We are into a series where we are exploring aspects of DoD's Better Buying Power (BBP) initiatives that will have direct and significant impacts on contractors. Of course, in the abstract, the entire BBP 3.0 impacts contractors to one degree or another but our focus here is on initiatives within the BBP umbrella that contractors will notice. In Tuesday's installment, we discussed the initiative to get rid of regulations that don't serve a useful purpose or where the benefits are not commensurate with the cost of compliance. Today we're going to discuss the department's initiative to enhance their should cost review capability.
DoD has been conducting should-cost reviews or similar analyses forever. We recall participating in one during the early 70s but they had been performed before then. However, those reviews have been done infrequently and with mixed results. Should-cost reviews evaluate the economy and efficiency of the contractor's existing work force, methods, materials, equipment, real property, operating systems, and management. The objective of should-cost reviews is to promote both short and long-range improvements in the contractor's economy and efficiency in order to reduce the cost of performance of Government contracts. The reviews require a mix of people with such skills as cost estimating, pricing, and contracting and subject-matter expertise in manufacturing or other areas relevant to the particular program being reviewed.
Finding people within DoD with the requisite skills to perform should-cost reviews on a temporary basis poses challenges and diverts the individuals from their primary tasks. While proponents of should-cost reviews say they can identify inefficiencies and potential savings during their analyses, the procuring organization must have the ability and willingness to use the results of the analysis in contract negotiations to achieve lower contract prices. And the procuring organization must also be wary of cost growth and future modifications negatively impacting the originally negotiated contract price.
DoD is well on its way to expanding should-cost reviews to its major programs. Nearly 100% of ACAT (Acquisition Category) 1 programs already have should cost targets and, according to the BBP 3.0 guidance, are managing them and achieving significant savings across the Department. (ACAT programs are categorized according to ACAT 1, 2, and 3. ACAT 1 covers the most significant programs while ACAT 2 and 3 categories cover progressively lesser dollars. The goal of the Department is to expand should-cost reviews until 100 percent of all ACAT programs are covered.
How do they plan to expand the number of should-cost reviews. Why the Department plans to institute an annual Should Cost and Innovation Award program to recognize organizations, groups, and teams who have displayed outstanding should cost commitment, innovation, and results for acquisition programs. Yep, that ought to do it.