New Defense Department contracting reforms introduced by Pentagon acquisition czar Ashton Carter call for increased scrutiny over Pentagon contractors.

Among the 23 points Carter--whose official title is undersecretary of defense for acquisition, technology, and logistics--introduced in a Sept. 14 memo is a call for more competition in defense procurement.

To that end, Carter writes in the memo that DoD contracting officers should immediately start conducting bid negotiations with companies, possibly on the basis of non-certified cost or pricing data supplied by a would-be contractor in cases when only one firm responds to a full and open solicitation.

This new requirement comes irrespective of what type of contract type the solicitation calls for--firm fixed price, or otherwise. When the government asks a company for cost or pricing data, it's essentially asking for internal cost data, which contracting officers use to make a determination of whether a company's offer is fairly and reasonably priced.

In the past when only one company has responded to a full and open competition, contracting officers haven't had to ask for cost or pricing data since they could make a finding of fair and reasonable pricing under the assumption that the company's offer was made in the expectation of competition, and thus already competitively priced.

Carter's new requirement is likely to be unpopular among industry, especially among those who have argued to the DoD in the ramp up to the memo that a single respondent to a full and open competition is not, as the Pentagon supposes, a sign of ineffective competition. Rather, they say that it's a sign of effective market research by DoD program management offices that have successfully conveyed to industry their expectations to the point where companies unlikely to submit a winning proposal have voluntarily dropped off before committing resources to responding to the solicitation.

The DoD spends about $55 billion annually on one-respondent competitions, according to Carter's memo. A company confronted with a request for cost or pricing data isn't lawfully obligated to respond, but those that refuse are ineligible for the contract award, unless a senior contracting official makes a highly unlikely exception.

Other contracting called for in Carter's memo include extension of the Navy's Preferred Supplier Program to a pilot encompassing the entire Defense Department. Under the preferred supplier program, vendors demonstrating superior performance earn the right to more favorable contractual treatment. Among the incentives the Navy has offered contractors is more favorable progress payment and potentially higher incentive fees. A "fee" is often what the federal government calls "profit."

In general, profit should be more tied to performance, Carter writes in the memo.

For more FierceGovernmentIT reporting on the contracting and acquisition changes announced Sept. 14, click here.

For more:
- download acquisition czar Ashton Carter's 23 point memo (.pdf)
- read a transcript of a Sept. 14 press conference given by Defense Secretary Robert Gates and Carter introducing the memo

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