Competition in Defense Contracting

The defense department is about to enter an age of austerity like it hasn’t seen in decades. Even the downsizing of the Military during the Clinton years pales in comparison to the cuts that must be made to the defense budget in order to comply with the debt ceiling agreement. A twelve member committee has to find $1.8 trillion in cuts or a package of automatic cuts will go into effect that would total $1.8 trillion slashing medicare and defense spending equally. The defense department has to start cutting costs, and fast.

 

So why is the Government wasting so much money on sole source supply for parts that other companies can make. For example, from 2006 to present, the defense department purchased $1.6 Billion worth of fasteners (Federal Supply Classes 5305, 5306, 5307, 5310, 5325). Of this total, almost 1/3 ($440 million) was from contracts for which there is only one supplier. Of the 154,053 contracts issued within this period, 38,392 (25%) of these contracts were sole source. After further analysis, many of these parts are not specialized items, and may have Commercial Off The Shelf (C.O.T.S.) equivalents. In fact, the Government would prefer to purchase C.O.T.S. parts whenever available. The problem is that only one supplier has been approved to supply these parts.

 

This is the opposite of what the Defense Department is trying to encourage, which is greater competition. In February of 2010, the Defense Department issued an interim rule to increase competition in major defense acquisition programs, in an effort to trim defense spending. As a result, prime contractors are required to provide technical data packages that were once considered proprietary information, making it easier for smaller companies to produce the same goods. This is part of an ongoing initiative at the Defense Department to increase competition for sole source items. This initiative has only begun, and has a long way to go.  Lots of small businesses would like to sell to the Government, but have difficulty finding drawings, technical characteristics, a sample or anything needed to compete with these large suppliers.

To make matters worse, some of these big suppliers try to further confuse competitors by providing part numbers to the military that are different than their similar off-the-shelf parts.  A competitor attempting to acquire a sample from one of these companies may be told that the particular part is only sold to the military.  If a company cannot acquire the part, then there is nothing to reverse engineer. One way to circumvent this strategy is to contact the buyer directly, or try to locate the supply depot that stores the item.  BidLink’s procurement history tool can help companies locate this vital information.

Once a company wins a long-term sole source contract, they can just count the money.   These contracts can last for years, and have thousands of delivery orders.  A reliable flow of business that can help offset the weak consumer and commercial markets.  The government evaluates sole source items and attempts to apply an estimate of what it would cost to acquire that item from a different source.  This includes the cost of creating the required technical documentation as well as any implementation requirements.

Sole searching

Finding sole source contracts is easy.  Our Procurement History tool searches 60 million contracts and line items, and can be refined by number of offers.  For fastener companies, you could search the NSN database for something like FSC 5305 to locate stock numbers of interest, then submit these into the Procurement History tool with the “sole source” check box selected. This will display a list of all sole source contracts for the selected items.  Look at the company details to see if they are a manufacturer or distributor, and locate the buyer information.  You can contact the buyer directly to get started.

A recent example was contract # SPM4AX-07-D-9007 which was awarded on 09-09-2011.  The defense department ordered 10,000 units of NSN 5305-14-529-9082, a screw priced at $51.67 ea.  In 2011, they have issued 8 delivery orders for this item, totalling $1.49 Million dollars.  The sole vendor is Messier-Bugatti (CAGE code F6137).  There is very little public information relating to this item or how to make it.

 

Sell to the suppliers

Many of these large suppliers, especially in the fastener industry are simply giant distributors who are experts in finding and winning defense contracts. Companies like Kampi and Columbia Nut and Bolt are good examples. Manufacturers can skip the government quagmire entirely by approaching distributors and selling to them.  These companies are easy to locate by searching through procurement history and vendor databases.

BidLink.net is a provider of defense industry information for contractors worldwide. This data includes millions of defense contracts, procurement history, part numbers and vendor details. This unique combination of resources allows BidLink to monitor and extract important information for the defense contracting industry. BidLink.net, based in Washington, D.C., provides bid consolidation, searching and notification services, as well as part number (NSN) lookup to many military activities and thousands of private companies around the world.

Comments? Send them to news@bidlink.net.

This article was written exclusively for “Fastener Journal” magazine .

http://fastenerjournal.com/

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