Getting Down to Business

June 7, 2007
The negotiation, execution and assessment of DoD contracts.

Congratulations, you have just been notified that your company was the successful bidder for a Department of Defense (DoD) contract. Now you can shut out those who helped guide you through the proposal activities. Clear out the personnel who helped you gain the competitive edge, “opened the doors to the DoD,” and helped your company avoid the frustrations of the bidding process. But why come so far, and make a fatal mistake late in the game?

If you think your company’s past experience, in its area of capabilities, solely qualifies it to launch into a DoD contract, please think again. There are many companies which have been awarded DoD contracts, then failed to meet the requirements or botched the opportunity to take short cuts on procedures and/or materials. There are companies that have — because of expediency — ignored the Federal Acquisition Regulations (FAR’s) and Defense Federal Acquisition Regulation Supplements (DFAR’s), offered an overly ambitious delivery schedule, and failed to have a individual watching their back during contract negotiations.

Perhaps the greatest mistake a company can make — upon the award of a DoD contract — is ignoring those that “brung ya to the dance” by saying “we have been in this business for X number of years and we don’t need anyone to tell us how to run our company.” But, don’t forget it probably wasn’t the DoD arena in which you have been doing business.

Depending upon the complexity of the procurement there may or may not be a technical requirements conference (TRC) prior to contract signing. If your company feels there are technical issues which need resolving then be adamant in requesting a TRC. Otherwise, you could be required to meet technical requirements and specifications which you do not fully understand, potentially jeopardizing your performance. Always remember the FARs and DFARs are there to protect the contractor as well as the government’s interests.

Contract Negotiation
Has the Government proposed a negotiated or non-negotiated contract? If you are awarded a firm fixed price (FFP) contract there are three payment options: No. 1, in a lump sum after all the deliverables have been achieved. No. 2, in progressive payments or No. 3, in incremental payments in accordance with (IAW) mutually agreed upon milestones.

Has the program/project manager included the program team in the contract formulation, negotiations, and discussions? Don’t go it alone and especially don’t forget to keep DoD “experienced eyes” by your side. This will save costs, consternation, frustration and grief down stream. The second set of eyes can help determine if your company’s profits will be derived from calculated award fees based on the governments ratings of your performance. The government is now leaning, more often, towards award fee contracts involving research and development programs.

Contract Execution
Now that you have survived the contract minutiae, make sure to have your program team in place. Are they ready and motivated to begin the execution of the contract? Do you have a metric system installed for tracking performance, cost and schedule? Are you familiar with the DoD’s red, yellow and green system for tracking program status? Are the intellectual property rights of your product(s) protected? Is your cost accounting system designed to track program costs?

Be familiar with engineering change proposals (ECP). These provide the documentation in which the engineering change is described. ECPs include change impacts to systems, configuration items and other associated configuration documentation affected by the proposed change. In addition, it typically describes how it will be implemented and provides estimated schedules and associated costs. The government or the contractor can submit ECPs to correct or enhance the capabilities/performance of the equipment. Contract modifications will be required if the ECPs are approved. Do you have someone experienced with DoD contracting procedures to review any contract mods to ensure that the company is protected?

Almost every program experiences a slip in the schedule, a glitch in the product’s performance, or a cost overrun. Please understand the government is “not out to get you” nor is it hoping you will default so it can issue a stop work order and hand the contract over to one of your competitors. First, discuss any problems or potential problems with the program team you trusted to bring you this far. If an adverse situation is inevitable, set up a face-to-face meeting with the DoD program manager and the procuring contracting officer (PCO). But above all, have someone available who understands the DoD systems acquisition and contracting structure.

Contract Assessment
Report card time! Yes, the government is required to periodically grade your company’s performance. This process is called the contractor performance assessment rating system (CPARS). In general, contractor performance assessments or evaluations provide a record — both positive and negative — for a given contract during a specified period of time. Hopefully, you will have developed an excellent rapport with your DoD PM so he or she will provide you with a draft CPAR for your review, comments, recommendations, additions and challenges prior to its final submission. The most important block in the CPAR is where the PM will state whether he/she will recommend your company for future DoD contracts. Monitor your CPARS closely.

Hopefully, these guidelines will be useful in fulfilling a company’s desires to expand its business by penetrating the DoD. Don’t be afraid to venture forth, just be aware that the DoD world has expectations which the commercial field does not require.

Frank A. Urbanic, Jr. is the CEO of Armed Forces Marketing Consultants ® Inc. ( He is a retired USAF Officer with extensive experience as a program manager in weapons systems acquisition. AFMC ® Inc. is a marketing consulting company uniquely structured to assist firms interested in DoD procurements. He can be reached at: [email protected] or 281-482-0641.