Do the baby and the bathwater deserve the same fate? An exploratory study of collaborative pricing in the U.S. department of defense

DOIhttps://doi.org/10.1108/JOPP-11-02-2011-B004
Pages240-274
Published date01 March 2011
Date01 March 2011
AuthorTimothy G. Hawkins,Jeffrey R. Cuskey
Subject MatterPublic policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 11, ISSUE 2, 240-274 SUMMER 2011
DO THE BABY AND THE BATHWATER DESERVE THE SAME FATE?
AN EXPLORATORY STUDY OF COLLABORATIVE PRICING IN THE U.S.
DEPARTMENT OF DEFENSE
Timothy G. Hawkins and Jeffrey R. Cuskey*
ABSTRACT. Alpha contracting is a collaborative effort between a buyer and
supplier during contract formation to maximize efficiency and effectiveness.
Collaborative efforts between the United States Department of Defense and
its suppliers have recently been scrutinized. Although several benefits of
Alpha contracting are identified within the literature, the phenomenon is not
ubiquitous nor is it well understood. Using the case study methodology, this
research explores Alpha Contracting to define success and to identify its
contributing factors. Additionally, this research identifies antecedents for
and consequences of use, variations of the processes employed, and some
misuse. The study culminates in the development of a conceptual model of
collaborative pricing, and provides five recommendations for enhanced use.
INTRODUCTION
Public policy requires that federal contracting officials procure
goods and services at fair and reasonable prices. Largely, this is
achieved by obtaining adequate competition. However, competition
is not always feasible; sole-source acquisitions are a perpetual reality
due to such circumstances as unique capabilities, intellectual
property rights, urgency of the need, and international agreements
(FAR 6.302).
--------------------------------
* Timothy G. Hawkins, Lt Col, USAF, Ph.D., and Jeffrey R. Cuskey, SC, USN
(Ret) are an Assistant Professor, and a Lecturer, respectively, Graduate
School of Business and Public Policy, Naval Postgraduate School. Dr.
Hawkins’s current research interests include electronic reverse auctions,
procurement ethics, buyer-supplier relationships, strategic sourcing and
services procurement. CDR Cuskey’s teaching and consulting interests are
in major systems acquisition, contracting, program management and
business financial management.
Copyright © 2011 by PrAcademics Press
AN EXPLORATORY STUDY OF COLLABORATIVE PRICING IN THE U.S. DEPARTMENT OF DEFENSE 241
Sole-source contracting can be a lengthy process depending on
the size and complexity of the procurement. The need to streamline
the Department of Defense (DoD) contracting process and reduce
procurement lead time was emphasized in the 1986 Packard
Commission report. The report concluded “too many of our weapon
systems cost too much, take too long to develop, and by the time they
are fielded, incorporate obsolete technology” (President’s Blue
Ribbon Commission, 1986, p. 44). The prolonged time to meet users’
requirements, caused by the inability to reduce procurement lead
time, “lowers customer satisfaction, costs more money, and is not
responsive to the changing-threat environment” (Brodfuehrer, 2000,
p. 23). The most important impact of prolonged procurement lead
time may be non-responsiveness to rapidly-changing threats. A
failure to meet the changing-threat environment may result in the
failure to meet the military’s most essential requirement of defending
the nation (Brodfuehrer, 2000).
Alpha contracting, also known as integrated process team (IPT)
pricing or “one pass” pricing, is an innovative technique that
compresses procurement lead time by converting some of the steps
during contract formation from serial to parallel processes (Meyer,
1997). Alpha contracting utilizes Government-contractor collaboration
throughout the entire pre-award process to develop and price the
requirements and scope of work. Success stories (Goodwin, 2002;
Huffstetler, 2000; Nissen, 1998; Rapka, 2006; Schutter, 1998;
Vinson, 2001; Wallace, 2000) explain how Alpha contracting was
utilized to form a sole-source contract within compressed
procurement lead time and at reduced costs. These accounts
detailed the benefits and disadvantages associated with the Alpha
contracting approach and suggested some factors that influenced its
success. However, the identified success factors may be incomplete
since they were explored from single case studies. Additionally, the
antecedents for and consequences of Alpha contracting use have not
been examined. Further, most people within the DoD acquisition
community have not participated in Alpha contracting, and the
reasoning behind this lack of participation has not been addressed in
the literature. Given the benefits that can often be realized through
effective deployment of Alpha contracting approaches, it is important
to understand why procurement involvement is limited, and whether
this is something that should be addressed. Absent this
understanding, it may be difficult for acquisition officials to determine
242 HAWKINS & CUSKEY
whether Alpha contracting would be appropriate for a specific
acquisition, leading to the development of acquisition strategies that
may be suboptimal.
Despite some documented successes of Alpha contracting, the
current contracting atmosphere seems to be trending back towards
arms-length approaches versus relational exchanges, such as Alpha
contracting. This trend is manifested in actions such as the Defense
Contract Audit Agency’s (DCAA) decision in August, 2008 to cease all
participation in Alpha contracting, and the decision by the Air Force
Materiel Command in April, 2009 to rescind its IPT Price Negotiation
and Agreement Guide. Although this rescission did not prohibit the
use of Alpha contracting within the Air Force Materiel Command, it
reduced the likelihood that Alpha contracting would be utilized.
The purpose of this research is to develop a conceptual model
that could be used to explain the collaborative pricing phenomenon
with hopes that misunderstandings will be dispelled and new insights
will emerge. Specifically, we suggest what constitutes successful
Alpha contracting, as well as factors driving its success. Additionally,
we identify antecedents for appropriate application and seek to
confirm purported benefits of use (i.e., consequences). This research
identifies the utility of Alpha contracting, and explains its narrow
usage to date.
The remainder of this study is organized as follows. First, a
detailed literature review was conducted of Alpha contracting and
underlying theories surrounding relational exchange. Next, the
research methodology explains sources and types of data, and the
means of analysis. Results are presented followed by a discussion of
theoretical and practical implications. Finally, five recommendations
are offered to improve the effectiveness of collaborative pricing within
the U.S. DOD.
ALPHA CONTRACTING PROCESS
Alpha contracting utilizes collaboration throughout the entire pre-
award process to jointly (government and contractor) develop and
price the requirements and scope of work (Nissen, 1998). Typical
representatives on the IPT include the contractor, contracting office,
program office, pricing analyst, DCAA, and Defense Contract
Management Agency (DCMA). In contrast, throughout a traditional

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT