How the U.S. Defense Department Became a Smarter Customer
WASHINGTON — Back when he was a senior executive at Raytheon more than a decade ago, Shay Assad could negotiate back-to-back contracts with military commands, knowing his government counterparts rarely spoke to each other.
But Assad, now the U.S. Defense Department’s director of defense pricing, said that has changed through, among other recent initiatives, the Contractor Business Analysis Repository (CBAR), which gives contracting officers unprecedented access to contractor financial information.
A contracting officer working to buy missiles from Raytheon’s Tucson, Ariz., subsidiary, for instance, now can access detailed pricing data on past business deals that both the company and missile division had with the Pentagon, according to Assad.
The idea is that providing access to pricing information will lead to a more informed acquisition work force, strengthening the government’s position at the bargaining table and resulting in a better deal for taxpayers.
“Analysis that used to take months to do now comes up online, and within minutes they can have that data,” Assad said in a recent interview in his Pentagon office.
Assad cites the CBAR as an example of how the Pentagon is buying smarter now compared with a decade ago.
The CBAR, which is administered by the Defense Contract Management Agency (DCMA), began early last year, providing nearly 2,000 users with information such as contractor pricing rates and compliance with cost accounting standards.
Starting June 24, for all negotiated pricing actions of more than $25 million, contracting officers also will upload data on prenegotiation objectives and contract negotiations into the CBAR, Assad wrote in a March 12 memo to commanders and deputy secretaries.
“This is not another bureaucratic reporting requirement,” Assad wrote. “The purpose of this memorandum is to create a powerful information source that will arm your contracting officers and program managers with the data and analyses that will better inform them as business professionals.”
This sort of pricing capability existed years ago within individual commands, he said, but subsequent acquisition work force reductions “took all that capability away.”
Assad said training has improved, and the Pentagon has hired more than 300 pricing analysts to assist contracting officers.
“We said we’d bring 300 folks in, and we’ve brought in almost 400,” he said. “We have a tremendous centralized capability within DCMA.
“As a result of Secretary [Robert] Gates’ workforce initiative, we decided we can’t put that capability in every buying command. But what we can do is create a centralized capability that everybody can use.”
Not every contracting officer gets access to the CBAR. Assad said access to the data, which contains confidential business information, is tightly controlled and CBAR use is monitored. “We know who is online, when and getting what data for what purpose,” he said.
Asked if the initiative, along with others, prompted criticism from former colleagues in the private sector, Assad acknowledges that “things have gotten a little hotter in the kitchen.
“This isn’t about reducing the profitability of the defense industry,” he said. “It’s about reducing costs. It’s not that we want our contractors necessarily to be less profitable, because you need a healthy industry.”
Adding to the Pentagon’s negotiating firepower is the creation of so-called integrated cost analysis teams (ICATS), which analyze what is happening at the 10 largest divisions of companies with which the Pentagon does business.
“So if you’re a contracting officer and you have a deal with one of those organizations, you can call one of those ICATs, and they’re there to help our contracting officers with some very relevant and specific engineering expertise and pricing expertise,” he said.
A Jan. 11 memo by Assad and DCMA Director Charlie Williams announced that they were placing ICATs at several major defense contractor divisions, including Raytheon Missile Systems.
“With the insight into contractor estimating systems and practices that DCMA gains from being co-located with these major contractors, it is the intent of the department to leverage this inherent advantage and enhance DCMA capability to the maximum extent,” the memo said.
One U.S. government entity looking to win more business from the Pentagon is the General Services Administration (GSA), which sells products and services to agencies across the federal government. From 2006 to 2011, Defense Department spending on GSA’s supply schedules dropped from $13.1 billion to $8.1 billion, according to the Center for Strategic and International Studies.
“There’s a role for GSA to play with us,” Assad said. “And one of the things we’ve urged the GSA to do is, we would like to see some schedules established where we could use them for the procurement of services on a cost-reimbursable basis, as well as fixed price.
“There are just certain types of services that we would not use the schedules for because it forces you into the use of a time-and-materials contract or a fixed, firm-price contract,” he said, noting that for some “knowledge-based” services, cost-reimbursable deals are better.
“I think there’s an opportunity there for GSA,” he said.
Meanwhile, GSA in April released draft requests for proposals to industry for its One Acquisition Solution for Integrated Services contract vehicle, which will offer agencies a wide variety of professional services and allow for cost-reimbursable contracts.