Do longer competitions bring better prices?
- By Matthew Weigelt
- Jul 25, 2011
Defense Department contracting officers haven't had enough competition to get a good price if a solicitation gets only one bid, according to a new proposed policy.
That's how defense procurement officials are viewing solicitations for work that only receive one bid. They aim to tighten the Defense Federal Acquisition Regulation Supplement’s rules on how DOD gets a fair or reasonable price from a company. The proposal was in the July 25 Federal Register. Read the proposal.
The overall rulebook, the Federal Acquisition Regulation, leaves decisions on price competition up to the contracting officer. The standard of competition is fulfilled, if he or she “can reasonably conclude that the offer was submitted with the expectation of competition.”
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Under DOD’s proposal, its contracting officers would no longer use that standard.
Contracting officers instead would have to re-compete the solicitation for at least another 30 days if they waited less than a month to receive bids and got only one.
If a competition was open for at least 30 days, the officers would have to determine prices to be reasonable through price or cost analysis or they can enter negotiations with the company that made the bid.
Officials wrote that they are pressing for the best price available.
“The purpose and effect of this rule is to promote real competition by ensuring that adequate time is allowed for receipt of offers, and ensuring that prices are fair and reasonable when adequate time has been allowed but nevertheless only one offer is received in response to a competitive solicitation,” they wrote.
The plan is based on recent memos from senior defense acquisition officials. DOD should not pay the contractor’s proposed price, even if the cost seems reasonable based on market research and having hosted a fair competition, according to an April memo from Shay Assad, then the director of defense procurement and acquisition policy and the current director of defense pricing.
DOD is under pressure to cut costs. Competition for contracts is one of the key points of major reforms laid out in the past year, along with controlling growth in costs, improving acquisition workforce's know-how of buying services, and launching affordable projects.
Defense officials are taking comments on the proposal through Sept. 23.
Matthew Weigelt is a former FCW senior writer who covered acquisition and procurement.