Splitting the Difference: I Negotiated Contracts for the United States Navy
Beckett, Jamie
Splitting the Difference: I Negotiated Contracts for the United States Navy By Jamie Beckett As investigations on defense procurement continue, the grim tales—the $600 toilet seat, the $7,600...
...If the Navy paid $10,000 for "tools" last year and $8,500 two years before, then the $11,000 proposed this year does not seem unreasonable...
...It's not enough to know cost and price analysis and to be familiar with the Federal Acquisitions Regulations...
...Of course Sperry knew about the impending request long before I did, so this step was a mere formality...
...Jamie responded extremely well and the contract was awarded 11 March 1981...
...That will guarantee approval of your post-negotiation clearance...
...Petersburg, Florida to visit another contractor, who treated us to a lobster dinner and key lime pie...
...The people who spend those billions of dollars in the defense budget must thoroughly understand the products they are buying...
...It's up in Fiscal," she said...
...Those raises, called step increases, come on top of the yearly cost-of-living increases approved by Congress...
...I also received a promotion and a $3,000 raise...
...After a month of reading regulations, I developed a taste for that double-strength coffee...
...Then you have four guys review it who know nothing about it...
...My female colleague who was so adept at putting off contractors, for instance, is now working on a top-secret project...
...The months of congressional wrangling and presidential edicts that become the defense budget eventually wind up as purchase requests for valves, air conditioners, or, in this case, a $6 million radar system...
...The contracting intern program is even easier on its charges...
...Secretaries now have word processors to make changes in the oft-rewritten contract clearances...
...When he did, several of us began to snicker...
...In November, we took another trip, to visit the Sperry plant in Long Island for a contract review...
...The fiscal office has speeded its operations somewhat...
...on Long Island was approved...
...When I returned, a slim green folder called a purchase request (PR) was waiting for me...
...The bulky Federal Acquisitions Regulations (which replaced the Defense Acquisition Regulations) govern every step of the process, from the definition of "contract" to bid-opening procedures to justifications for a noncompetitive buy...
...their sleepy, half-closed eyes...
...In May I went back to school for a three-week refresher course on the regulations...
...The negotiator answers everyone's questions, rewrites the clearance and sends it back through the chain...
...That's not the case today...
...Easy money The civil service system, I feel, is largely to blame for workers' ineptness and for a lackadaisical attitude regarding the work at hand...
...Yet, at the same time, the work is boring and tedious...
...A $25 million contract clearance, for instance, must be signed by the branch head, the division director, the chief of the contracts group, someone from the "contract clearance group" in the Naval Material Command (which oversees NAVSEA), and the head of that contract clearance group...
...A clearance like that is seldom approved on the first try...
...According to Navy Public Affairs, the command spent $14.8 billion in fiscal year 1984...
...A passable performance is all that is needed to get such hefty raises...
...They would put the Monopoly money in shoeboxes at the beginning of the year, then count it out as contracts are awarded...
...It was a thick, slick document filled with numbers and headings like "shop equipment" and "engineering labor!' However intimidating it may have seemed, this proposal was puny compared to those for larger deals, which were many volumes long and were often delivered in huge cardboard boxes...
...They are, as I have indicated, a minority, but there are enough of them to constitute a substantial problem...
...The twisted route was a little bit like the contracting process, which involves so many steps and so many people that even if everyone involved is highly competent, it cannot help but drag out over many months...
...Beckett has continued to peform in a satisfactory manner...
...the commodore asked...
...Those who have never worked for the government might imagine offices of lazy civil servants who spend two-hour lunches in bars...
...The process would work better, one contracting officer told me recently, if the fiscal folks would use Monopoly money instead of their sophisticated computers, which are constantly breaking down...
...Many months passed...
...It is about a 10-minute walk from the Crystal City Metro station, through underground passageways, past the Safeway, through a parking garage, across the street, then through a minimall of arcades and fast-food eateries, into a winding corridor, past the credit union, to the elevator...
...So why does it take so long—six months to a year—to award a major contract...
...When we returned, the audit report had arrived, and I began to write my contract clearance...
...My boss had a habit of nodding off while he was answering my question...
...This same contractor often writes the specifications and helps the Navy prepare the PR...
...Forms pile upon forms...
...Although there has been much fuss in the past couple of years about merit pay, the fact is that most workers get raises every year if their performance is judged satisfactory...
...I was asssured I'd get plenty of help on the contract, but my boss had a habit of nodding off in the afternoon, sometimes while he was answering one of my questions...
...One contracting officer still at the Navy describes the clearance approval process this way: "So you have one guy write it who knows a lot about the deal...
...What price will you settle on...
...No one seemed too upset by it, because they knew what I had yet to realize: the purchase of military equipment is regularly and routinely mired in the sludge of bureaucratic incompetence and excessive regulation...
...First, the use of a sole-source contractor must be justified...
...With much ado, we gathered in a conference room at the end of the hallway...
...That may sound difficult, but it isn't...
...Retired Admiral Hyman G. Rickover, whose criticism often nettles the Navy, lodged a similar complaint in a November 1984 essay in the American Legion Magazine: "A major problem in the Defense Department is that those at the top are too far removed from those who know the facts and do the work . . . . As these phenomena cascade down the organizational chart, the `checkers' eventually outnumber the 'doers The extra layers of management delay work, waste time, and dilute responsibility!' My measly $6 million contract clearance needed only two "chops," but I spent nearly four months writing it and waiting for approval...
...I returned to a new office and a new boss, my second rotation in the three-year training program...
...Splitting the Difference: I Negotiated Contracts for the United States Navy By Jamie Beckett As investigations on defense procurement continue, the grim tales—the $600 toilet seat, the $7,600 coffeemaker, the contract delays, the cost overruns— have become almost commonplace...
...The contractor had called to find out why she hadn't finished some work...
...The audit report was due in September, but the deadline was pushed back to November...
...Then you have one guy review it who knows something about it...
...Unless there are complications, award goes to the lowest bidder...
...I pictured myself in tense discussions with hard-nosed defense contractors...
...I awoke in darkness on the first morning I was to report to NAVSEA and suited up in Navy-inspired blue and white...
...The clearance explains the negotiator's position, based on his own cost and price analysis, the auditor's analysis, and the engineer's comments on the product...
...Charlie and Bonnie, Sperry's contracts people, delivered the proposal in July...
...One of his favorite expressions was, `It's close enough for government work...
...The post-negotiation clearance was approved with little fuss, but contract award was still many weeks away...
...The key to choosing a negotiating position is to make sure the "negotiator's price" is close to the figure you and the contractor are likely to settle on...
...It's out of my hands...
...Many regulations have nothing to do with contracts but are instead congressional attempts at socio-economic equity...
...Split the difference between the auditor's position and the contractor's proposal...
...We settled on a bottomline figure that was—guess where—midway between their proposal and my pre-negotiation position...
...Many don't want to be there...
...The contracts personnel are for the most part honest, regular folk...
...We awarded the radar systems contract to Sperry in March 1981...
...My boss, a retired Navy pilot, greeted me at the office door, wearing a huge grin and a starched white shirt that I came to know as his uniform...
...When a proposal is that voluminous, it is easy to hide things like a $3,000 wrench, for instance, in a heading called "tools," or a $7,000 coffeepot in a heading called "shop equipment ?' If Sperry had done that, I would have had no way of knowing...
...Generally the wording is: "This contractor is the only one with the requisite knowledge and experience to perform the contract...
...In July, my boss and I went to St...
...It worked and the folder was neater than that of any other negotiator, for the time being...
...We were supposed to take notes, but most only pretended to do so...
...Fake the top off it," the commodore said, "then maybe you can take some notes ." Knowing the numbers Some things have improved since I left the Navy...
...All I knew about defense procurement came from a month in the office and a month-long course on the Defense Acquisition Regulations, which fill four or five fat loose-leaf binders...
...You can hear it in bathroom conversations and in the nearby bars, which are crowded at lunchtime and after work...
...More needs to be done...
...One senior negotiator I knew was so notorious for his addiction to video games that his secretary would fetch him in the arcade when she needed him in the office...
...NAVSEA is part of a gargantuan office-apartment complex called Crystal City, workday home to more than 20,000 Navy employees and hundreds more who work for the contractors and companies that do business with the Navy...
...A congressional committee hasn't called me to testify, but I have a story of my own...
...Unfortunately, there are a lot of negotiators who are not diligent...
...The sessions were rarely educational, but they were a break from the tedium and a chance to socialize...
...There you go...
...One highlight of our mole-like existence— hardly anyone has an office with windows—was the biweekly training session...
...The contract disappeared down the dim corridors for awhile, as the document was prepared and the "fiscal" office attached the funds to it...
...One of his favorite expressions was: "It's close enough for government work ." The Navy doesn't shop for bargains, but the contracting system is designed to be fair...
...For one thing, contracting personnel must receive much better training...
...It was exciting...
...I spent the first few days there cooped up in his tiny office, reading the regulations, and drinking double-strength coffee that he insisted I take black...
...I am, sir," the lieutenant replied, and held up his pen...
...Many contracts are funded by more than one source and must circulate through several fiscal offices, spending a week to two weeks in each...
...The negotiator's job is to shepherd the contract through the system as quickly as possible, a difficult task even for the most diligent worker...
...The neatest folder The Naval Sea Systems Command is the largest single contracting activity in the federal government...
...After graduating from college with a degree in journalism, I had received a splashy brochure with color photographs of ships and submarines and a letter inviting me to become a Navy contracting intern...
...The PR contains an engineer's description of the item, an estimated price, and, in the case of most NAVSEA contracts, the name of the sole-source contractor...
...This is the performance report that boosted me from a GS-7 to a GS-9: "During this reporting period, Ms...
...But there were also people like my second boss, who arrived each morning at 5:45, an hour and 15 minutes before he was due in, and my first boss, who arrived promptly at 7 a.m...
...TWO months after I "came on board"--knowing nothing about business, accounting, or negotiations— I was assigned a $6 million contract for radar systems on Terrier-class ships...
...Another fellow, too old to do much work, was appointed "civil defense coordinator...
...One afternoon a coworker told the office gang, through spasms of giggles, how she had responded to a contractor who had just telephoned...
...The goal of this type of reasoning, often repeated at NAVSEA, was "cover your ass ." I sent Sperry's proposal to an engineer for a technical review and to an auditor for a pricing review...
...My boss came in handy here...
...and often worked long past 5 p.m...
...I had a list of questions prepared, and we bantered back and forth for a few days...
...In June they sent me to school in Petersburg, Virginia to read more regulations...
...The 12-story building I worked in stands in the center of a trio of cream-colored concrete office buildings...
...You can see it in their pale, drawn faces...
...There are five types of "money," which vary according to the type of contract—research and development money, for instance, funds research and development contracts...
...He was an expert at filling out those 11 x 14-inch sheets of graph paper, writing numbers in neat columns for comparison...
...their retirement countdown calendars...
...Noncompetitive contracts, generally worth more, involve many more steps...
...Evaluations are generally based on past prices for the same or similar items...
...But they still horrify me because I spent two-and-a-half years inside a defense department contracting office, and I know: the contracting process is a mess...
...Branch heads now use computers to track contracts...
...I even prided myself on the small role I would play in bolstering the nation's defenses...
...I only did that once...
...Meanwhile, my boss showed me how to make the pages stay neat in the purchase request folder...
...It sounded exciting...
...Who's taking notes for you, lieutenant...
...One day a Navy lieutenant got nailed...
...Nobody gets fired, they just get moved from office to office...
...their rumpled clothing...
...I imagined the sharp, experienced Navy negotiators guiding me through this complex and vitally important business...
...The intern program is designed to bring eager, young college graduates into the civil service and turn them into crackerjack negotiators...
...We spent one afternoon sunning on a government auditor's boat, and I tried my hand at waterskiing...
...At the end, we never agreed on those line item costs I had questioned...
...I simply hid a contract for several $9,000 valves in my desk drawer because I didn't understand it...
...In fact, everyone knew that the delay was her own fault, but nothing was done...
...Contracting interns must now have some business background or they must study accounting soon after they enter the program...
...There are those, of course...
...Most important, more contracts are going out to bid, which generally ensures fairer prices and faster awards...
...I remember rushing through lunch breaks, telling anyone who would listen I was "in negotiations...
...I had never seen a Navy ship, let alone a Terrier-class ship...
...The bigger the deal, the more authorities...
...Checkers and doers The regulations require that the clearance and every other document carry the signature, or "chop," of numerous authorities...
...Everyone laughed when she told how she put off the caller...
...There are regulations favoring minority businesses, women-owned businesses, small businesses, and areas with high unemployment...
...We punched three holes in each page, then we put reinforcements on each hole to make sure the page stayed straight...
...A competitive contract is relatively simple to execute...
...The purchase is advertised...
...The next step was the Request for Proposal, a document that provides the contractor with specifications and required delivery dates...
...From what I hear, he is still wandering the hallways in a yellow hard-hat, explaining building escape procedures...
...If only I had known the old "split the difference" trick I wouldn't have spent all those months worrying about that $6 million purchase request (which, incidentally, ended up as an $8 million contract...
...Because of her sound judgment, Jamie was assigned the Terrier FY81 ship overhaul program, which required an unusual [sic] quick turnaround...
...The contracts department is on the fifth floor...
...Funding may take a week, two weeks, or more...
...Negotiators seldom have the time or technical expertise to dissect a proposal...
...It is tempting to forget amid the mass of paper that you are dealing with the taxpayers' money that is to go toward items vital to the national defense...
...Charlie and Bonnie flew in from Long Island...
...To go to any other contractor would cause a delay in the program of X months and an additional cost of Y." I wrote these words, and my request to seek a contract with Sperry Corp...
...You can hear it in the bleep of the video games employees sneak out to play, in the sound of the coffee cups being filled from the 32-cup dispenser, in the whispered telephone conversations, hopes of escape...
...To lure young graduates, the program promises interns a starting salary of $17,824 and a grade increase—that's about a $4,000 raise—each year for three years...
...Jamie Beckett is a reporter at the Norwich, Connecticut Bulletin...
...I held up the repair and overhaul of two Navy ships for more than two months while working as a contracting intern at the Naval Sea Systems Command (NAVSEA...
...Negotiations were much simpler...
...Tivo months or more may pass before the document drifts back to the negotiator's desk...
...It was too easy...
...It frightens me a little when I think about some of the people charged with that responsibility...
...A few months later I stashed the contract for the $9,000 valves in my desk drawer...
...I was a neophyte when I entered the Navy's contracting intern program in May 1980...
...Jamie has the potential to do GS-9 level work...
Vol. 17 • April 1985 • No. 3
