How SOCOM makes price tradeoffs to accelerate contract delivery

Here is Paul Weisgarber and Noel Burke on the Air Force Contracting Experience podcast discussing their experience working with Special Operations Command (SOCOM) through the Ghost program, which is a 90-day rotation to get rapid acquisition experience. Here’s a slice:

Then there is trust between the PM [program manager] and the PCO [procuring contracting officer], you do what you said you were going to do and I do what I said I was going to do, and we have the same goals in mind — If we’re trying to acquire some new capability and my goal is to get the price but the PM’s goal is to deliver it on time then it’s not going to be successful. Am I willing to pay a little bit more to get it on time? Or is price more important?

 

… One thing that’s hard for people is that you can’t always have the best price and speed. Sometimes you have to choose. Sometimes, SOCOM is willing to pay more because they get them delivered in a timely manner. Many of you listening to this have had that experience, it was obsolete upon delivery or nearly obsolete. That kills you. Spent all that time and money for this solution and its worthless on arrival. Sometimes you say, I’ll pay a little more for this but I can get it at the speed of need.

For procurements, usually DoD requests multiple quantity options to be priced to determine the cost-quantity tradeoff. But I haven’t seen DoD ask for multiple prices depending on time to delivery [have you?]. The funny thing there is, pricing out tons of CLINs, option quantities, delivery schedules, that would drag out the proposal process forever. It completely negates the whole purpose of speed to delivery.

There really isn’t a penalty to contracting officers for delaying a procurement until they can justify the price through competition, commercial equivalents, or cost data. The real constraint is when the funding expires, not necessarily the warfighting requirement. You have to sympathize because if a post-award audit or some oversight action shows that the company made more than 15% profit on a sole-source award then the contracting officer will get dinged pretty hard. But there was no reward for getting that fielded in a timely way. The asymmetry of incentives.

Ultimately, the tradeoff between cost and time is a subjective one. How much more DoD should be willing to pay to get delivery in one year rather than two years is really a military-value question. The return to great power competition means that DoD’s risk isn’t cost growth but not fielding capabilities in time to deter a conflict.

That means PMs and PCOs should be close to the military user to really understand whether cutting the delivery schedule in half is worth 30% more in price. I’d like to really see how they documented the specific decision on that tradeoff because that should be shared with other contracting offices. But it seemed to be enabled in SOCOM by their proximity and identification with the user:

SOF — that culture, the principles. You’re rubbing shoulders with users in a joint environment. I’ve been at Wright-Patt most of my career, CONUS and OCONUS deployments in the past. But you don’t always get to rub shoulders with the user and talk with them. Whereas when we go down there [to SOCOM] the user is an integral part of the IPT, and it’s a much smaller, flatter, organization and team you’re working with… You go down there to learn as a junior acquirer to mold the next set of leaders.

The Air Force, of course, has a lot of very large MDAP programs that are in sole source procurement. I’ve heard that they use a lot of undefinitized contract actions, but finalizing the negotiations can take two-plus years on average. There were backlogs well over 1,000 days that they’ve been working down.

Usually SOCOM is thought of as “different” not because of special authorities but because they have smaller programs, rarely if ever run an MDAP. But here’s a quick story from their time at SOCOM:

There was a $145 million OTA that they were looking to negotiate. Unfortunately there was a really aggressive award schedule, someone above said let’s get this done yesterday. So myself and two other ghosts volunteered to negotiate. We were able to price, negotiate, and get to a handshake on a $145 million OTA in less than a week. They put the responsibility in our hands, let us run, and it was a fantastic learning experience.