AT&L | The Contracting Education Academy

January 4, 2011 By AMK

DOD emphasizes education, requirements in acquisition reform

The Defense Department is examining its practices for buying weapons, and employee training and contracting approaches appear to be top priorities in the acquisition overhaul process.

According to industry insiders, the two-pronged approach is essential for reforming DOD’s acquisition practices.

In a memo dated Nov. 19, 2010, Frank Kendall, principal deputy undersecretary of Defense for acquisition, technology and logistics, stressed the importance of improving the development of requirements for DOD goods and services and providing better training for the employees charged with buying, according to a Federal Times report.

The report cites senior DOD officials as saying that the changes could be enacted next year.

“Requirements development…has been identified as a weakness in the department and has led to cost and schedule overruns on many programs,” Kendall said in the memo. “Requirements development is paramount to successful acquisition outcomes.”

He also asked acquisition employees to take advantage of existing training opportunities at DOD. Those opportunities consist of courses that can last for hours or months, with many taking from two hours to five days.

“[I] am confident this additional training will help our programs to ensure more successful acquisition outcomes in the future,” Kendall wrote.

Calls for restructuring DOD’s acquisition process are growing in the wake of Defense Secretary Robert Gates’ plans to shave $100 billion from DOD’s budget, a proposal that was followed in December by a White House-led effort to identify further defense savings.

Industry insiders say the fusion of employee training and improved requirements development will be necessary to catalyze DOD acquisition reform.

“The acquisition personnel community does need education and discipline in making sure to tie requirements to the art of the possible,” said Stan Soloway, president and CEO of the Professional Services Council. “But it would be a [mistake] to believe that alone will solve the problem. You can’t lose sight of the fact that requirements development isn’t always an acquisition exercise; it’s driven by the customer as well.”

On the requirements side, industry insiders say the way DOD buys goods and the goods it buys must be transformed for a 21^st-century military. The need for services and IT is increasing, but the model for procuring those goods isn’t changing fast enough to keep up.

“DOD needs to implement modern, enterprisewide IT systems,” said Jacques Gansler, former undersecretary of Defense for acquisition, technology and logistics, during a panel discussion on government acquisition held by Compusearch in December. “For example, right now there are 4,700 different business IT systems in DOD.”

Gansler also stressed the need for DOD to institutionalize a rapid acquisition process that uses short acquisition cycles and spiral development.

“We have to be more agile, do [acquisition] in small chunks, review and evaluate before moving on to the next chunk,” said Frank Spampinato, director of acquisition and contracting at the Federal Aviation Administration, during the December panel discussion.

On the employee side, more expertise and better training for an evolving workforce are also necessary for successful acquisition reform, according to speakers on the Compusearch panel.

“We need specialists in IT contracts, people who are familiar with the nuances of IT contracting,” Spampinato said.

Gansler pointed to the changing demographics of the acquisition workforce, including the growing retirement of baby boomers with years of experience and the increasing number of millennium-generation workers who are familiar with technology but lack the institutional understanding.

“A flexible, responsive, efficient and effective acquisition program for sophisticated, high-tech goods and services requires smart buyers,” Gansler said. “This requires both quantity and quality of senior and experienced military and civilian personnel, especially for expeditionary operations.”

The federal IT arena also needs to be better at attracting talented workers, said Soraya Correa, director of the Homeland Security Department’s Office of Procurement Operations.

“We’re not making the acquisition career field attractive,” Correa said. “We need to focus on the mission; that’s what’s exciting.”

Still, Soloway said DOD’s latest focus on training and requirements development represents an important step for acquisition reform.

“Enhancing training for the acquisition community is a positive step,” he said. “It’s not going to solve the problem. There are a lot of steps. But this is one of the longest-standing, most difficult issues for DOD.”

— by Amber Corrin – Jan. 3, 2011 – Federal Computer Week

September 14, 2010 By AMK

Game changer: DOD rewrites its book on acquisition strategy

Defense Secretary Robert Gates today released a 23-point memorandum for reforming defense acquisition processes, aiming for increased efficiency and productivity and proclaiming a new era in defense spending and acquisition strategy.

“We are focused on changing the way the Pentagon does business,” Gates said at a Pentagon briefing discussing the new guidelines.

The guidance, a culmination of several months’ worth of critical analysis of defense spending, establishes targets and milestones to measure improvement and takes on bureaucracy, business incentives and an overall shift in acquisition from large-scale weapons and systems to services.

In the new Defense rulebook there are five points of focus: setting goals for affordability and control cost growth; incentivizing productivity and innovation in industry; promoting real competition; improving tradecraft in services acquisition; and reducing non-productive processes and bureaucracy.

Gates said that under a new “will cost/should cost” initiative, program managers will now be required to set affordability targets for their projects that cannot be altered without approval from Ashton Carter, undersecretary of Defense for acquisition, technology and logistics.

“We need to design for affordability,” Gates said. The next-generation ballistic missile submarine, a new Marine Corps presidential helicopter and a new Army ground combat vehicle are examples of programs had been forced back to the drawing board after cost overruns and cancellations, he said.

“Past mismanagement deprived us of incentives to bring down costs,” Gates said as he discussed incentivizing to increase productivity and efficiency.

To do so, Gates said he is expanding the Navy’s preferred buyer program across DOD; the program effectively lists contractors with optimal performance records and gives them preferential status in consideration of new contract awards.

“The way to reduce costs is to incentivize cost reduction. We’re going to make sure we’re giving contractors the right incentives,” Carter said at the briefing, including by improving contract structures and examining sub-contracting fees.

Additionally, the new measures will force contractors to share cost overruns with the government if programs become more expensive than originally planned.

Competitive bidding and contract award practices are also being instituted, with special attention paid to contract opportunities that receive only one bid – which Carter said represents “a substantial number of contract awards.”

“Real competition is the biggest driver of productivity,” said Carter.

At the Pentagon briefing, Gates and Carter both acknowledged the department’s own role in runaway acquisition costs and pledged to make it a priority to eliminate redundant steps and requirements in the acquisition process.

“In some cases our own bureaucratic processes contribute to contractor behavior,” Gates said, noting the elimination of “unneeded” reports and unnecessary requirements and processes imposed on contractors by DOD.

“These bureaucratic processes waste our time and your taxpayer money. We are a contributor to low productivity, and we need to step up,” Carter said.

“Implementation is everything, and we recognize that,” he added, vowing that the department will continue its aggressive pursuit of cost savings that began at the beginning of the summer with basic plans for acquisition reform.

According to Gates, Carter will report to him monthly on progress in meeting designated targets and milestones.

— Amber Corrin – Sept. 14, 2010 – Federal Computer Week

June 28, 2010 By AMK

Pentagon tightens reins on contractors

The Defense Department is calling on government contractors to do their part to reduce inefficiencies in procurement as part of a larger stratgey to address expected shrinking budgets that DOD will face over coming years , according to a senior DOD official.

The announcement follows up on recent plans released by Defense Secretary Robert Gates to shave $100 billion from the DOD budget over the next five years.

Ashton Carter, undersecretary of defense for acquisiton technology and logistics, outlined his new initiatives for garnering the 2 percent to 3 percent net growth needed to fund the war, without increasing budgets, by eliminating some overhead costs and transferring the savings to combat capabilities.

“Everybody knows we’re entering a new era. We need to play the game that’s on the field,” Carter said at a Pentagon press briefing today. Defense contractors need to “look at their activities, practices and processes, and see where you can identify savings.”

The approach is two-pronged, looking within the DOD workforce for better techniques and acquisition analysis and challenging industry to do a better job of providing goods and services on time, on budget, and on schedule for less, one industry executive said.

“The goal is laudable, unquestionably,” said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, who attended an invitation-only summit this morning that Carter held to meet with defense industry executives. “There isn’t enough money to sustain the military’s long-term needs.”

In efforts to close the gap, Carter and his office are taking aim at contracting activities, particularly at the different types of contracts, program costs and the practices that surround them.

One concern is what type of contracts are used for particular needs. Carter’s plans include a move to phase out award-fee or cost-plus contracts that reimburse contractors for legitimate costs plus award additional bonus revenues, instead favoring fixed-price contracts “in which government and industry share equally in cost overruns and underruns,” according to Carter’s memo to industry. Fixed-price contracts also would be favored over less-certain time-and-materials contracts as well.

It’s a move that is causing a considerable stir in the defense contracting industry as the companies remain unsure as to what the new guidelines will mean for their business. In a client memo, FDR Markets predicted the initiative “will likely increase uncertainty, and the risk profile, of the defense industry and we expect it to cause the group to weaken as a result.”

“There’s a lot of uncertainty of the implementation,” Chvotkin said, expressing concern about unnecessarily eliminating a contract type that could still be of use, depending on the goods or services. “You want to match what you want to buy with the right contract type. You don’t want to decide how to buy before you decide what to buy.”

Contracted goods and services “cover a broad span of activities and no one size fits all. Yet some of his initial recommendations may unnecessarily limit flexibility,” Chvotkin said in a released statement from his association. “For example, the department is right to focus on choosing the right contract vehicle, but why take a tool out of the toolbox by eliminating time and material contracts?”

Still, Carter insisted he wants to work with industry and understands the vital role defense contracting serves. “We do not have an arsenal system in the United States: the Department does not make most of our weapons or provide many non-governmental services essential to warfighting. These are provided by private industry,” Carter said in the memo.

At the Pentagon briefing, Carter also outlined plans to incentivize the trimming of excess spending, while leaving open the repercussions for companies that don’t work to get leaner.

“This is about costs, not profits. We want to use profits as an incentive for the defense industry, an incentive for saving taxpayer dollars. We want to foster productivity growth,” he said. Companies that do participate “will retain programs, get new programs and remain profitable if you’re leaner.”

Carter added that final guidance would be released in coming weeks.

— by Amber Corrin – June 28, 2010 – Federal Computer Week

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