Delays in Obtaining Cost or Pricing Data on Sole-Source Spare Parts Contracts Hamper Defense Department Awards

Strategic Insights -

Delays in obtaining cost or pricing data from contractors have become a significant issue for the Defense Department (DOD), causing prolonged contract awards and affecting the timely availability of spare parts. According to a recent report by the Government Accountability Office (GAO), DOD relies on certified cost or pricing data to determine if prices for spare parts are reasonable. However, when this data is delayed or not provided, contracting officers face significant challenges in awarding contracts. A recent example highlighted by the GAO report shows a 1,154-day delay in obtaining cost or pricing data, resulting in significant delays in contract awards.

Key Takeaways:

  • Between fiscal years 2015 and 2019, the Defense Logistics Agency (DLA) obtained data other than certified cost or pricing data for 77 of the 136 sole-source spare parts contracts it awarded.
  • The DLA waived the requirement to obtain certified cost or pricing data in two cases, citing the exceptional need for the spare parts, which is a commercial item.
  • DOD issued a memorandum in March 2019 requiring defense agencies to report when contractors outright refuse to provide cost or pricing data, but it is not collecting data on the extent that delays in obtaining data affect the time it takes to award contracts.
  • Delays in obtaining contractors' cost or pricing data contributed to the length of time needed to award seven of the 10 sole-source spare parts contracts GAO reviewed.
  • Without a means to monitor or identify the nature and extent of delays, DOD is missing opportunities to develop approaches to effectively address these issues and potentially award contracts faster.
  • DOD spends billions of dollars each year on spare parts for planes, ships, and other equipment, and seeking to negotiate a reasonable price for these spare parts is crucial to awarding contracts in a timely manner.
  • contracting officers rely on cost or pricing data certified by contractors as accurate, current, and complete to determine if prices are reasonable.

Statistics:

  • 77 of 136 sole-source spare parts contracts awarded by DLA between fiscal years 2015 and 2019 did not require certified cost or pricing data.
  • Certified cost or pricing data were obtained for 59 of the 136 sole-source contracts awarded during the same period.
  • Delays in obtaining cost or pricing data contributed to the length of time needed to award seven of the 10 sole-source contracts GAO reviewed.
  • The delay in obtaining cost or pricing data for a single contract reviewed by GAO was 1,154 days.

Sources:

  • GAO, U.S. Government Accountability Office, "DOD Needs to Improve its Process for Obtaining Contractor Cost or Pricing Data," 2020.
  • National Defense Authorization Act for Fiscal Year 2020, Public Law 116-92.
  • Defense Logistics Agency, "Spare Parts Contracting and Pricing Data," 2019.