If at First You Don’t Succeed…Try a New Title: Navy Announces Superior Supplier Incentive Program to Replace Preferred Supplier Program
April 22, 2013
As we previously reported here, almost three years ago the Navy announced a plan to introduce a “Preferred Supplier Program” (“PSP”) to reward contractors that have excelled in the areas of cost, schedule, performance, quality and business relations. The Navy received comments in response to this proposal, most notably from the Council of Defense and Space Industry Associations (“CODSIA”), expressing concerns that the program was vague and poorly defined. The program seemed dead in the water until on April 9, 2013, the Navy announced the “Superior Supplier Incentive Program” (“SSIP”). Although it has a new title, the SSIP is virtually identical to the PSP. Just as originally proposed under the PSP, the SSIP gives contractors awarded Superior Supplier Status (“SSS”) better contract terms, but the special status will not be a factor in source selection. The Navy is soliciting public comments until May 3, 2013.
As under the PSP, the SSIP states that the Navy will rate contractors using data from the Contractor Performance Assessment Reporting System (“CPARS”) as the baseline. The Navy will consider data in the following areas:
- technical (quality of product)
- schedule
- cost control
- management responsiveness
- management of key personnel
- utilization of small business
- other factors as appropriate
The Navy will rate contractors on a 5-star scale with 3 stars being the minimum for SSS. As proposed under the PSP, the Navy again intends to promote energy efficiency through the SSIP by granting a fifth star only to contractors that maintain an active Energy Efficiency Program.
The two main differences between the SSIP and the PSP are in the initial evaluation of contractors and the favorable contract terms and conditions. Under the SSIP, the Navy intends to evaluate its top 15 contractors that supply goods and top 15 contracts that supply services, determined by the value of the contract awards for the most recent fiscal year at the business unit level. If a contractor supplies both goods and services, it will be evaluated in the category that represents a “preponderance” of the sales to the Navy. Under the PSP, however, the Navy would only have initially evaluated its top 25 contractors, regardless of category.
Under the SSIP, contractors with SSS are eligible for favorable contract terms and conditions related to: more favorable progress payments (adjustments may be made to progress payment percentages or retention percentages); priority for adjudication of final labor and indirect cost rates; an increased interval between business system reviews. This is slightly different than under the PSP, where contractors with preferred status were eligible for: more favorable progress payments; recognition of preferred status in the development of profit or fee based upon weighted guidelines; tailored contract reporting requirements; and special award fee pools. There is no explanation in the Federal Register notice as to why the Navy changed the types of potential favorable contract terms.
Other than these minor differences, however, the two programs are very similar. We will have to wait and see if industry groups like CODSIA will have the same concerns with the SSIP that they voiced regarding the PSP, and whether the Navy will have more success with its new proposal. Information for submitting comments can be found in the federal register notice here.
Katie Calogero is the attorney responsible for the content of this article.