A Modest Proposal to Enhance Civil/Military Integration: Rethinking the Renegotiation Regime as a Regulatory Mechanism to Decriminalize Cost, Pricing, and Profit Policy

Abstract:     
Neither Congress, the procuring agencies, the media, nor the public will condone government contractors reaping what are perceived as excessive profits. Accordingly, the procurement process employs an unduly complex, burdensome, risk-laden, and ineffective mechanism that erects significant barriers to civil/military integration. This paper (presented at the 1999 Defense Systems Management College (DSMC) Acquisition Research Symposium) examines certain policy implications associated with the Truth In Negotiations Act (TINA), the existing audit regime, and the use of criminal and civil anti-fraud measures to scrutinize deviations from these complex cost, pricing, and profit policies and controls. It re-visits the long-extinct Renegotiation Act and finds it less troubling than the existing quagmire. It analogizes to recent experience in the public utilities industry, which employs a sharing mechanism as an explicit, transparent means for addressing excessive profits. The paper proposes to simplify and decriminalize Federal procurement pricing and profit policy by drawing from the historical renegotiation experience. A transparent renegotiation regime (1) could be one less burdensome or complex element of a regulatory scheme that presents suppliers with a menu of regulatory options; (2) would allow contractors to select the approach that best corresponds to their own assessment of which contractual rules will minimize their costs; and (3) could permit the Government to share, directly or indirectly, in these increased efficiencies and savings.

Number of Pages in PDF File: 15

Keywords: Truth in Negotiations Act, TINA, Renegotiation Act, profit policy, government contracts, public procurement

JEL Classification: H57, K12, K23

working papers series