tion of the function of profit, are not in the Government’s interest. Negotiation of extremely low profits, use of histori - cal averages, or automatic applica- tion of predetermined percentages to total estimated costs do not pro- vide proper motivation for optimum contract performance. (48 C.F.R. § 15.404-4(a) (2025). Experienced acquisition profes - sionals, particularly in the era of cutting-edge commercial technol- ogy, know all too well that low prices and/or thin margins rarely guarantee mission success; in fact, they often signal risk. By conflating price rea- sonableness with cost transparency, oversight practices risk drifting away from their intended purpose—and end up creating barriers instead of enabling access to the innovation the warfighter needs most to main - tain American weapons systems su- periority. The Hidden Cost Across the defense industrial base, compliance costs continue to rise. Large contractors absorb these costs as overhead, but small businesses, a frequent source of innovative and creative solutions, can face existential challenges. Many must implement systems akin to Cost Accounting Stan- dards (CAS, 48 C.F.R. Ch. 99), merely to compete in light of these increased cost-like inquiries. Moreover, demands for cost data from small businesses and new en- trants to the government market, who are unaware of the nuances of government contract pricing, may inadvertently and innocently sub- mit incomplete or less than relevant data. These factors can lead to pre- ventable post-award allegations of
52.215-20 and 52.215-21, appear in fixed-price solicitations, burdening contractors and contracting officers alike. These approaches blur the line between cost and price and often are demanded without any apparent con- sideration of the criteria under FAR 15.403-3 for requiring the submission of “data other than certified cost or pricing data.” Cost-First Risks Whether it is habit or heightened oversight expectations, the cost-first approach shifts the focus from perfor - mance outcomes to pre-award doc- umentation volume, weakening the core efficiency of fixed-price contract - ing. While some data are necessary to evaluate price reasonableness, agencies often disregard adequate information provided by contractors to support other price analysis tech- niques under FAR 15.404-1(b). Disap- pointingly, contracting officers often are unwilling or unreceptive to offer - ors’ inquiries or requests to modify or limit cost-submissions without con- sideration of the merits of potential contractors’ requests. This runs con- trary to the directive that recognizes contracting officers should “[o]btain the type and quantity of data neces- sary to establish a fair and reasonable price, but not more data than is nec- essary.” (FAR 15.402[b]) The data often are used to drive down profits, which may be mistak - enly viewed as evidence of waste. Historically, the FAR cautioned against this mindset even during cost analysis: It is in the Government’s interest to of- fer contractors opportunities for finan - cial rewards sufficient to stimulate ef - ficient contract performance, attract the best capabilities of qualified large and small business concerns to Govern- ment contracts, and maintain a viable industrial base. Both the Government and contractors should be concerned with profit as a motivator of efficient and effective contract performance. Negotiations aimed merely at reducing prices by re- ducing profit, without proper recogni -
fraud that may reduce innovators and new participants in the defense industrial base. This is particularly so given concerns over investigation or civil liability under the False Claims Act, risks that do not typically arise in a commercial marketplace. Compliance also increases costs that, when factored into bids, drive prices upward and erode taxpayer value. Personnel costs associated with responding to these requests increase a commercial company’s bid and proposal costs that are often absorbed in overhead costs. Request- ing unnecessary data can increase proposal preparation costs, gener- ally extend acquisition lead time,
Experienced acquisition professionals ... know all too well that low prices and/or thin margins rarely guarantee mission success; in fact, they often signal risk.
30 DEFENSE ACQUISITION MAGAZINE | JULY – AUGUST 2026
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