Bidding Behavior in DoD's Commercial Activities Competitions

In a previous study, CNA analysts used data from past DoD A-76 competitions to construct a model of savings and projected the potential savings from additional DoD Commercial Activities (CA) competitions. In this paper, we use an alternative approach for estimating savings from future DoD CA competitions. We estimate two separate bidding equations - one for the in-house team bid and another for the minimum contractor bids, along with an equation for baseline cost. Based on these estimated equations, one could then indirectly project future savings in the A-76 inventory as the difference between predicted baseline cost and the predicted winning bid. Using the new approach, we project an annual savings of $6 billion if the entire 1995 DoD CA inventory were competed under A-76 rules.