Defense industry pushes back against Pentagon’s consolidation concerns

The Aerospace Industries Association last week pushed back against comments made by the Pentagon’s chief weapons buyer, who in unusually strong language raised concerns about consolidation in the defense industry.
Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics.
Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics.

Frank Kendall, the Undersecretary of Defense for Acquisition, Technology and Logistics, said this week that continued consolidation of major defense firms could limit competition, stifle innovation and eventually result “in higher prices to be paid by the American taxpayer in order to support our warfighters.”

And Kendall said he feared a future where the Pentagon “has at most two or three very large suppliers for all the major weapons systems that we acquire.”

Aerospace Industries AssociationBut in its statement, David F. Melcher, the chief executive officer of the AIA, said that as defense spending tightens and there is continued budget uncertainty, “it’s no surprise that industry is looking to become leaner and more efficient.”

Keep reading this article at:

Lockheed-Sikorsky deal stokes fears about industry consolidation

As the world’s largest defense company gets even larger, Pentagon leaders worry that competition is evaporating.

BlackhawkThe Pentagon’s top arms buyer worries that Lockheed Martin’s upcoming $9 billion acquisition of Blackhawk helicopter maker Sikorsky is part of a bad trend in which large defense firms get bigger and competition wanes.

The Defense Department will not block the purchase, but “we believe that these types of acquisitions still give rise to significant policy concerns,” Frank Kendall, undersecretary for acquisition, told reporters on September 30. “The Department of Defense is concerned about the continuing march toward greater consolidation in the defense industry at the prime contractor level.”

Keep reading this article at:

Agency’s “cut-and-paste” proposal evaluation upheld

An agency’s evaluation of proposals was not improper even though the Source Selection Authority “cut and paste” portions of a selection document used in a similar procurement – including typographical errors and a reference to a firm that had not submitted a proposal.

GAO-GovernmentAccountabilityOffice-SealThe GAO’s recent decision highlights an uncomfortable truth of government contracting: while the government can (and often does) demand nearly perfect proposals, the government may be able to get by with sloppy or lazy evaluations.

The GAO’s decision in Noble Supply and Logistics, B-410877.4 et al. (July 29, 2015) involved a DLA solicitation for maintenance, repair and operations supplies in the DLA’s south central region, geographical zones 1 and 2.  The solicitation called for two contracts to be awarded, one for each geographical region.

Keep reading this article at:

Lockheed Martin’s new combat vehicle bid could redraw battle lines in defense industry

The battle lines in the defense industry are in the process of being redrawn, and the unveiling of Lockheed Martin’s Amphibious Combat Vehicle (ACV) provides yet another example that the big players could be reshuffling.
Lockheed Martin has introduced its candidate for the new Amphibious Combat Vehicle.  Photo courtesy Lockheed Martin.
Lockheed Martin has introduced its candidate for the new Amphibious Combat Vehicle. Photo courtesy Lockheed Martin.

At the Modern Day Marine Trade Show in Quantico on September 22nd, Bethesda, Maryland-based Lockheed Martin Corp. (NYSE: LMT) formally introduced its entrant into the U.S. Marine Corps ACV competition.

The ACV is slated to replace the Marine Corps’ current aging fleet of Amphibious Assault Vehicles (AAV), land and sea vehicles with the capability to shuttle Marine forces in seafaring vessels ashore.

What’s particularly interesting about Lockheed Martin’s unveiling is that it is further a representation of the defense giant’s move to control a broader range of platforms in its defense portfolio.

Keep reading this article at:

GAO says GSA needs to pay more attention to competition and prices on Schedule contracts

Only 40 percent of orders placed against GSA Schedules in FY14 were based on three or more quotes — the number required by the Federal Acquisition Regulation (FAR).

This finding comes as a part of a recently-released Government Accountability Office (GAO) report.

Competition - GSA Schedule Orders - FY14

According to the General Services Administration (GSA), total sales through the Federal Supply Schedules (FSS) program in fiscal year 2014 were $33.1 billion. This includes purchases by federal, state, and local agencies, including federal intelligence agencies which do not report their FSS spending publicly. GAO’s analysis of publicly reported federal procurement data shows that federal use of the FSS program has declined from $31.8 billion in 2010 to $25.7 billion in 2014 — a 19 percent inflation-adjusted decrease. This is consistent with the decline in overall federal contracting obligations. The FSS portion of total federal contracting obligations remained steady — between 5 and 6 percent.

The extent of competition on GSA Schedule orders is influenced by various factors. One factor identified in the orders from the agencies GAO reviewed — the Departments of Defense (DOD) and Health and Human Services (HHS) and GSA — involves situations where few vendors can fulfill agencies’ specific needs.

HHS had a significantly higher percentage of FSS obligations in fiscal year 2014 on orders that were competed but the agency received only one or two quotes — 51 percent — compared to DOD and GSA, which received one or two quotes for 35 and 32 percent of their FSS obligations, respectively. HHS’s practice of targeting solicitations to fewer vendors may be contributing to this higher rate.

The bottom line?  Agencies are paying insufficient attention to prices when using FSS, according to GAO.  Ordering agencies did not consistently seek discounts from Schedule prices, even when required by the FAR. In addition, GAO found cases in which officials did not assess prices for certain items, as required, or had insufficient information to assess prices. Contracting officials were not always aware of the requirement to seek discounts and told GAO that the need to assess prices was not emphasized in training and guidance. When contracting officials are not aware of these regulations, agencies may be missing opportunities for cost savings.

Why GAO Did the Study

The FSS program provides agencies a simplified method of purchasing commercial products and services at prices associated with volume buying. In 2011, the FAR was amended to enhance competition on FSS orders. Competition helps agencies get lower prices on products and services and get the best value for taxpayers.

In its report, the GAO examined competition and pricing for FSS orders. The report addresses: 1) how and to what extent the government is using the FSS program, 2) factors influencing the degree of competition for FSS orders, and 3) the extent to which agencies examine prices to be paid for FSS orders.

GAO analyzed data from the Federal Procurement Data System-Next Generation on obligations through the FSS program for fiscal years 2010-2014 and reviewed a non-generalizable sample of 60 FSS orders awarded in fiscal year 2013 by DOD, HHS and GSA, the agencies with the highest use of the FSS program. GAO also interviewed officials from these agencies and FSS vendors.

What GAO Recommended

GAO recommends that DOD, HHS and GSA issue guidance and assess training to focus attention on rules related to pricing. DOD, HHS and GSA concurred. GAO also recommends HHS assess reasons contributing to its higher rate of orders with only one or two quotes. HHS concurred.  The complete GAO report, publicly released on August 10, 2015, may be seen at: FSS – More Attention Needed to Competition and Prices.