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Matthew Fleharty

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  1. I think the Army awarded the contracts for the original round of COVID vaccines. Nevertheless, I wasn't being serious - just trying to establish the absurdity of using an arbitrary 15% markup brightline with a product that is relevant in all of our lives
  2. As Vern points out, cost of production is only one way to analyze whether a price is fair and reasonable. Consider this: if more than 15% profit is "unreasonable" I expect the DODIG to investigate the COVID vaccine contracts next. The vaccine reportedly costs approximately $1.20 per dose to produce, yet the US Government paid anywhere from $15-$20 per dose...that's a "profit" of over 1,000%! 😳
  3. I forget where I first found this, but here is a quote by Henry Ford on prices/costs that I often share when I hear/see similar debates as this one:
  4. A couple thoughts (which may or may not be worth what you're paying for them) 😉: Optimal speed vs. faster: speed is just one aspect of any acquisition and and the right speed depends on what you're trying to accomplish. Just as an athlete trying to run and win a marathon will not run the race at 100m pace, acquisition professionals need to think purposefully about their particular acquisition to find the optimal speed rather than just trying to go as fast as possible with the potential for unintended consequences. Work in parallel (both between government/industry and internally): I found it beneficial to get the cost data the government thought it needed as early in the process as possible, certainly well before the contractor delivered their proposal. This way we could start analyzing methodologies and estimating a fair and reasonable price concurrently with the contractor. In some cases the information we requested was not what the contractor relied on to build their estimates, but that's okay - there is usually more than one way to generate an estimate and we could always discuss which were best during negotiations. This requires the cooperation of industry, who can be reluctant to share information with the government early before it goes through their own internal review processes, but thankfully I have worked with and established trust with some excellent individuals on the contractor side which facilitated early exchanges of information. Transparency & Expectations: see my comments on this thread.
  5. Ever since I heard the term "Alpha Contracting" I thought it was a funny thing - if it is simultanesouly so different AND successful, why not use it for every sole source acquisition? I think those who understand sole source negotiated contracts understand that the factors that determine whether "Alpha Contracting" is successful are not unique to it - that second article you post talks about the importance of factors like "trust," "top management support," and "commitment and focus" - does "Alpha Contracting" automatically come with those characteristics? I highly doubt it - trust has to be earned and maintained, not every acquisition is a top priority, and depending on who the players are on each side will determine if they are professional enough to remain committed and focused. Simply put, you can't simply declare that an acquisition is going to use "Alpha Contracting" and expect success. Conversely, you can achieve success without even knowing a thing about "Alpha Contracting." I successfully negotiated multiple large sole source contracts (some quite rapidly) before I even knew the term "Alpha Contracting" existed. It is not a prerequisite nor is it a panacea - I think if both parties promise to do a professional job and strive to maintain a healthy working relationship throughout the process you'll achieve success, regardless of whether you use or call it "Alpha Contracting" or not.
  6. I'd encourage anyone interested in AI's capabilities and its limitations to read "The Myth of Artificial Intelligence: Why Computers Can't Think the Way We Do." I found it well argued and well written (which makes it an enjoyable read). I've loaned my copy out at the moment, but once I get it back I'll post some relevant excerpts for the community's consideration.
  7. I recommend starting any negotiations with an exploration of expectations and responsibilities. From an expectations standpoint, I would describe what the other party can expect from me and what I expect from the other party. Those expectations are largely reciprocal - if an expectation isn't reciprocal, stop to think about why and whether or not it is fair to make that an expectation. Come to an agreement on those expectations first with an understanding between both parties that we're all fallible so when those expectations are broken it's in the collective interest to identify that and correct it immediately. Sounds like you're on the Government side - I would add that I often see an asymmetry of information/transparency for negotiations over the CCoPD threshold. The Government requires contractors to prepare extensive estimates and provide current, accurate, and complete data in extensive/elaborate proposals, yet I see some Government negotiators reluctant to provide the details behind the Government's estimates to contractors. That baffles me and I think it violates the norm of reciprocity and, consequently, trust during negotiations. One thing I did during every major negotiation was to provide the same information/estimate for every Basis of Estimate (BoE) and put it side-by-side with the contractor's estimate so that we could compare the methodologies, assumptions, and data to talk about which ones held more merit than the others. That's the other key point in my opinion - focus less on the total/results and more on what the right methodologies, assumptions, and data to use are and let the numbers come out however they come out. I was in a negotiation where we did this and both parties treated the negotiation as a problem solving exercise, not a battle of wills. At one point we came across a BoE where the Government thought a different methodology was more appropriate - after listening to our explanation the contractor agreed. That methodology happened to calculate that the labor effort was significantly lower than the contractor proposed which would result in considerable savings for the Government; however, a day later, the negotiation team realized we used the wrong number in our computations and that the methodology we agreed on now estimated that the effort would take significantly more labor than both the Government's and the contractor's original estimates. I checked the revised math and it was now correct so I accepted the results, much to everyone's dismay - including my own...the delta was not only surprising but significant so a natural inclination could have been to fight it. But I am glad that I didn't because following that single decision, our negotiations proceeded remarkably well - the contractor understood that I meant what I said about my expectations and my responsibility to negotiate a fair and reasonable price (not the lowest price possible). If you find a way to establish trust and teamwork in your negotiations, when you discuss the topic of profit percentage won't matter.
  8. Let's note that "PoP" is regularly misused in place of more proper terms such as "delivery date" or "completion date" (your original post was not specific as to if this was a supply, service, or project) - I have seen many a contracting practitioner worry or fall prey to a contractor's claim that they could not continue to work beyond the contract's "PoP" and, in some cases, improperly extend the "PoP" without any consideration. The reality is that the contractor could continue to work and that their delivery or completion would just be considered late (based on the "PoP" dates established by the two parties in the contract). An expiration of a "PoP" is not a license to stop fulfilling one's contractual commitments - just consider how a contractor might feel if the government chose to stop paying invoices once a "PoP" ends because it allegedly signals contract completion to the parties...
  9. @formerfed Talk about the pot calling the kettle black...This forum is supposed to be for the exchange of ideas and effective exchange of ideas in many cases requires us to challenge the ideas others present. If that makes you feel lectured to the point that you just say “I’m done” that’s unfortunate. This is an appeal to an authority which is a logical fallacy - there are plenty of DoD acquisitions that had scrutiny and approval at very high levels that were not sound and did not achieve the desired objectives...
  10. Exactly - that’s a major problem with the way acquisition professionals conduct competitions - instead of focusing evaluation factors on promises and an offeror’s capabilities that are more likely to predict their performance, we instead ask for fluffy narratives called “technical approaches” or “key personnel plans” or “employee management/retention plans” - none of which provide any value other than making the source selection team feel good about their decision because they liked what they read from the offeror. Recommend you read Vern Edwards’ exceptional article “A Primer on Source Selection Planning: Evaluation Factors and Rating Methods” in Briefing Papers issue 17-8 - I think it is required reading for all acquisition professionals, especially those involved in conducting competitive acquisitions. I re-read the Army’s competition - it didn’t pay a penny for development...it Instead paid up to $5K for an idea presented on paper and up to $100K for an idea presented as a pitch, neither of which required the presenter to do any development (at least based on the stated evaluation method on their website). The recipients of that prize could choose to spend it on developing a ventilator based on the idea they presented...or they could choose to do literally anything else with it because I saw nothing requiring recipients to spend the prize money on ventilator development (unless I missed it). Assuming I didn’t miss that fine print, what makes that an effective approach to encourage small businesses and educational institutes to develop ventilators? I would think a more effective prize competition would be something like this: we’ll pay $250K to the first 4 small businesses or educational institutes who show up with a functioning ventilator prototype that meets these standards...
  11. (Emphasis added above) - you say “different objectives”...why? To me the objective for both “ventilator challenges” is to get to more ventilators fastest to address the potential shortfall...did I miss something? Everything you detail about “promoting new technologies” vs. “taking pieces of existing, commercial items” are not objectives...those are means to an end (and if the means became the objective during a pandemic then that, to me, is the definition of taking one’s eye off the ball). Anyone have any idea how the Army’s essay writing and public speaking contest turned out?
  12. Different team, different competition with a different rule set - looks like the one you posted @bob7947 focused more on getting prototypes than paper...a lesson for the Army, @formerfed, and @joel hoffman : all “innovative” acquisition strategies/procedures are not equal
  13. My apologies that you felt insulted by my remarks, that was not my intention. I suppose we’re not going to reach a common understanding on this issue - I think the notion of “sparking thinking” is better done by asking for actual results/prototypes rather than ideas in the form of quad charts and pitches. Some doctor was able to do just that with parts from a hardware store ( https://www.usatoday.com/story/news/health/2020/04/07/coronavirus-ventilators-mississippi-medical-center-charles-robertson/2966719001/ ) probably for less that $105K too...
  14. @formerfedDo we want ideas in a time like this or actual solutions? The article’s situation and where the Army could end up aren’t too different if you think critically about it - both selection mechanisms were based on proposals/sales pitches and no credibility related to previous experience or demonstration of an actual product. I suppose others share the inability to see the similarity between the two which is way the prize was structured the way it was to ask for quad charts (for $5K) and pitches (for $100K) rather than actual products. Recommend you check out the book “How to Make a Spaceship” which discusses the XPrize and a drastically different way for using prizes to actually deliver tangible innovations rather than just “very quick ideas.” If you enjoy history, consider looking into the Orteig Prize which Charles Lindbergh won not by talking about how he would fly across the ocean, but actually doing it.
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