A common complaint about government contracting is it takes forever to complete a deal.
Well, much of the delay comes from what’s called cost analysis. Cost analysis requires govies to go into each cost element in a proposal like direct labor, overhead rates, G&A, ODCs, COM and profit/fee. Govies are required to get the best rate possible and confirm with research (and/or verify with other gov agencies) that the rates are legitimate. It takes a while. Sometimes this data is useful; other times it is not. One of the most common is when a potential contract will cost $700,000 or more, we have to get what is called Certified Cost or Pricing Data. It gets complicated, but Certified Cost or Pricing Data requires cost analysis. If it’s under $700,000, we only have to do price analysis, a simpler and much faster technique. Price analysis doesn’t give you all the data that cost analysis does, but it tells you the bottom line. This is what we really care about, especially in competitive situations where contractors can lower the price for the government.
Raising the threshold means govies only have to perform price analysis and not cost analysis as well, so the contracts get awarded faster. Therefore, raising the threshold for Certified Cost or Pricing Data to somewhere between $1 and $2 million should speed up these smaller contracts.
As a side note, raising the $700,000 would be helpful to small businesses. Small businesses don’t have the large cash reserves many large contractors do to hold out for a delayed contract award. A raised threshold would also help an overwhelmed acquisition workforce, especially as it performs more work as large contracts are broken into many small contracts.