A recently issued memorandum from the Department of Defense (“DoD”) promises changes to the formation and administration of defense contracts.  This could be good news for contractors.  The memorandum instructs DoD acquisition officials to be more flexible in the types of contracts awarded by the DoD, and it recognizes that a best-value acquisition requires a balance of quality and price.

On November 13, 2012, Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics, issued a memorandum to DoD’s acquisition workforce.  The memorandum, titled “Better Buying Power 2.0: Continuing the Pursuit for Greater Efficiency and Productivity in Defense Spending,” outlines thirty-six initiatives in seven focus areas, each aimed at increasing DoD’s and industry’s efficiency.  This “BBP 2.0” memorandum is preliminary and will be finalized in January 2013.

BBP 2.0 follows more than two years after DoD’s original release of “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending.”  By comparison, the “BBP 1.0” memorandum contains twenty-three initiatives in five focus areas.

As described in the chart below, most of the initiatives begun under BBP 1.0 will be continued under BBP 2.0.  However, the new memorandum departs from BBP 1.0 in two significant respects.  Industry, and in particular a recent letter from the Professional Services Council, has likely had some influence on these changes.

First, BBP 2.0 adds an entirely new area of emphasis: improving the professionalism of the DoD acquisition workforce.  According to Under Secretary Kendall, the aim is to provide “a deeper bench” of officials qualified to handle the complexities of major acquisition programs.

Second, BBP 2.0 retreats from the rigid rules of BBP 1.0 related to contract formation.  BBP 1.0 emphasized the use of Fixed-Price Incentive Firm Target (FPIF) contracts, even going so far as to mandate the use whenever possible of a 50/50 share line and 120% ceiling.  In contrast, BBP 2.0 is more flexible, instructing officials to “[e]mploy appropriate contract types.”  Similarly, BBP 1.0 mandated that acquisition officials tie profit margins to the risk of subcontractor performance.  BBP 2.0 takes a broader view, requiring instead that DoD “[a]lign profitability more tightly with Department goals.”  Finally, BBP 2.0 takes steps to correct DoD’s recent trend of equating cheapest with best value.  BBP 2.0 requires acquisition officials to “[b]etter define value in ‘best value’ competitions” and, when a Lowest Price, Technically Acceptable procurement is used, “to define [Technically Acceptable] appropriately to ensure adequate quality.” 

Contractors interested in commenting on BBP 2.0 should do so soon.  DoD’s two-month period “for review and comment by stakeholders in industry and government” ends on or about January 13, 2013.

A full comparison of BBP 1.0 and the preliminary BBP 2.0 is found below: 

Click here to view table.