Defense Department contracting officers aren't exactly consumer watchdogs when it comes to getting the best value for the Pentagon's money, according to a new General Accounting Office report.
The agency's commercial purchasing habits reveal that DoD contracting officers too often buy items at their face value and neglect to find out if list prices are truly fair, said the report, "Contract Management: DoD Pricing of Commercial Items Needs Continued Emphasis" (NSIAD-99-90).
Under federal acquisition regulations, purchasing officers can't assume that catalog or list prices are reasonable. Instead, they must perform a thorough price analysis to determine whether an offered price is fair. Different types of price analysis include: comparing bids for a competitive contract, comparing an offered price to prices paid historically for an item, or using measurements such as dollar per pound to compare prices.
According to GAO, defense contracting personnel haven't gotten the hang of pricing under sole-source commercial contracts yet. "Recent commercial prices paid by some DoD contracting officers may reflect insufficient training or a lack of understanding of what constitutes good price analysis in a sole-source environment," the report said.
Purchases of commercially available products and services at the Defense Department are expected to increase in the future, the report noted. As a result, training for contract officers should be intensified until price analysis and negotiating skills improve, GAO recommended. DoD's current training efforts "have yet to be fully understood or embraced," GAO said.
The biggest problem is that contracting officers often use the easiest and fastest price analysis method, comparing an offer to a listed or catalog price. This practice is too limited to prove that prices are fair and reasonable, GAO said. Of the 65 commercial sole-source purchases GAO looked at, 33 were reviewed by only comparing the offered price to a catalog or price list or to a historically paid price. Contracting officers negotiated lower prices in only three of these 33 purchases.
In addition, many contract officers told GAO they were unaware the Defense Contract Audit Agency (DCAA) offers a service under which it reviews sales and other data provided by contractors in support of their offered prices.
Contracting officers often paid a premium for unneeded services and did not include clauses requiring contractors to provide sales data to support their offered prices, GAO said. In one case, a contracting officer paid $1,307 each for 81 aircraft engine parts that were purchased for $300 each under a separate contract negotiated a year earlier. Although the officer knew about the lower price, he didn't know he was allowed to use the other contract.
Many contracting personnel said they don't have enough time to perform extensive price analyses when their customers' needs are urgent. Employees also felt that some contractors are too difficult to negotiate with due to their status as sole-source providers.
Recent legislation should help contracting officers in such circumstances, the report said. The 1999 National Defense Authorization Act requires federal procurement regulations to spell out exactly when contracting officers should require vendors to provide more information than just cost and pricing data, and to define the roles and responsibilities of support organizations like DCAA. It also requires DoD to track price trends for commercial items so that steps can be taken to prevent or address sudden price hikes.
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