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.