By Darrell Oyer, Darrell J. Oyer & Company:
A recent article in the Federal Times suggests that DOD “should-cost” reviews be used as an alternative to contractor price proposals. The rationale is that because should-cost review teams are led by senior government leaders and supported by the contractor’s senior management the resultant should-cost price is fair and reasonable. This approach would require a waiver from the Truth in Negotiations Act. The author contends DOD’s should-cost reviews would provide more analysis into the reasonableness of the price than any proposal review team would be able to accomplish.
For years some government personnel have envisioned a means to reach a fair and reasonable price without the need for a contractor price proposal. One idea in the 1960’s was the contractor labor and indirect cost rates could be loaded into a government data base and thus government personnel could estimate the price for each competing contractor. The Army had a process called Alpha contracting whereby the government and the contractor sat down together and estimated the price.
“Minor” problems with this include:
1–Obtaining a waiver from the Truth in Negotiations Act.
2–Data bases do not readily accommodate differing cost accounting systems (direct v indirect costs and composition of indirect cost pools).
3–DCAA will no longer participate in Alpha contracting type arrangements: where is the audit report?
4–Impasses would likely be resolved the same way they are now– negotiations.
5– Critics might decry the absence of an independent DCAA audit report.