DoDI 5000.02 | The Contracting Education Academy

April 1, 2020 By cs

Today’s complexities demand more chefs, fewer cooks

If you’re a cook, you had better become a chef!

Do you know the difference?

A cook can follow a recipe and prepare a nice meal, but a chef can take a variety of wide-ranging ingredients, understand how they complement each other, and create a gourmet feast.

Have you ever watched “Chopped” on the Food Network? Each chef contestant is given a basket of eclectic ingredients and a challenging schedule to fix an epicurean dish that their customers, the judges, will fawn over.

Sound familiar? We live in an increasingly complex acquisition world where just following a Department of Defense Instruction (DoDI) 5000.02 recipe will not suffice to provide your customer, the Warfighter, with the “dish” needed for success. For example, if you were to have taken the Defense Acquisition University’s Intermediate Systems Acquisition course 10 years ago, you would have been shown a single, phased-approach model, the Defense Acquisition Management System (shown below in Figure 1).

Five years later, with a recognition that software is developed and procured differently than hardware, DoDI 5000.02’s refresh would have exposed you to six different models, a combination of hardware and software-dominant paths. An appreciation that the break between phases is not a smooth process led to the revamping of the hardware model, as well (Figure 2).

Today, our acquisition world’s complexity has expanded even more, recognizing that different situations require different urgencies, tools, and solutions. This has resulted in the Adaptive Acquisition Framework, whose latest draft includes the 2019 DoDI 5000.02 process as only one of the six potential paths to acquiring the best Warfighter solution (Figure 3).

You need to become a chef! Gone are the days of being able to simply follow the prescribed Milestone A, B, C recipe. But how to make the change? First, you need to understand the circumstances presented to you. What is the “speed of relevance” for your program? How flexible and/or stable are the requirements? Have you established an enduring conversation with your customer to discuss requirements options? Then you will need to apply a thorough understanding of the major ingredients that will spell success or failure for any program. What are they? Let me suggest the following as a start.

Acquisition Pathway

Where does your effort fit into the new Adaptive Acquisition Framework? Are you trying to exploit some new innovative technology and provide the Warfighter with residual operational capabilities? Explore the Middle-Tier Acquisition (MTA) Rapid Prototyping path. Is there some proven technology, perhaps exploiting a commercial use, that you can produce quickly and field within 5 years? If so, then, MTA’s Rapid Fielding path might be right for you. Is software the major acquisition product, perhaps an upgrade to a command and control product? Why not follow the Software Acquisition path? Of course, there is nothing evil about the traditional Major Capability Acquisition path, which can and should be tailored to meet your specific needs. But it is crucial that you understand the requirements and benefits, along with the risks, of taking these different acquisition pathways, and then choose the pathway most appropriate for your program.

Contracting Strategy

Congress recently expanded some tools for finding and getting the right defense industry contractor on-board for our programs. Beyond traditional contracting vehicles based on the Federal Acquisition Regulation, Other Transactions (OTs), and Commercial Solutions Openings (CSOs) have provided some great additional options. Are they right for your program? Does your program meet the Three Ps of OTs — purpose, prototype, and participation? Many of your colleagues have embraced these contract vehicles, as evidenced by a rapid increase in OT use over the past several years. However, beware of statements that imply one contract vehicle is superior to all others. Some dishes need salt, and some need sugar. Just because both flavorings are white granular substances doesn’t mean it is appropriate to use them interchangeably. A good understanding of contract strategy differences can mean the difference between success and failure. If risk is too high and you’ve demanded a fixed price contract, industry proposals will reflect that. In such a case, you can likely gain flexibility and save money using a cost-reimbursable vehicle. You can often save time using an OT, but not always. The experts say that if you’re using OTs for the sole purpose of saving time, don’t! Always remember the reason you choose a particular contracting vehicle is to properly incentivize the contractor to provide your end users with the product they need, when they need it.

Funding Strategy

How will you get the money to run your program? Beyond the traditional Planning, Programming, Budgeting and Execution (PPBE) system that requires 2 years of foresight for acquiring funds, are there other sources of more immediate funding? Are you aware that the DoD has a Rapid Prototyping Fund administered by the Under Secretary of Defense for Research and Engineering? Could that bridge the 2-year gap between a great technological opportunity now and establishing your long-term funding line through PPBE? If you can go faster via additional funds, have you explored getting on your service’s Unfunded Requirements List or pursued Reprogramming Requests? You need a thorough grasp of all of your options to get the required money, in the right appropriations, at the right time. Depending on your total budget, you will have a variety of reporting and accountability requirements. Have you accounted for those in your timelines? Can they be waived, when appropriate? Understanding your program deeply enough to predict the funds needed, in the appropriations category needed, will allow your team to ensure the money is available in time.

System Engineering, Metrics, and Risk/Opportunity Management

What is your path to getting the technical solution to work? Are you prototyping the hard stuff first — i.e., “the quickest path to failure,” as Dr. Bruce Jette, the Army’s Acquisition Executive would say. One of the most important system engineering tasks is to develop and maintain a rigorous risk and opportunity management plan. With today’s need for products to be delivered at the speed of relevance, it is essential that your team thoroughly recognizes the risks facing the proposed solution. How can those risks be mitigated? Will they be assumed, transferred, controlled, or avoided? And don’t forget about opportunities. Are any available that would increase speed or performance? What resources are needed to enable pursuit of those opportunities?

This risk/opportunity management plan is not to be built and put on a shelf, but to serve as a steady guide as the product matures. If your product is software, do you understand the Risk Management Framework and how to best exploit its virtues to improve your software product? Is agile software development the right methodology for getting your software matured and in the users’ hands? If not, why not? A good strategy for developing the technical solution for the warfighter’s requirement is essential to your program’s success.

Integrated Testing

Employing a collaborative effort with the warfighter and tester, have you established a test and evaluation plan to ensure that your product meets that customer’s needs? What type of testing does your product and chosen acquisition path demand? A program manager’s worst nightmare is to contract for a product and successfully execute that product, only for the warfighter or tester to find it inadequate. If you follow a rapid prototyping pathway, you should engage in a test-learn-fix-test approach with multiple user test points in a series of small, targeted events, while maximizing modeling and simulation to increase your speed. A Test and Evaluation Master Plan will be required for the traditional Major Capability Acquisition approach; however, you should tailor it to increase testing’s influence on your development efforts. Like many of the functional offices, these vital activities can appear to program managers as impediments. However, they serve a vital role. Engaging with them early and developing a common understanding of schedule and technical requirements can foster an environment of mutual support toward the common goal of getting war-winning technology faster into the hands of the warfighters. Still, you also need to ensure that it stays in their hands. So, it is crucial that you track sustainment and producibility, starting early in the design process.

Sustainment and Producibility

One of the potential pitfalls of the rapid prototyping path could be the neglect of production and sustainment costs in the effort to ensure that the product reaches residual operational capability within the 5-year window dictated by Congress. Studies have shown that, by the time the Preliminary Design Review is conducted, approximately 80 percent of the program’s life-cycle cost (LCC) is determined, even though only a small percentage of the program’s cumulative costs has been spent. This early design work is the place where the team has the best opportunity to impact LCC. By the time of the Critical Design Review, the LCC commitment is approximately 90 percent (Figure 4).

Production, logistics, and other considerations must be exhaustively understood and prioritized early or your program could easily become unaffordable. Prototyping emphasizes an experimental philosophy in order to get innovative technology to work. Without a strong program manager emphasis, there is little incentive to focus on future LCC drivers — i.e., production, operations, and support. Also, award fee contracts, which allow for profit margins to be influenced subjectively, and to include consideration of items such as affordability and sustainability, are highly discouraged. This may dissuade the government/contractor team from paying much heed to these longer-term factors. Like a chef who has visualized the flavor and presentation of the final dish early in the cooking process, your team must emphasize sustainment and producibility early in the design process to ensure that the final product is technologically superior, producible, and affordably sustainable.

As a former senior manager of manufacturing at one of our industry partners, which produced the interiors of the canceled VH-71 Presidential Helicopter, I can testify how early design decisions can subvert manufacturing’s ability to produce an affordable product.

Yes, a number of other factors must be decided on, managed, and tracked in order to produce a successful product for our warriors. Your team cannot forget to ensure the myriad other elements—such as environment, safety, and occupational health, spectrum certification, airworthiness, unique identifiers, energy policy, etc.—that must all be addressed for the program to succeed. However, the thorough understanding and vetting the above six major ingredients will allow you to master the complexities of today’s acquisition world. With that mastery, you will no longer feel the need to open up the DoDI 5000.02 cookbook to find the recipe for creating a good product. Instead, when you open up the basket of ingredients that the requirements and acquisition community has handed you, you’ll be able to create a gourmet, masterful acquisition strategy. Bon Appétit!

David Riel is the author of this article, first published in the March-April 2020 issue of Defense Acquisition magazine. Riel is professor of Acquisition Management at the Defense Acquisition University in Kettering, Ohio. He formerly had a 20-year career with the U.S. Air Force, including work with industry. The author can be contacted at David.RIel@dau.edu.

September 23, 2015 By AMK

Tailoring and critical thinking: Key principles for acquisition success

Based on recent Department of Defense (DoD) acquisition guidance, programs now have the opportunity to approach acquisition program management in ways previously viewed as nontraditional. Unfortunately, many programs are hesitant to veer too far from accepted routines, thereby not taking advantage of opportunities to explore new acquisition approaches.

In one partnership between the Defense Advanced Research Projects Agency (DARPA) and U.S. Navy, however, such opportunities have been fully embraced and may provide future programs with touchstones on how to increase program cost-effectiveness and efficiency as well as program success.

The Long Range Anti-Ship Missile Opportunity

To ensure DARPA maintains its ability to deliver outsized impact by focusing on breakthrough technologies, the agency seeks active engagement with its technical community and users as sources of inspiration. One approach DARPA uses to better understand warfighter needs is to visit Service and Combatant Command organizations and listen to customer desires that require innovative solutions in a short time period. In 2008, one such visit with ADM Robert Willard (Commander, U.S. Pacific Fleet) resulted in a request for a technical capability that became the Long Range Anti-Ship Missile (LRASM) program.

The LRASM program started in 2009 as a joint design and demonstration initiative between DARPA and the Office of Naval Research. With DARPA as the lead organization, the LRASM program was to leverage the state-of-the-art Joint Air-to-Surface Standoff Missile Extended Range (JASSM-ER) airframe, and incorporate additional sensors and systems to achieve a survivable subsonic cruise missile (See artist’s concept below).

In 2013, DARPA conducted two successful flight demonstrations that initially proved the technical approach. Concurrent with these technical accomplishments came two important programmatic decisions. First, a Resource Management Decision was issued that officially provided resources for a joint DARPA-Service transition effort to mature the technology and deliver an early operational capability (EOC) by Fiscal Year (FY) 2018. Second, an Acquisition Decision Memorandum (ADM) was signed by Under Secretary of Defense for Acquisition, Technology, and Logistics (USD[AT&L]) Frank Kendall in February 2014 that approved the Navy’s request to implement an accelerated acquisition approach with streamlined guidance and delegated the Milestone Decision Authority to Sean Stackley, Assistant Secretary of the Navy for Research, Development and Acquisition (ASN/RDA).

This effort was one of many to come upon the transitional “Valley of Death”—an effort moving from technology demonstration/maturation to formal Program of Record status—resulting in programs encountering both challenges and opportunities depending on the chosen acquisition philosophy. According to CAPT Carl Chebi, the U.S. Naval Air Systems Command (NAVAIR)’s Precision Strike Weapons program manager (PMA-201) in 2009–2013, the early recognition of the high risk yet high potential of this effort by senior leadership helped set the foundation for a successful transition.

Establishing the Foundation

A key outcome from the ADM was establishment of the LRASM Deployment Office (LDO), which was given the responsibility to implement the accelerated acquisition approach with the streamlined governance. At this point, the LRASM program began an LDO restructure based on the need to continue technical development while transitioning from DARPA to the U.S. Navy.

The subsequent LDO restructuring discussions were influenced largely along cultural tendencies—that is, merging people with different perspectives on managing a weapon system acquisition program. On one hand there was the DARPA worldview: Modify and tailor guidelines to achieve outsized impact as quickly as possible, which leads to acceptance of some high-risk options. Alternatively, there was NAVAIR’s worldview: Adhere to a rigorous and methodical approach in close alignment with existing Office of the Secretary of Defense (OSD) and Navy guidance and oversight.

Realizing that a traditional acquisition program approach was impractical with an FY 2018 deployment timeline, the cooperatively led DARPA/Navy LDO was a very close teaming arrangement with co-leads: Dr. Arthur Mabbett from DARPA’s Tactical Technology Office and Navy CAPT Jaime Engdahl, PMA-201 program manager from the Program Executive Office for Unmanned Aviation and Strike Weapons (PEO [U&W]).

When establishing the LDO, Mabbett described two LDO characteristics thought necessary to meet the LRASM program goals: “The LDO required an approach ensuring focused and dedicated collaboration between the S&T [Science and Technology], Acquisition, and T&E [Test and Evaluation] communities. Also, the organization needed to be given a high degree of autonomy while unhampered from the normal acquisition program bureaucracy. Therefore, we wanted the LDO to incorporate a principled program execution approach: Time is of the essence, flatter/leaner organization, decision timing aligns with program execution, and streamlined processes.”

Key Principles for Success

To achieve a successful transition resulting in a warfighter capability by FY 2018, the LRASM team relied upon two powerful acquisition principles — tailoring and critical thinking.

1. Tailoring

The new DoD Instruction (DoDI) 5000.02 (Operation of the Defense Acquisition System) dated Jan. 7, 2015, includes more than 50 references to the principle of “tailoring.” As stated in the Instruction: “The structure of a DoD acquisition program and the procedures used should be tailored as much as possible to the characteristics of the product being acquired, and to the totality of circumstances associated with the program including operational urgency and risk factors.”

This concept is illustrated by the four basic and two hybrid defense acquisition program models presented in DoDI 5000.02. These models are intended to serve as examples of program structures tailored to the type of product being acquired or the need for accelerated acquisition. The explicitly stated expectation for every acquisition program is to view the most relevant model (i.e., hardware focused, software focused, etc.) as an initial baseline approach, which then should be tailored to the unique character of the product being acquired. In the DoDI 5000.02 cover memorandum, Kendall stressed the importance of program managers using these models “… as references to assist their thought processes and analysis of the best structure to use on a given program.”

In the case of the LRASM program, the LDO was structured when the new DoDI 5000.02 was released. This timing turned out to be fortuitous. Navy CAPT Kevin Quarderer, LRASM principal deputy program manager during the technology demonstration effort, remarked: “The LDO team viewed the new DoDI 5000.02 to be more permissive than previous versions. We felt this new guidance provided justification—and formally sanctioned backing—for the team to do what they felt necessary to meet the LRASM program time lines. We recognized that we were now in a position where we could tailor our program to only accomplish the absolutely essential statutory, regulatory and milestone requirements while, at the same time, negotiating out from other processes, reviews, documents, etc., that did not provide any ‘value-added’ contribution.”

Since the LRASM program was acknowledged as an accelerated acquisition program, the LDO team embraced the tailoring concept afforded by Model 4 (Accelerated Acquisition Program) as its acquisition framework starting point (Figure 1).

FIGURE 1. MODEL 4: ACCELERATED ACQUISITION PROGRAM

Engdahl described the LRASM team’s challenge of taking this new accelerated acquisition construct that was very flexible and tailorable: “The team wrote a ‘clean-sheet’ acquisition strategy that tailored the systems engineering process and milestones that we defined as ‘knowledge points’ to clearly articulate the points in the program where we expected to have enough knowledge to make specific program decisions. We then tailored documentation and requirements strategies to move as quickly as possible through the program.”

2. Critical Thinking

A basic principle for improved defense acquisition outcomes is to expect program managers and their team to think critically. Kendall has highlighted critical thinking as a cornerstone to improved acquisition outcomes. As one of the four key overarching principles associated with the Better Buying Power initiative, he wrote: “The first responsibility of the acquisition workforce is to think. … Our workforce should be encouraged by leaders to think and not to automatically default to a perceived ‘school solution’ just because it is expected to be approved more easily.”

The LRASM program was based on the understanding that critical thinking was necessary for program success; the program could not afford to blindly follow well-worn paths used by other programs. The program management team needed to think in terms of being trailblazers in challenging the norm—and critical thinking was a skill that would help the team do so. Fortunately, with the influence of DARPA’s long-established culture that seeks out critical thinking, this skill became part of the LRASM “way of life” from the beginning.

Mabbett identified the principle of critical thinking as one of the keys to success for not just the LRASM program but for any acquisition program: “Always challenge the norm or typical way of doing business. Yes, programs have guidelines and processes to consider; but programs should not take these guidelines and processes as things that have to be followed unquestioned. Add logic and thought. Think about what processes exist to help—as program manager, IPT [Integrated Product Team] lead, or team member—to make the right decisions. Processes are simply one piece of a program’s tool set. Learn to challenge and question assumptions and data presented until you’re convinced the most cost-effective and efficient decision is being made.”

According to Mabbett, “Team empowerment was absolutely essential to the daily progress and success of the program. We did not treat ‘empowerment’ as a cliché. Rather, leadership challenged the team to make decisions and solve problems using a critical thinking approach. Our job as leadership was, in turn, to engage the team members on their decisions to verify they had thought the problem and solution through. We had a mutual exchange to confirm the thought process and decision, and then moved on.”

Critical thinking is a key part of all LRASM processes. As one example, the program tailors its system engineering process to the specific systems engineering event. The large number of technical experts who typically show up at such events is drastically reduced to ensure a focus on the technical review boards, where approximately a half-dozen independent participants come in to provide experienced consultation. So systems engineering events such as Preliminary Design Reviews and Critical Design Reviews become important learning events about where technical risks may lie. This approach relies upon a more critical-thinking approach and provides a more useful outcome for the team.

Key Success Enablers

LRASM then used these two key principles—tailoring and critical thinking—in conjunction with interrelated key success enablers in order to best structure the program for a successful acquisition outcome.

Senior Leadership Access

LRASM benefited from senior leadership access based on direct support to a Combatant Commander and Numbered Fleet Commander in order to counter adversaries’ use of emerging technologies. The LRASM program used this access to coordinate senior leadership support for the tailoring and critical thinking approaches being developed; this established a solid program foundation at the very beginning.

With this foundation, the LRASM program lean governance approach then included the establishment of an Executive Steering Board (ESB) with Stackley and DARPA Deputy Director Steve Walker as the principals. Monthly ESB meetings became the core means for LRASM senior leadership to regularly and quickly inform stakeholders of ongoing progress and key decisions. The ESB approach was able to minimize staffing churn and perceived bureaucratic obstacles. The objective was to keep the program moving forward, and the ESB’s streamlining of the oversight process turned out to be an effective means to accomplish this goal.

Stakeholder Buy-In

Constant communication was absolutely essential to educate stakeholders at all levels as to how the LRASM program was structured and managed. As this acquisition program differed from the norm, clear messaging and continuous engagement were of paramount importance. Expectations were communicated explicitly and unambiguously. The LRASM leadership team also took on an instructor role to educate those comfortable with the more traditional acquisition process: It was not only acceptable—but expected—to take more nontraditional approaches in an accelerated fashion.

Streamlined Decision Making

The LDO decision-making process was developed very early in the program: Decision making was considered fundamentally important to keep the LRASM program successfully moving forward. Not only did the DARPA/Navy interface have to be managed, but the Air Force JASSM-ER and B-1 and Navy F/A 18 programs had extensive equities affecting daily program execution—and these also required attention.

The LRASM program employed as little formal staffing as possible. Weekly decision boards were scheduled to discuss program status. These meetings concentrated on decision criteria, or decisions that were needed in order to maintain program momentum. Team leads came prepared with background, options and recommendations for each of their decision criteria topics so LRASM leadership could make decisions. Such an approach created transparency and resulted in much discussion. As a result, there was no uncertainty about coming issues that could hold back the program if there was no decision.

“I insisted on a succinct decision-making process since we didn’t have the time to continuously analyze every problem over and over,” Mabbett stated. “The philosophy was for LRASM leadership to verify critical team decisions in order to maintain progress.”

Risk Management

One of the LRASM program frameworks is reliance on a fundamental systems engineering process woven into the program’s integrated master schedule (IMS). Once a week, the IMS is reviewed with the team leads and prime contractor, Lockheed Martin, to evaluate program status in terms of identified metrics inside the systems engineering process. Wrapped into this activity is an integrated risk process. As a result, all risk-mitigation steps are quantified as they relate to the systems engineering process and are rolled into the IMS. Therefore, the program managers can see how risk mitigation is executed inside the IMS and, in turn, actually reduce the formal risk associated with the program.

Careful consideration ensured that risk management was steeped in systems engineering principles—but not driven by the systems engineering process. This approach has become an important ESB tool from an oversight perspective—specifically, in terms of how risk can be used when focused within the context of the systems engineering process and IMS to mitigate risks as much as possible.

The Right People

LRASM leadership kept the initial LDO small with no more than 12 subject-matter experts—all of them unquestioned experts. These highly skilled team members were handpicked for openness, agility and motivation to lean forward and succeed. Subsequently, the LDO has incorporated Navy personnel as functional leads alongside DARPA subject-matter experts now that the transition effort is under way. But the tenet of the program has not waivered: Use only the right person with the right skills in the right job.

The importance of keeping to this fundamental tenet is borne out in the risk-management process. Having chosen the right people in the right place with the right skills, LRASM
leadership empowered the team members to come up with their own processes and products that they used to manage the program—in this case, the risk-management process. Such an approach helps create team buy-in and is an example of applying the necessary rigor and then using it for speed in the program.

Such empowerment of the right people allows the LRASM program to maintain a flat, lean organizational profile. LRASM leaders view this situation as a leadership opportunity in that their people are chartered not only to execute the program but to invent rapid and innovative processes and keep the program moving forward. In this regard, Quarderer remarked: “Management’s main challenge was to keep up with each of our teams as they made progress, but that’s fine—that’s what management should want.”

Inspired by the Mission

Quarderer explained that his time in the Fleet helped him to stay motivated and to motivate others while part of the LDO. “I remember feeling that I did not have the upper edge that I wanted, and that if we went to combat, I didn’t feel that the end outcome was going to be where I wanted it to be,” he said. In sharing his experience and the fact that ADM Harry B. Harris Jr., then commander, U. S. Pacific Fleet, had taken time to address the LDO about the importance of its efforts, Quarderer felt that the team members understood the sense of urgency in meeting their commitment.

Operational Pause

While the recognized sense of urgency was driving the team to move quickly, Engdahl and Mabbett recognized the need to take time to assess the effectiveness of the LDO. They approached the Defense Acquisition University to conduct interviews and a Team Effectiveness Survey to provide an assessment of the organization, individual satisfaction, team effectiveness, communications and command climate of the LDO. While it seemed the effort would take precious time away from the many things the LDO needed to do to make aggressive progress, the effort proved critical for the leadership team’s ability to address the LRASM challenges and opportunities. Quarderer commented: “We needed to take a pause and figure out what was going well, what were long-term challenges, and what needed to be corrected. We needed to do all that very quickly before we got too far down the road in any of those nonstandard organizational pieces that were not working well before they festered too long. We needed the team to be a well-functioning group so that we could focus completely on the mission if we were going to make our timeline.”

Maintain Focus

Like any acquisition program, the LRASM program was buffeted by a multitude of expectations that were not always in alignment with each other. From the very beginning, the LRASM leadership kept a singular laser focus on the stated and original requirements. Efforts to expand LRASM’s capabilities through requirements creep were continually and successfully rebuffed. This message was strongly conveyed to the LRASM team to ensure a “one voice” approach to expectations management. The schedule was too tight for anything to be entertained but the originally stated requirements; anything different was recognized as a near-certain reason to miss the FY 2018 EOC date.

Not “The” Answer

Can the initiatives and approaches used by the LRASM program be replicated by all acquisition programs? No. A one-size fits all approach would not lead to the successes realized by the LDO. Can other acquisition programs examine LRASMs initiatives and approaches for potential applicability? Absolutely.

And that’s the point: The LDO construct is not “the” answer for how to further improve government acquisition processes. But it illustrates that all programs have the opportunity to develop their own tailored initiatives and approaches. DoD senior leadership has given every program the ability to aggressively use the critical thinking capabilities of its workforce in order to tailor a program approach that best fits that program’s unique set of requirements, challenges and opportunities.

All programs need to eagerly embrace such a mindset. Threats to our national security are accelerating while budgets decline, and therefore we all need to challenge existing processes and procedures so we can produce and deliver weapon systems in the most cost-effective and efficient manner possible. Anything less is a disservice to the warfighters and taxpayers.

This article was written by Jesse Stewart, Michael Paul, and Mike Kotzian and was published in the September-October 2015 edition of Defense AT&L. The authors can be contacted at mike.kotzian@dau.mil; michael.paul@dau.mil; and jesse.stewart@dau.mil. To print a PDF copy of this article, click here.

September 4, 2015 By AMK

DoD’s use of commercial acquisition practices — When they apply and when they do not

The Department of Defense (DoD) generally buys major weapon systems through the defense acquisition system, a process that is highly tailorable but still built around the assumption that the DoD will compensate suppliers for product development, contract through Defense Federal Acquisition Regulations (DFARS) and be heavily involved in all aspects of the product life cycle.

A number of organizations—including the Defense Business Board, some think tanks and some in Congress — have encouraged or recommended greater use of commercial practices. There are indeed times when using more commercial practices makes sense, and we should be alert to those opportunities — in any aspect of defense procurement.

**The author of this article is Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics.**

There are three aspects of “going commercial” that I would like to address — first, purchases based on the fact that an item is offered as a commercial product; next, the need to access cutting-edge commercial technologies; and, finally, those cases where we can take advantage of private investments to develop products we might traditionally have purchased through the normal multi-milestone acquisition system.

Our policies and regulations try to strike the right balance between taking the steps needed to protect the taxpayer from overpaying while simultaneously avoiding discouraging commercial firms from doing business with DoD by asking for more information than they are willing to provide. For purely commercial items widely and competitively sold on the open market, this is easy. For thousands of items, from office furniture to cleaning supplies to laptop computers, the DoD pays commercial prices (subject to negotiated adjustments for quantity-based discounts, etc.) without inquiring as to the costs to produce the products. Other items are more clearly and purely military products, such as a replacement part for a howitzer or a low observable fighter component. The gray area between these extremes represents a problem in first determining that a product can be considered commercial, and, then, if there is no competition for setting the price for that product, obtaining adequate information from the supplier and other sources to determine that the price charged is fair and reasonable. We are working to expedite these processes, make them more predictable, and provide technical support to the procuring officials who must make these difficult determinations. I’m afraid that we will never be perfect at this, given the vast number of items the DoD procures and our limited resources, but we must and will improve our performance while preserving a reasonable balance.

It is clear that in many areas of technology the commercial market place is moving faster than the normal acquisition timeline for complex weapon systems. Examples include information technology, micro-electronics, some sensor technologies, some radio frequency devices and some software products. In most cases, these technologies will enter our weapon systems through one of our more traditional prime contractors. Our prime contractors and even second- and lower-tier suppliers are looking for a competitive advantage, and, when commercial technologies can provide that advantage, they will embed them in their products.

Competition among primes can give us access to current commercial technologies early in a program, but we often move to a sole-source situation when we down-select for Engineering and Manufacturing Development (EMD), reducing the incentives for inserting state-of-the-art commercial technologies. We can sustain these incentives by insisting on modular designs and open systems, both emphasized under the Better Buying Power initiatives. As part of this process, we also must manage intellectual property so we don’t experience “vendor lock” in which we cannot compete upgrades without going through the original contractor.

Accessing Commercial Technology

The DoD also is taking other steps to improve our access to commercial technology. These include opening the Defense Innovation Unit–Experimental (DIU-X), in Silicon Valley, investments through In-Q-Tel and increased emphasis on the productivity of programs like the Small Business Innovative Research program. The DoD also is evaluating the Congressionally-sponsored Rapid Innovation Fund (RIF) and will make a decision this year as to whether to include a request for funds for a Reduction in Force in the Fiscal Year 2017 President’s Budget. All these steps are designed to open the DoD to more timely and broad commercial technology insertion.

The last of the three “going commercial” topics I would like to cover involves situations in which the DoD substitutes a more commercial acquisition model for the ones depicted and described in DoD Instruction (DoDI) 5000.02. In some cases, industry, traditional defense contractors and others will invest to bring a product to the DoD market, without DoD shouldering the direct cost of product development. The critical motivation for these independent businesses decisions is the prospect of reasonable returns on the corporate investment.

Cost Sharing

Sometimes, especially when there is a mixed DoD and commercial market for the product, a cost-sharing arrangement may be appropriate in a public private “partnership” for development. DoD acquisition professionals need to be alert to these opportunities and prepared to analyze them and act on them where they benefit the government. When we do this, we may need to be innovative and think “outside the box” about business arrangements and contract structures. In these cases, the structure and processes in DoDI 5000.02 may be highly tailored or even abandoned. I’ll illustrate this concept with a few real-life examples.

As we moved down the path of DoD-funded research and development for tactical radios under the Joint Tactical Radio Systems program, we discovered that in parallel with the DoD-funded programs of record, some companies had invested their own money to develop and test products that used more advanced technologies than the Programs of Record. These essentially commercial product development efforts offered the prospect of cheaper and higher performance systems, without a DoD-funded development program. As a result of this, we changed the acquisition strategy to allow open competitions and stressed “best value” source selections so we could take advantage of the most cost-effective radios available.

Our “system” had a little trouble adjusting its planning to this type of acquisition. The Developmental Testing people wanted to perform a standard series of developmental tests, even though the development was complete. Operational Test people wanted to test each competitor—before source selection. Program oversight people wanted to do Milestone (MS) A and B certifications, even though there was no reason to have an MS A or B.

What we needed, and where we ended up, was a competitive source-selection process for production assets that included an assessment of bidder-provided test data, laboratory qualification testing, and structured comparative field testing to verify the offered products met DoD requirements. There were minimum requirements that had to be met; once that was established, a bidder would be in a “best value” evaluation for source selection for production. It was a little surprising to me how wedded our workforce, in both the Service and the Office of the Secretary of Defense, was to the standard way of doing business—even when it didn’t really apply to the situation.

The next example involves space launch. The DoD is working to bring competition into this market. That opportunity exists because multiple firms have been investing development funds in space launch capabilities for both commercial and DoD customers. We acquire space launch as a service; there is no compelling reason for DoD to own launch systems. What we need is highly reliable assured access to space for national security payloads, which can be acquired as a service. For some time, we have been working to certify a commercial launch company to provide national security launches. That milestone recently was achieved for the first “new entrant” into national security launches in many years. The DoD did not fund the development of the new entrant’s launch system, but it did provide support through a Cooperative Research and Development Agreement for the certification process.

More recently, the need to remove our space launch dependency on imported Russian rocket engines has caused the DoD to evaluate options for acquiring a new source of reliable competitive launch services. Through market research, we know there are options for private investment in new launch capabilities but that industry’s willingness to develop the needed products may depend on some level of DoD funding. The DoD intends to ask for industry bids in a very open-ended framework for whatever financial contribution would be necessary to “close the business case” on the guaranteed provision of future space launch services. This novel acquisition approach will work only if the combined commercial, other government customer, and military launch demand function can provide enough anticipated launch opportunities to justify industry investment. This effort is a work in progress, and we don’t know if it will prove successful. If it does succeed, it will provide for the continuing viability of two competitive sources of space launch services—without the need for DoD funding and executing a new standard DoD development program for a launch or propulsion system.

Another example from the space area is the Mobile Ground User Equipment (MGUE) for GPS III. These GPS receiver electronics “chips” will be ubiquitous in DoD equipment and munitions. The technology also will be relevant to commercial GPS receivers that will be embedded in millions of commercial devices. Here, also, the DoD has been proceeding with a standard DoD-funded development program with multiple vendors developing MGUE risk reduction prototypes leading up to an EMD program phase. The combined market for this capability is so great that the competitors proceeded with EMD on their own, without waiting for a DoD MS B or contract award. They did this so successfully that the EMD phase of the program was canceled in favor of a commercial approach that limits the DoD’s activities to compliance testing of the MGUE devices and integration of those devices into pilot platform programs.

The final example I’ll cite is the Marine Corps decision to defer the program to acquire a new design amphibious assault vehicle in favor of a near-term option to acquire a modified nondevelopmental item (NDI). The Marine Corps concluded, I believe correctly, that the technology was not mature enough to support the Corps’ desired performance levels and that a new product would be unaffordable. As a result, the Marine Corps opted to first evaluate and then pursue a competitively selected near-NDI alternative. This is more military than commercial off-the-shelf, but the principle remains the same. This program does include some modest DoD-funded development to, for example, integrate U.S. communications equipment and test for compliance with requirements, but it is a highly tailored program designed to move to production as quickly as possible and with minimal DoD costs.

The Common Thread

What all these examples have in common is the DoD’s recognition that an alternative path—outside the normal DoDI 5000.02 route—was available and made sense from both a business and an operational perspective. Once such an opportunity is recognized, a more commercial approach can be adopted, but this requires some novel thinking and open-mindedness on the part of the DoD acquisition team. We cannot “go commercial” for all of our acquisitions or even most of our weapons systems. The normal process works best for the standard low-volume, highly specialized, cutting-edge and uniquely military products that populate the DoD inventory. The business case simply isn’t there for industry to develop and offer these types of products without DoD development funding. In all standard DoD acquisitions, however, we need to proactively look for ways to embed or insert the most current commercial technologies. Where commercial approaches are justified, we need to spot and capitalize on the opportunity.

This article was reprinted from the September-October 2015 issue of Defense AT&L Magazine. To print a PDF copy of this article, click here.