The recent trials and tribulations of EDS on the NMCI contract raise questions about the federal government's role in ensuring the success of contractors on large engagements. Conventional wisdom holds that the relationship between contractor and government is largely a zero sum game, and seller beware if the contractor negotiates a deal that is not profitable. This approach ignores the strategic aspect of relationships between the government and contractors providing major systems support - for example, those that have been pioneered by the Department of Defense with major suppliers like Boeing and the large aerospace vendors. Moreover, when the government relies on the existence of indigenous industries - like the technological and industrial complex that supplies it - the government is to large measure responsible for the dynamics at play in the market. As the largest buyer, in many ways, the government acts as a monopolistic-buyer, and as such takes on special responsibilities.

The experience of NMCI makes clear the government is not well-served when a major contractor negotiates an ill-advised deal. While the contract loses money and comes under threat of dissolution, the government receives poor service and is in danger of losing one of the few companies that can provide the kind of enterprise support necessary if transformation is to succeed. Counter-intuitively to those who seek only least cost without considering highest quality and long term strategic relationships, the government has a critical interest in making sure that its major contractors are both profitable and accountable - in essence, to be a partner in the assurance of acquisition stability.

Earlier in the evolution of government contracting, the government implicitly recognized its special relationship with certain industries. Cost plus fixed fee contracting represents the government's tacit admission of its role as a monopolistic buyer. These contracts essentially guarantee profitability for contractors that perform to specification. Without duplicating the known disadvantages to taxpayer and government of wide spread cost plus fixed fee contracting, the government should seek to understand and identify the special situations where it does and should have a special relationship with its contractors.

What can and should the government do to ensure acquisition stability, and how can it provide the conditions necessary to make profitability possible and even likely? Government is increasingly entering into long term strategic engagements like the Navy Marine Corps Intranet (NMCI) and Deepwater, an acquisition program to upgrade all assets of the USCG with state-of-the-art equipment awarded to Integrated Coast Guard Systems (ICGS) - and has a consistent track record of providing murky and unbounded requirements. The first prerequisite for acquisition stability is a set of firm and realistic requirements that are not open to lackadaisical interpretation by the contractor or exploitative interpretation by the government. Second, the government must insist that the contractor put in place a management system that both demonstrates compliance with the requirements and quickly points out situations where compliance with the requirements as written is impossible. Finally, the Government should build acquisition flexibility into its very large contracts - e.g., through a 10-25% set-aside at award - to reflect the nearly-certain expansion and modification of requirements that the contractor will encounter, and to allow the government to appropriately compensate the contractor without having to seek supplemental or revised funding for the project.

It is important to distinguish that not every situation calls for this type of examination or government commitment. Commodities or industries where there is a thriving set of non-government buyers should not need special consideration.It is important to distinguish that not every situation calls for this type of examination or government commitment. Commodities or industries where there is a thriving set of non-government buyers should not need special consideration.