DoD Contract Negotiations: An $18 Million Dollar Case Study
While compliant accounting systems and full back office accounting services are a major focus for ReliAscent, this is a foundation for a number of other competencies we possess. One is Contract Negotiations. We have an abundance of experience, knowledge, and insight into the negotiation process in general and helping clients in the gov-con space in particular. A quick look at a recently concluded negotiation offers a window into services we can provide.
The ReliAscent team assisted an SBIR client years ago setting up their accounting system to meet DCAA compliance requirements for cost-plus type contracts. Their prototype proved successful, and after a couple more development contracts, it was time to bid on and negotiate a sole-source, fixed-price production contract for a substantial number of units.
The government conducted essentially two types of evaluations of the client’s proposal: a technical and a cost/price evaluation. The technical folks took the proposal and made sure all the specifications could be meet. They also weighed in on the number of hours it took to build the particular product being sold. An auditor from the DCAA was assigned to evaluate of cost, and the contracting officer asked the client to calculate fee using the DoD’s “weighted guidelines” method.
The results of the government evaluation was a mixed bag. The technical folks seemed to be satisfied with the level of effort needed to produce the product. The DCAA, however, aggressively attacked the client’s direct costs and indirect rates. The contracting officer scored the client low on the factors used in the weighted guidelines for determining fee. This resulted in the government’s first offer being $18.3 million less than the proposed price.
Defending the proposal
With our assistance, the client provided strong assertions contrary to the DCAA findings based on the government’s own guidance and regulations regarding the DCAA’s findings. The turning point in negotiations hinged on having a teleconference with the contracting officer, technical staff, and the DCAA auditor to present our case. Also discussed was the client’s thorough evaluation of fee using the weighted guidelines method.
Crossing the finish line
Not unlike many negotiations, crossing the finish line meant compromise from both sides. Much of this also entails assessing the motivations and predicting the behavior of the other side. Working closely with our client, they were able to settle at a price they were comfortable with. Of the $18.3M the government questioned in their first offer, the client was able to recover approximately $9.5M.
ReliAscent: Building from the accounting
Our financial expertise starts with the bookkeeping and accounting, and extends into indirect rate development, job cost accounting, up to assuring the financial health and strategic growth of the client. While we excel at accounting for government contractors, we can address important issues across the entire acquisition cycle, from pricing through negotiations, contract management to closeout. A number of our staff are members of the National Contract Management Association (NCMA), and we abide by the NCMA Code of Ethics as a trusted member of the government acquisition ecosystem.