Sharpen Those Pencils

Companies that want to keep doing business with the Air Force will have to be more efficient, accept lower profits, and perform on-time and to budget, said Maj. Gen. Wendy Masiello, Air Force deputy assistant secretary for contracting. Speaking at an AFA-sponsored, Air Force breakfast in Arlington, Va., on Wednesday, Masiello—who’s been selected for a third star and to head the Defense Contract Management Agency—said if companies aren’t meeting cost and milestones on existing projects, “we risk losing the program … it’s just as simple as that,” because of the extreme tightness of the budget. The Air Force is taking a “deep” look at costs, and reviewing “should cost” at every level, Masiello said. “We need the primes to look at the vendor and supply base” for greater efficiencies, she said, since some 70 percent of cost now is incurred at those levels. On long-term deals, where the Air Force “thought we were negotiating 10 percent profit” but the contractor is making 15-20 percent profit, Masiello said that’s fine, as long as USAF is benefitting from the efficiency. To encourage best efforts, competition will be introduced wherever possible, and companies shouldn’t assume a follow-on award unless they truly offer the best deal, she said, telling attendees to expect a lot of renegotiation. “Maybe we’ve been generous in the past,” she observed, and the profit being earned “is not commensurate with the risk.”