Navy wants to establish a preferred supplier program

Most major companies have them, and now the Navy wants one too -- a preferred supplier program that would give preference to contractors that have demonstrated superior performance in controlling costs, meeting schedules, providing quality services and products, and reducing energy consumption.

Through a May 24 notice in the Federal Register, the service is seeking industry feedback for establishing a pilot program that would reward qualifying companies with things such as more favorable progress payments, tailored reporting requirements and special award fee pools.

Designation as a preferred supplier would not be a factor in contract awards, but solicitations could contain terms and conditions that would apply to preferred suppliers after a contract is awarded.

"Companies in the private sector that have implemented PSPs have significantly improved performance. Cash flow, profit, and contract terms and conditions that reduce contractor costs and risk are powerful incentives that can be used to motivate contractors to perform at a high level," the notice said.

The Navy currently negotiates business arrangements on a contract-by-contract basis. "As a result of this decentralized and individual approach, [the Navy] loses an extremely important opportunity," the notice said.

Secretary of the Navy Ray Mabus said in a statement he intended to "reward contractors with favorable contract terms and conditions and favorable payment schedules in return for consistent and exemplary contract performance."

At least during the pilot phase, the Navy intends to rate its top 25 contractors using the Contractor Performance Assessment Reporting System to develop a baseline of performance data.

Factors the Navy intends to consider include technical competence, ability to meet schedule, cost control, management responsiveness, oversight of key personnel, and a company's use of small business. In addition, the Navy will assess energy efficiency for all contractors as an excellence factor.

The notice stated, "Energy efficiency is a critical [Navy] requirement significantly impacting the successful achievement of [the service's] missions." It specifically seeks feedback on how the department should evaluate companies' use of energy as relates to the life cycle of its products.

Companies have until July 23 to submit comments.

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