How DoD is bettering its commercial pricing practices

DoD is setting up Cost and Pricing Centers to form a brain trust on commercial price determinations.

The Defense Department is spending a lot of time trying to figure out how it can speed up its acquisition process while saving money too.

One method DoD is constantly working on is how it buys commercial items. It spends about $60 billion a year on items that are sold in the private sector.

But, determining what is considered a commercial item and how much that commercial item should cost can get tricky.

That’s where the Defense Contract Management Agency’s new Cost and Pricing Centers come into play.

First started as a pilot program back in 2013, the congressionally mandated centers are set to be fully staffed this June.

“The team first looks at a contractor or a subcontractors’ proposal with respect to proposing a commercial item. We provide advice to government contracting officers with respect to, ‘Is this a commercial item or is it not,’” said Steven Trautwein, a senior price cost analyst at the Cost and Pricing Center in an interview with Federal News Radio. “Once an officer has determined it to be a commercial item then the next challenge is the pricing and so our people have to do market research to understand what the market looks like, we’ve got to compare prices with respect to similar items that have been purchased in that particular market space and then we have an array of other tools available for us. As a last resort we could ask for cost data from contractors for example.”

The Cost and Pricing Centers have their headquarters in St. Petersburg, Florida and have opened or are opening satellite offices in Boston, Philadelphia, Denver, Phoenix and Indianapolis.

Despite the expansions, the centers still have a lot of work to do before they are completely up and ready. Most of that work comes in the form of training cost price analysts.

The centers are still not taking in the full volume of proposals they are capable of because the analysts are still learning, Trautwein said.

“Over time this team will become the DoD-wide resource to assist contracting officers in making the commercial item determinations with the pricing. We don’t really have a good handle on what that volume is going to be at this point,” Trautwein said.

The Centers are bringing people in as analysts from within the government and also from the private sector.

Analysts go through basic DoD acquisition training and certification requirements. They will also go through some Defense Acquisition University courses on commercial item determinations.

“The real key for us is on-the-job training, where we bring them onto a team, take them through some real life examples and eventually letting them work on a smaller case with a mentor, with a more senior individual who has been on longer,”  Trautwein said.

Of course those are only the challenges within the centers. Trautwein said the biggest challenge is changing the culture within the entire DoD. While that’s not the total mission of the centers, they are trying to help DoD more into more of a commercial mode, Trautwein said.

Since DoD’s acquisition workforce is so large, not everyone can be trained to make commercial determinations. DCMA has been given the responsibility of holding that knowledge and trying to develop the culture around it.

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