs and getting fair discounts.

Coley was replying to a Dec. 7 report from the IG’s office. Auditors found Army contracting officers failed to determine whether $5.3 million was a fair and reasonable price for 131 products on an order.
Auditors found another contracting officer placed a $176,000 order with the VA, but did not receive $13,000 worth of products and received $31,000 worth of the wrong products. The command never asked for a refund for the money for the order because the contracting officer did not receive word about the botched order.

“DOD contracting officials need to improve making price reasonableness determinations, requesting price reductions, and supporting best procurement approach determinations,” reads the audit released Dec. 7.

DOD requires officers to ask contractors for reductions in price. But several of the officers interviewed by the IG said they did not know of the requirement. In at least one instance, a contracting officer who did make the request dropped it easily after the vendor said it did not give discounts on its schedule sales, according to the report.

Auditors said DOD needs to improve on these areas, as well as determining whether going to VA is the best approach for purchasing. The result is that “DOD contracting officials might not have always received the best value when using VA for direct interagency purchases.”

Along with the administration, members of Congress have also voiced concerned about contract pricing. On Dec. 12, Sen. Claire McCaskill (D-Mo.), chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee, said the government has problems in checking prices and getting rebates. Her complaint was with food service contracts. According to her figures, the government received only 5 percent of available refunds over the last five years. In a letter to Zients, she suggested that food services contracts be a part of OMB’s strategic sourcing initiative.

A newly created Strategic Sourcing Leadership Council has until March to decide on several commodities to strategically source.

With budget cuts looming, pricing has been a focal point for administration officials. Jeffery Zients, acting director at the Office of Management and Budget, issued a memo Dec. 5 on strategic sourcing, the initiative to ultimately get lower prices for goods, specifically for commodity IT products. Officials have cited the discounts earned through bulk-buying and overall smarter purchasing as a factor in lowering contract spending for the third year in a row.

About the Author

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

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Reader comments

Thu, Dec 13, 2012 SPMayor Summit Point, WV

The IG is correctly citing problems but mixing apples and oranges. Pricing has nothing to do with the failure to deliver or the delivery of the wrong products. Failing to negotiate with vendors with a firm backbone is an altogether different problem.

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