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Box 5: Are the Government Market and the Private Market Well Integrated? In 1993, the Center for Strategic and International Studies surveyed 212 Department of Defense contractors (including those with less than $500,00 in sales to DoD)to examine how to integrate DoD’s purchasing practices with those of the private market. The results show that DoD’s policies had little to do with the private market. Contractors segregated their operations. The study found that 86% of government purchases came from companies that segregate some portion of their operations between private and government consumers, or that set up a separate data management system for government. Only 12% of the contractors surveyed “do business in both the federal and commercial markets using the same facilities and business operations.” The difference was even more pronounced for “commercial companies” (firms where federal sales were less than 30% of total sales), among whom 93% of sales came from firms that segregate their operations. The study found that businesses established a segregated office to deal with the government because of its unique contracting process rather than unique technology requirements or lack of demand in the private market. Contractors spent more time earning the government’s dollar. For the contractors that segregated their operations, a majority found that preparing and submitting a proposal to the federal government required at least twice as much labor. A majority believed that overall administrative labor costs (for contracts, finance, legal, and inspection) as a percentage of sales were at least three times higher for government sales. Contractors supported melding the government market with private markets. When asked what measures would allow their commercial segments to pursue the government market more actively, 79% of the contractors suggested use of the Uniform Commercial Code instead of government acquisition rules, and exemption from unique government contracting requirements. Also, 72% called for “reconciliation of commercial and federal specifications and standards,” and 89% said that production and management processes were “substantially similar” or that products “could be coproduced.”* |
* The Federal Acquisition Streamlining Act of 1994 (FASA) attempts to address a couple of issues raised by the study. FASA
requires contracting officers to seek uncertified price information rather than detailed cost and pricing data unique to the
government’s information requirements. It also specified a preference for commercial items in developing contractual requirements.
Source: Debra van Opstal, Integrating Civilian and Military Technologies (Washington, DC: Center for Strategic and International
Studies, 1993).