DRIVING COMPETITION
process of acquiring the rights, allowing competition at a more manageable level.
Q. Prime contractors compete at the component level to lower their cost and price; why can’t the government compete at the subsystem or even a lower level?
A. It can, by qualifying alternate sources of materials.
Establish competitive factors where it makes sense. Depending on the weapon system and performance requirements, material cost drivers may be one of the highest-cost and lowest-risk items to qualify. Tis is one area to address if com- ponent or subsystem data rights do not allow competition. It is also an area where it is incumbent on the PMO to write con- tract solicitations and requirements that are not overly restrictive to a single source.
AIMING FOR COMPETITION
Competing wherever possible is one of the tenets of BBP, to find the best value for the taxpayer while providing Soldiers with cutting-edge equipment. Here, a 519th Military Intelligence Battalion Soldier checks his M-249 automatic rifle sight before engaging a paper target downrange in Spin Boldak, Kandahar province, Afghanistan, Feb. 8. (U.S. Army photo by CPT Lindsay Roman)
Specialty chemical and metal prices con- tinue to rise, especially where there is only one supplier. In this case, alternate material qualification is needed to miti- gate production risks should some sort of industrial accident occur.
For example, in May 2012 one of the two U.S. nitric acid producers suffered an explosion that could have had a significant impact on the ability to produce enough nitric acid to meet delivery requirements if there were no alternate source. Work- ing with the prime and subcontractor in qualifying an alternate material source also incentivizes the incumbent provider to pursue lean manufacturing or rightsiz- ing operations to meet current market demand. If it is too costly for another U.S. material provider to rightsize or streamline processes in order to operate at a lower cost, look abroad; many foreign
producers have found smart ways to pro- duce more efficiently. Tis option has to consider the effect on the U.S. industrial base and any national security concerns. Engaging the
service’s industrial base
policy representative can help navigate these hurdles.
Q. Tese are just a few possibilities to consider in establishing competitive con- ditions to lower production price. Are there other subsystem areas to address?
A. Qualify alternate sources of compo- nents or subsystems.
As with materials, components and sub- systems provide opportunities to qualify additional sources to establish competitive conditions. Tere may also be an opportu- nity to encourage dual sourcing by prime contractors. If the prime is unwilling to qualify another source, the government has the option to do so, then to either dual-source or compete at the subsystem or lower level and provide government furnished equipment (GFE) to the sys- tem integrator. “GFEing” subsystems and below will reduce the significant burdened rate added at each level up to the prime contractor, but comes with the responsi- bility and the requirement to use internal resources to manage it.
Qualifying an alternate component and subsystem source is by no means easy. Critical
information required to pur-
sue this includes the data rights status, performance risk, the cost to qualify and compete, and the projected return on investment.
Q. What happens if there aren’t alternate commercial sources to compete?
A. Leverage government resources to bridge the gap.
132
Army AL&T Magazine
April–June 2013
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