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I'm on the industry side of a recent proposal in which the ETA for award is about one year out. Because there is a push on our side to get it awarded by the end of the year, there's been some discussion about using Alpha Contracting, which I'm not familiar with. I read these articles to try to get some insights, and wanted to know if anyone had any first hand experience and could share any pro tips or pitfalls.

 

Thank you in advance! 

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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.

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If what you mean by "alpha contracting" is "alpha pricing," and the acquisition involves the DoD, please be mindful of DCAA's memo, "Discontinuance of DCAA Participation in Integrated Product Teams" dated August 4, 2008, and DCAA Contract Audit Manual, ¶ 4-103b:  "However, auditors are reminded that DCAA does not participate in meetings established to discuss proposal development, or review or provide input on draft proposals, which is a common practice for members of integrated product teams (IPTs)."

See also CAM ¶ 2-106a:  "DCAA does not provide nonaudit services to the entities we audit and the discussion in GAGAS 3.64 – 3.106 is not applicable to DCAA. DCAA does, however provide advisory services to our customers, which could cause impairment to independence, or give the appearance of an impairment. To avoid these risks of impairment to independence, auditors will not participate as team members of Integrated Product Teams (IPT), which typically involve teaming with the contractor to develop a proposal."

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15 hours ago, Mike Twardoski said:

wanted to know if anyone had any first hand experience and could share any pro tips or pitfalls.

A youthful experience for me that I have never forgotten.  Jet A spilled on a airport runway.  Sole source authority took a few days but was quicker than usual due to the environmental concerns.  Contract negotiated and work done to remove, remediate and replace 30,000 cubic yards of runway and soil.  Included re-pavement of the runway. All told the contract negotiation and work took 3 days.

I second Matthew Fleharty's comments if that is the direction you are headed but noting Jacques comments a little more detail on your part might generate other valuable comments.  (Mine might not be but I always found my experience on that one procurement to support that anything is possible with the right players!) 

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14 hours ago, Matthew Fleharty said:

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.

Thanks for the insights, @Matthew Fleharty! I think the conditions surrounding trust, top management support, etc. are present considering this is a long-running program with a solid rapport between us and the customer. I'm sure there are issues in our blind spot that'll unravel as we go, but I think we have a good foundation at the moment. 

You spoke about negotiating some multiple large sole source contracts quite rapidly. What are the keys to achieving that beyond trust, commitment, and focus? Could you share any lessons learned? 

Thank you @Jacques and @C Culham for your feedback as well! 

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Mike,

What about all the strap-hangers?  Will they cooperate and participate in real time, trying to be helpful?  Or will they be silent during real time and then stab you in the back, so to speak, with questions and demands for serial reviews and re-writes and so forth?  Top management support is good!  I hope your top management will demand that this support flows all the way through the organization.

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48 minutes ago, Mike Twardoski said:

Thank you @Jacques and @C Culham for your feedback as well! 

As I continue to read the discussion and read the articles provided I also harken back to the days when I utilized the USACE Partnering approach.   Maybe Alpha is a new twist on it, I won't read more to reach a foregone conclusion, but a look see about it might be of help in your search for help.   https://www.iwr.usace.army.mil/Portals/70/docs/cpc/91-ADR-P-4_Partnering.pdf

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Alpha Contracting is not a new twist. It is an idea from the early '90s, mainly used in DOD R&D and systems development shops. Read up:

Kirzow and Sweeney, An Exploratory Study of Alpha Contracting: Antecedents, Processes, Issues, Success Factors and Consequences (2009), https://apps.dtic.mil/sti/pdfs/ADA510039.pdf

Quander and Woppert, Analysis of Alpha Contracting from Three Perspectives: Government Contracting, the Government Program Office, and Industry https://upload.wikimedia.org/wikipedia/commons/b/b4/Analysis_of_alpha_contracting_from_three_perspectives-_government_contracting%2C_the_government_program_office%2C_and_industry_(IA_analysisoflphcon1094510569).pdf

Jennejohn, "Braided Agreements and New Frontiers for Relational Contract Theory," Journal of Corporation Law (Summer 2020), 45 J. Corp. L. 885.

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Alpha contracting is undertaken usually when the government single-sources a system, and frequently the prime contractor approached is one with a longstanding relationship with the government. That type of situation, where the two parties have had prior deals and, as a result, also have a strong expectation of future deals, is the sort of scenario where bilateral informal sanctions, such as the threat to cut a party off from future transactions, should have significant bite.

Anyone who has worked in a systems shop, like Matthew, knows that you work regularly with a small group of contractors engaged in various aspects of your program. You see their representatives all the time and you engage in multiple sole source negotiations with them. Alpha Contracting permits a relational approach to contracting. DCAA doesn't want to participate because they worry it will compromise their objectivity and audit integrity. It's been considered a time-saver, among other things.

It's not a procedure for amateurs. It takes knowledge, experience, technical familiarity, saavy, and a higher than usual degree of trust.

It can work if you've got smart people, but like all such "innovations" its proponents oversell it and exaggerate their successes.

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Here's a description of Alpha Contracting given during a 2006 House hearing, concerning a construction project in Iraq:

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The U.S, Government also proposes to utilize the "Alpha Contracting" technique to form a contract with MIDCON. Typically, acquisition is sequential process of developing a statement of work, preparing a solicitation, receipt of proposal, evaluation of proposals, negotiation and contract award. Using the "Alpha" process, the statement of work, contract formation and price are developed in parallel as a collaborative effort by a team consisting of the proposed contractor, the contracting officer, the technical staff/engineers, the Defense Contract Audit Agency and legal. in fact, this is the typical scenario of what would occur after termination of a construction contract. Alpha Contracting is an acceptable process that has been used successfully for weapons systems over the past 10 years.

 

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Here's a link to a 2008 DODIG report that discusses conflict between an Army buying office and the DCAA in an alpha contracting negotiation:

Quote

TACOM LCMC and DCMA contracting officials did not include DCAA personnel in the Alpha contracting process for the FY 2005 Bradley vehicle procurement; therefore, DCAA personnel could not perform an effective review of material costs.

https://media.defense.gov/2008/Jul/03/2001713289/-1/-1/1/08-107.pdf

I guess those pesky auditors didn't want to be sufficiently relational.

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3 hours ago, Vern Edwards said:

Here's a description of Alpha Contracting given during a 2006 House hearing, concerning a construction project in Iraq:

 

I suspect the person testifying believed (or believes) Alpha contracting is an “acceptable process.”  Depending on your agency, your mileage may vary.  Air Force Materiel Command, for instance, currently seems to interpret the requirement at FAR 15.406-1(b) for a prenegotiation objective before the negotiation of any pricing action as requiring traditional pricing and has structured its business clearance rules accordingly.

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On 1/7/2022 at 8:32 AM, Mike Twardoski said:

You spoke about negotiating some multiple large sole source contracts quite rapidly. What are the keys to achieving that beyond trust, commitment, and focus? Could you share any lessons learned? 

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.
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16 hours ago, Matthew Fleharty said:

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.

Great insights, @Matthew Fleharty. Much appreciated! At the moment, we're about 2 months away from the start of negotiations. The PCO invoked 252.215-7008 ONLY ONE OFFER (JUL 2019) shortly after we submitted our proposal last summer, so we're in the process of circling back and getting new, compliant quotes from our suppliers for the CCoPD submission, which is taking a fair amount of time. 

I read - and re-read, and then bookmarked - your comments about transparency & expectations. which I found especially enlightening. Our team is working with a contracting office we have no experience with. As you might expect, suspicions are heightened from our end. The idea of setting expectations and responsibilities at the start is something that certainly resonates, at least with me. 

Thank you again, Mr. Fleharty! 

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Having participated in Alpha Contracting on a large construction task order on a multibillion dollar, long term CP, IDIQ Systems Contract for design/build/systemization/pilot operations/operations/closure of a plant to demilitarize Chemical weapons, the circumstances you just described don’t appear to be “Alpha Contracting”. However, I would suggest that the parties engage in some type of “partnering process” , if not too late, that might allay your suspicions and concerns. 

2 hours ago, Mike Twardoski said:

The idea of setting expectations and responsibilities at the start is something that certainly resonates, at least with me. 

Your above quote is one of the important aspects of the “partnering process” that the Army Corps of Engineers is required to offer as a voluntary, mutual process on all construction contracts. Partnering continues throughout contract performance after the initial expectations and responsibilities are  laid out. 

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4 hours ago, joel hoffman said:

Having participated in Alpha Contracting on a large construction task order on a multibillion dollar, long term CP, IDIQ Systems Contract for design/build/systemization/pilot operations/operations/closure of a plant to demilitarize Chemical weapons, the circumstances you just described don’t appear to be “Alpha Contracting”. However, I would suggest that the parties engage in some type of “partnering process” , if not too late, that might allay your suspicions and concerns.  

Thanks for the tip, @joel hoffman. Forgive my ignorance, but how does one go about starting that partnering process? Is it a pre-negotiation conference? I'm very interested in learning more. 

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Mike, We probably need to get some clarification from you concerning the context of your questions and concerns. Is your proposal for a new contract or an action under an existing one? 

On 1/7/2022 at 8:32 AM, Mike Twardoski said:

Thanks for the insights, @Matthew Fleharty! I think the conditions surrounding trust, top management support, etc. are present considering this is a long-running program with a solid rapport between us and the customer. I'm sure there are issues in our blind spot that'll unravel as we go, but I think we have a good foundation at the moment. 

You spoke about negotiating some multiple large sole source contracts quite rapidly. What are the keys to achieving that beyond trust, commitment, and focus? Could you share any lessons learned? 

Thank you @Jacques and @C Culham for your feedback as well! 

22 hours ago, Mike Twardoski said:

Great insights, @Matthew Fleharty. Much appreciated! At the moment, we're about 2 months away from the start of negotiations. The PCO invoked 252.215-7008 ONLY ONE OFFER (JUL 2019) shortly after we submitted our proposal last summer, so we're in the process of circling back and getting new, compliant quotes from our suppliers for the CCoPD submission, which is taking a fair amount of time. 

I read - and re-read, and then bookmarked - your comments about transparency & expectations. which I found especially enlightening. Our team is working with a contracting office we have no experience with. As you might expect, suspicions are heightened from our end. The idea of setting expectations and responsibilities at the start is something that certainly resonates, at least with me. 

Thank you again, Mr. Fleharty! 

So, if this is a proposal for a new contract and the PCO “invoked” the DFARS clause for use in a competitive acquisition after only one proposal was received, the PCO (who you apparently haven’t previously worked with) probably notified you that you are the sole proposer and they need you to provide cost and pricing information, more detailed breakdowns and subcontractor cost or pricing and/or breakdowns.

So, are you asking if there could be a pre-negotiation conference to establish responsibilities and expectations, I’d say yes, you could request that and I see no reason why the government should not agree to that - but you’d have to ask, since it may not be their usual business practice.

A pre-negotiation conference should also certainly help allay suspicions about working with an unfamiliar government team. It can also be useful to clarify scope or requirements questions and explain aspects of your proposal.

I used to participate occasionally in pre-proposal and pre-negotiation conferences.

As for “partnering”, as practiced By the USACE, that is a voluntary, post award practice.   Carl Culham provided a link to the USACE Partnering guidelines.  Good luck!

 

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13 hours ago, joel hoffman said:

Mike, We probably need to get some clarification from you concerning the context of your questions and concerns. Is your proposal for a new contract or an action under an existing one? 

So, if this is a proposal for a new contract and the PCO “invoked” the DFARS clause for use in a competitive acquisition after only one proposal was received, the PCO (who you apparently haven’t previously worked with) probably notified you that you are the sole proposer and they need you to provide cost and pricing information, more detailed breakdowns and subcontractor cost or pricing and/or breakdowns.

So, are you asking if there could be a pre-negotiation conference to establish responsibilities and expectations, I’d say yes, you could request that and I see no reason why the government should not agree to that - but you’d have to ask, since it may not be their usual business practice.

A pre-negotiation conference should also certainly help allay suspicions about working with an unfamiliar government team. It can also be useful to clarify scope or requirements questions and explain aspects of your proposal.

I used to participate occasionally in pre-proposal and pre-negotiation conferences.

As for “partnering”, as practiced By the USACE, that is a voluntary, post award practice.   Carl Culham provided a link to the USACE Partnering guidelines.  Good luck!

 

@joel hoffman Indeed, it's a proposal for a new, follow on contract. Thank you for the advice and insights! 

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