Contracting Strategy and Management

The contracting strategy mirrored the acquisition strategy by executing as many steps of the contracting process as possible in parallel rather than series. The MRAP JPO contracting team started the process by awarding a sole-source contract to FPII for 288 Cougar vehicles, while simultaneously issuing an RFP to industry. The JPO did this in order to leverage an active production line and start production immediately, while also beginning to mobilize the industrial base. This competitive approach provided several important benefits. For one, it spurred innovation in that the JPO accepted different designs as long as they could meet or exceed a minimum survivability requirement. In addition, a $100,000 incentive per vehicle for early delivery of test vehicles motivated the manufacturers to deliver test vehicles earlier than their proposed schedules (2008, Owen, p.11). The JPO contracting office also incentivized speed in delivery by establishing the order of testing based on order of delivery. For example, the first manufacturer to deliver vehicles for testing, FPII, was the first to begin DT-C1 testing. The first manufacturer to complete this testing was also the first awarded an LRIP contract. To further add leverage, the JPO made no guarantee that all manufacturers that did deliver would be awarded a production contract, thereby creating a winner-take-all possibility. Although all manufacturers that eventually passed testing were awarded LRIP contracts, manufacturers did not know that there would be multiple contracts at the time of testing.

In fact, each contract had a 4,100 vehicle ceiling per year, with the intent of having enough production capacity under any one contract for the possible award of the entire requirement (then 4,066 vehicles) to a single manufacturer (Owen, 2008, p.11). This further incentivized the manufacturers to deliver first.

The initial approach of issuing IDIQ contracts followed by production orders to low-risk manufacturers prior to testing, although costly, accomplished two tasks. First, by buying all rather than a portion of the minimum amounts from each manufacturer, the Government fulfilled the obligations of the IDIQ contracts. This reduced the risk of

protest or complaint over unfilled orders. Second, assuming the low-risk manufacturers would pass testing, the early production orders enabled easy transition into full production because those manufacturers were already ramping up for production. Of the nine manufacturers awarded IDIQ contracts for test vehicles, the source selection committee assessed five as acceptably low in risk to receive LRIP contracts prior to testing. Although two of these manufacturers ultimately failed, three of the five that did meet DT-C1 requirements completed that phase of testing more prepared for production than if starting from scratch. This example demonstrates the risk acceptance and associated trade-off with this aspect of the acquisition approach. In exchange for an accelerated ramp-up of three MRAP manufacturers, the program bought 160 vehicles from OTC and Protected Vessels, Inc. (PVI), at a cost of $23 million, that it couldn’t ultimately use (Hansen, 2008, June 10).

An additional aspect of the contracting strategy, intended to maximize program participation, allowed contractors to mitigate some of their production risks, performance risks and start-up costs by including all those costs up front in higher per-vehicle prices for lower order quantities. This stepladder pricing was considered one of the most valuable business attributes of the contracting strategy, yet it is a practice not condoned in traditional acquisition programs. In addition, it helped limit the Government’s liability in the event of a contract termination (Owen, 2008, p. 11). Alpha¹¹ contracting was another tool used successfully in that it saved both time and money by establishing costs and prices with vendors up front. This became apparent with the large volume of undefinitized contract actions (UCAs), engineering change proposals (ECPs), amendments, and modifications because time consuming negotiations did not have to be

11There is no formal definition of Alpha Contracting. It is a theory of acquisition reform and in the case of the MRAP program applied in a hybrid form due to the use of multiple manufacturers. Defined by Clements (2002, p. 58), “Alpha Contracting is a method of sole-source contracting that capitalizes on the teaming of the Government and the contractor early and throughout all stages of the acquisition process. It differs from the traditional sole-source contracting method in that it includes the contractor in the planning and development of the contract from the beginning of the process, thereby reducing the overall time to contract award.”

conducted for each change, variant, or vendor. Additionally, it helped create a long term partnership rather than the win-lose adversarial relationship that can occur with traditional negotiations.

The multiple-award, IDIQ, test and production acquisition strategy effectively implemented the concept of “competitive prototyping” to expedite vehicle delivery, foster competition and innovation, and provide the maximum amount of ordering flexibility available. In short, competitive prototyping sped delivery of MRAP vehicles to warfighters and led to an ever-improving product. Recognition of the advantages produced by competitive prototyping have since resulted in a mandate by the USDAT&L, John Young (2007), that all acquisition strategies requiring USDAT&L approval will require competitive, technically mature prototyping through the milestone B decision.

In spite of the contracting strategy successfully employed for the MRAP program, the lead JPO contracting officer pointed out the challenges involved. Primarily, the program lacked enough trained people do to contract work given the size of the task (L.

Frazier, personal communication, July 28, 2008). At peak operation, twenty-three personnel were on staff in the JPO contracting office, three of whom were administrative rather than contracting specialists. After peak operation, the number dropped to 14, putting significant work load on the remaining personnel. Navy contracting personnel also rotated in and out of the JPO assignment every two months (Mann, 2008, slide 6). In an effort to assist with getting trained and competent people in the contracting office, the JPO employed contract specialists under contract from two different organizations. In addition to providing personnel, these contractors also provided buildings and office space.

Another challenging aspect of the contracting process involved managing amendments (L. Frazier, personal communication, July 28, 2008). The dynamic nature of the program required numerous amendments in three broad categories of logistics, testing, and ECPs. These three amendment categories, combined with five different manufacturers, each with multiple variants, increased the amount of contract work dramatically. Examples of contract amendments for the MRAP program were as follows:

• Logistics–Initial contracts included no logistical plans due to the speed with which they were awarded. The contracts were amended after the initial award.

• Testing–Changes due to testing included additions to product verification testing and plans for successive test phases. These changes were necessary due to the evolving nature of the test and evaluation master plan (TEMP).

• ECPs–All ECPs were executed as a form of letter contract or UCA, meaning the contractors were awarded a contract for immediate production with all cost and pricing data agreed to as a “not-to-exceed” amount. This amount had to be definitized or finalized at a later specified date.