Analyzing Noise in Contracting Officer Decision-Making

Abstract

The Federal Acquisition Regulation states that contracting officers have authority to enter into, administer, or terminate contracts and make related determinations and findings (FAR 1.602-1, 2023). In performing these duties, contracting officers make decisions necessary for effective contract management, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. These contracting decisions are based on contracting officers’ knowledge and experience in contract management principles more so than by government rigid rules or checklists. In making these decisions, contracting officers are allowed wide latitude to exercise business judgment (FAR 1.602-2, 2023). This wide latitude may result in variability in these decisions, often referred to as “noise” (Kahneman, Sibony, & Sunstein, 2021). An agency does not expect individual contracting officer decisions to be entirely free of noise, but when aggregated, often noise is far above the level that agency leaders would consider acceptable. The problem in government contracting is that managers do not account for noise in contracting decision making. The purpose of this research is to investigate the level of noise in contracting officer decisions.