Statistical Methods in Sole Source Contract Negotiation

This paper describes procedures that are used to analyze proposals that arise in the acquisition of military systems by the Department of Defense, a scenario that involves elements of both conflict and cooperation. Current practices lead to situationsin which the Department of Defense must deal with a sole source, and thus forgo savings that might be realized from competition between contractors. To deal with this, the Armed Services Procurement Regulations prescribe procedures for the analysis and negotiation of sole source proposals. The procedures are timeconsuming, and can generate enormous backlogs of proposals for government price-analysts, who, because of the pressure of time, may not be able to carry out a thorough and accurate analysis on which to base their negotiation. This analysis paralysis may cause payment delays which, in turn, force contractors to borrow working capital and suffer capital losses.