DoD acquisition updating guidance on contract types, industry communication

Jason Miller talks to Claire Grady on Federal Drive with Tom Temin

The Defense Department’s acquisition arm is updating guidance on handling a wide variety of contracts and how it communicates with industry about them.

DoD Director of Defense Procurement and Acquisition Policy Claire Grady told Federal News Radio that she hopes to have two guidebooks — one on contract types and one on source selection — out by the end of March.

“One of the things we’re working on is trying to provide job tools and job aids to help people be more aware of and more comfortable with using different contract types, looking at what the circumstances are and tailoring accordingly,” Grady said during the Acquisition Excellence 2016 conference hosted by the American Council for Technology and Industry Advisory Council.

Grady also said it’s important to communicate clearly with industry what the government is looking for in a contract.

“If you tell people what it is you want and how much it’s worth it to you — and when I say worth it to you, it’s the end user it’s worth it to, not the contracting officer, not the program manager — it sure helps industry figure out how and where they want to invest in terms of their proposal to respond to that requirement,” Grady said. “Wouldn’t it be nice if we didn’t make people guess what was really important to us, or how important it was to us?”

An emphasis on risk

The contract type guidebook could be called “shelf-ware, phone-a-friend or reference material” for the person who’s structuring the contract, Grady said.

The way the guidebook will do this is by presenting different contract types and each type’s respective elements, “to make sure that when … a contracting officer in concert with the program manager is making a decision on a contract type, that they really are making an informed decision that has considered all the variables.”

The update is not a checklist, but a guide for helping to choose one type of contract over another. The goal, Grady said, is to elaborate on the thought process behind selecting the right type of contract, but with “a real emphasis on risk.”

“So how does risk manifest itself in the business deal and what is the right contract type to align with that,” Grady said. “Taking it one step further, we’re also looking at the incentives structures associated with contracts to make sure that we’re truly recognizing the risk and appropriately sharing it between government and industry.”

The guide can prompt consideration of how much risk is already in a target cost, how much risk may materialize and what is a fair profit for industry if that risk does appear.

“Using that thought process the structure almost writes itself,” Grady said. “But you have to understand the risk, how that risk might manifest and percentage of that risk industry really can influence, and factor that into what the profitability should be if it does manifest itself.”

Grady said this summer a pricing training symposium is being hosted with the Office of Cost Assessment and Program Evaluation, where participants will be walked through the guidebook.

“The guidebook is capturing the philosophy that we’ve been espousing for the last few years, it’s just giving people an actual reference guide to reinforce what we’ve been telling and teaching people in the classes,” Grady said. “We want to use continuous learning opportunities to better equip them to execute those responsibilities. We want a workforce that continues to enhance and develop over the course of their career.”

Clear communication, total team approach

The source selection guidebook emphasizes a “total team approach to engagement in the source selection process,” Grady said.

The goal is to make sure Defense is getting out its requirements and “clearly communicating those to industry,” so that companies know what are the priorities as well as what it will take to win a contract.

Grady said there’s also an “emphasis on communicating up front what truly is important to us from a value perspective, and in cases where it makes sense, quantifying that and communicating that up front in terms of how we will adjust the valuated price to account for that enhanced performance that’s desirable from an end-user perspective.”

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