In particular, Chvotkin said the change could deter commercial companies from seeking defense business, as commercial acquisition is a much simpler contracting process. Items that would no longer be considered commercial would have to go through the traditional defense procurement procedure, keeping critical technology out of the hands of the war fighter, he said.
If you ask me, this is a potentially dangerous path for DoD to pursue. The onus for a regulatory change that would de facto limit margins on product sales to DoD would be born by small businesses – who are, by an large, the engine for rapid technology innovation in DoD. Small businesses rely on external investment to underwrite technology development efforts. And outside investors are not likely to risk capital on a venture that is artificially limited to a paltry margin levied by the DoD acquisition bureaucracy.
A better way to approach this problem is for DoD to require cost data for only those products that are substantially underwritten by the government in the form of defense contractors’ indirect rates. If the government is paying for it, whether directly or indirectly, it should have a right to review actual product costs. If DoD is not paying for it, then it should let the market set the price – just like the commercial world does.
Dispute Brews Over Changes to Commercial Acquisition Process | Defense News | defensenews.com.