Pareto optimum improvement in Government contracting

Abstract

The Government regulates its procurement programs to correct what it perceives to be market failure and to implement its socio-economic policies. This research applies economic theory to determine if Pareto improvement is possible in three Government contracting areas: Small Business Programs, Cost Accounting Standards, and Certified Cost or Pricing Data. In cases of socio- economic implementation, Pareto improvement cannot be achieved. However, in cases of market failure, the Government can modify its regulatory stance to realize Pareto improvement. Specifically, it should increase the CAS threshold to $100M, move CAS waiver authority to the agency level, delete specific CAS requirements, and increase use of parametric.