Pentagon seeks to avert low-ball bids on development contracts

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http://www.stripes.com/news/us/pentagon-seeks-to-avert-low-ball-bids-on-development-contracts-1.447167

>The Pentagon is seeking ways to crack down on contractors that make low-ball bids for multibillion-dollar development projects in anticipation of collecting other Defense Department funds later.

>Contractors oppose a proposed regulation saying that Pentagon contracts specialists could recalculate bids as higher than submitted. That would increase the risk that a company would lose the bidding to a competitor.

>The question is whether some contractors rely too much in their bid calculations on estimates of future Pentagon reimbursement for their independent spending on research and development of unrelated projects. That's as opposed to a bid based more on a contract's technological risk and labor-cost projections, as well as the fruits of a bidder's own prior independent research and development expenses.

>Counting on future reimbursements can give bidders "a significant competitive advantage" so "we just want to make sure that things are transparent," Claire Grady, the Defense Department's director of procurement policy, said in an interview.

>The Pentagon actively encourages companies to spend their own funds on independent research and development that meets military needs, and repays some of the expenditures. The Pentagon reimbursed industry $3.8 billion in fiscal 2015 and $3.5 billion in 2014 for its share of these "IR&D" expenditures. The expenses are typically reimbursed as indirect costs spread across a company's entire business base.

>Facing strong opposition -- led by the Council of Defense and Space Industry Associations, an umbrella group for contractors -- the Pentagon announced on Dec. 22 that it would extend the time for industry comments on the proposed regulation by a month, through Feb. 2. The extension increases the chances the proposal could be scrapped or revised by the incoming Trump administration.
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