The Army Contracting Command-Rock Island (ACC-RI) Pricing Directorate has been working diligently with the center’s contracting teams and many companies to negotiate cost savings for the center. Fiscal Year 2020 was an especially notable year, as the directorate negotiated approximately $1.4 billion in savings.
Dan Miller, Director, Contract Pricing Directorate, said cost price analysts plays a pretty important role in the negotiations.
“Cost price analysts provides advice to the Procuring Contracting Officer (PCO) / contract specialist on what the cost should be, and whether it is fair or reasonable,” said Miller. “They’ve analyzed the cost and calculated what they considered to be a reasonable position.”
A lot is involved in analyzing the overall proposed cost such as material, labor, overhead, and profit. The analyst calculates the position based on data provided by the contractors.
In FY20, ACC-RI’s cost savings were more significant than in past years because there was a particularly large savings on a Chemical Demilitarization (Chem Demil) negotiation for the Pueblo, Colorado Chemical Agent Destruction Pilot Plant. Miller says that the company proposed $1.9 billion to provide continuation of chemical demilitarization operations and ACC-RI’s contracting and Pricing Directorate professionals negotiated that price down to $1.2 billion.
Christina Pacha, contracting officer from the Pueblo team, says that the Pricing Directorate was fully supportive in the negotiations, and has helped them in the past by supporting them with cost analysis on change modifications for the chemical demilitarization contracts.
“They have helped the team through [Defense Contract Audit Agency (DCAA)] audits, especially reviewing rates to determine the most up-to-date rates, which typically result in savings,” said Pacha. “The Pricing Directorate has also found errors in proposals when it comes to calculating things like incentives.”
Pacha’s overall impression of the negotiations was pretty positive.
“We went into it with a really strong position that was supported by technical and by the Pricing Directorate,” said Pacha. “I think we were very prepared.”
The contract was done in two phases. First, they established up front what the cost ceiling was going to be and what required services and supplies would be up for negotiation to remain within that ceiling. At the start of the negotiations, the terms were outlined and the team stuck with those terms throughout the process.
“In the second stage of negotiations, we went through line by line and brought up points that had been supported by the Pricing Directorate and technical to reduce cost tremendously,” said Pacha.
Miller says that the remaining $300 million savings ACC-RI achieved in FY20 were based on typical negotiations.
“Many of the negotiations result in smaller savings; however, they all add up,” said Miller. “The largest savings generally come from Chem Demil or the Logistics Civil Augmentation Program (LOGCAP) contracts.”
Miller said the Pricing Directorate started keeping track of the center’s savings about 10 years ago, so he has a full view of the directorate’s and center’s achievements. It’s only been in the last few years that the savings log has been provided to the front office on a weekly basis.
Sheila Haynes, administrative assistant with the Pricing Directorate, has been providing reports on a monthly basis to ACC Headquarters. Haynes said ACC-RI is among the top three centers for cost savings across the command for FY20.
Miller says there is a Defense Federal Acquisition Regulation Supplement (DFARS) requirement to attach Price Negotiation Memorandums (PNMs) valued at over $25 million to the Contractor Business Analysis Repository (CBAR), which is managed by the Defense Contract Management Agency (DCMA).
“These savings mean a lot for the center and Army overall,” said Miller.
Miller says that the savings from firm fixed price contracts means that they have more money to spend for the warfighter.
“We are doing our job to reduce costs that are not reasonable,” said Miller. “The Pricing Directorate has a quality staff to analyze cost and price and to help the PCO negotiate fair and reasonable prices, said Miller. “Both the PCO and price analyst recognize that some proposals may be inflated and that they have a job to negotiate fair and reasonable prices.”
Miller says that they are doing the best they can with the resources they have. There are savings out there and they have to continue to grow their skillsets in order to find the best value for the government and the American taxpayer.