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President's Perspective 

Time Is Right to Clean Up Defense Acquisition 

2,013 

By Lawrence P. Farrell Jr. 

When the Defense Department submitted its fiscal year 2014 budget, the possibility of sequester was not considered. Industry executives, administration officials and politicians on Capitol Hill all assumed that some solution would be found. The prevailing thinking could be summed up as follows: “Sequestration won’t happen, but I don’t know how it won’t happen.”

Well, it did happen, and maybe we all need to consider that if we don’t know how something won’t happen, then we need to prepare for it to happen. The resulting budget crisis has the Pentagon scrambling to catch up. To be fair, many leaders in the defense industry’s largest companies always expected the worst, and those firms, while hurting like other businesses, are much better positioned to weather the storm. The real problem, though, is the considerable damage that will happen to the nation’s industrial base at large as the military builds down in an unplanned and inefficient way.

Since the sequester for fiscal year 2013 was triggered March 1, the Defense Department has been allowed to reprogram funds to balance its accounts, and is preparing a major amendment to the 2014 budget. The 2015 spending plan, now in preparation, will assume that the Budget Control Act of 2011 (BCA) caps will remain in place. The real issue that now must be faced, and can no longer be ducked, is where will another $500 billion be found in an already depleted budget? The needs are many, but the pressing imperative for operations and maintenance funds puts research, procurement and force structure squarely in the crosshairs.

Investment funding represents approximately 30 to 40 percent of the budget. It remains to be seen how much of that money will be taken from these critical accounts to pay the BCA bill. Obvious answers are program cancellations and reduced procurement quantities.

There is a better way to save money, though, and that is through administrative changes to the Pentagon’s acquisition system. Many studies show that cost overruns in major acquisition programs average around 70 percent. Some large programs have unit costs overrunning many times the average unit cost targets. A much more efficient and disciplined acquisition system has the potential of lowering weapons costs substantially, perhaps as much as 10 to 20 percent. The savings over time could add up to hundreds of billions of dollars.

So how is this efficiency to be achieved? One place to start is the Goldwater-Nichols legislation, which needs to be adjusted to bring the service chiefs back into the acquisition chain of command. Only a service chief can effectively make tradeoffs among budget, requirements and program performance. There ought to be much more focus on disciplining the requirements process. Adjusting requirements downward is a much needed process that is done poorly. And “block” development, where a system is developed in increments, on time and on schedule, seems to have been forgotten.

Then, there is massive red tape. Every program is saddled with a plethora of reviews and administrative procedures that seem to have plunged the entire system in quicksand. Program managers spend more of their time building PowerPoint slides and briefing their program than they do on actual program management. This is nothing new. The Packard Commission identified the same problem in its seminal study on acquisition nearly three decades ago. “All of these pressures, both internal and external to DoD, cause the program manager to spend most of his time briefing his program. In effect, he is reduced to being a supplicant for, rather than a manager of, his program,” the commission said.

If anything, the process today is even more encumbered than it was in the time of the Packard Commission. Recall, too, that one of the objectives of Goldwater-Nichols was to create a direct line from program manager to program executive officer, and then to service acquisition executive. Today, this is being violated in the extreme.

One alarming consequence of this dysfunctional system is that talented program managers are becoming an endangered, almost extinct species. Managers who can push back against unreasonable requirements or burdensome processes, and can execute to cost and schedule, are hard to find.

We have a system that doesn’t properly select, grow and nurture acquisition talent. Nor do we have a system that frees up talented managers to execute programs that are unencumbered by excessive process. The system we have fails to recognize that acquisition is a profession much like law, medicine or investment and financial planning.

What is needed is a system where top leadership is deeply involved in the process of growing properly credentialed acquisition professionals, where that leadership is deeply involved in balancing budgets, requirements and program performance, and where program content is adjusted downward to preserve budget flexibility and balance.

This system needs to be staffed by top players and must have strong functional support in the areas of cost, engineering and contracting. It should focus on setting a “baseline” in programs and structure them in true evolutionary developmental fashion, by taking account of technology readiness at major program milestones.

This might seem hard to do, but in reality it is simple. The tough part is to back away from the excessive layering of processes that involves literally thousands of overseers who have a say in, but no responsibility for, acquisition performance. It is impossible to hold acquisition managers accountable when they have little to no say in program strategy. Indeed, it is impossible to hold anyone accountable for program performance in the system we have today. Clearly, we have more reviewers than workers.

But the system can be fixed, and the incentive is clearly there. The Defense Department needs to reduce spending and there is plenty of money to be squeezed from inefficient acquisition programs. A properly functioning procurement system could easily save about 10 percent of total defense spending. Poorly planned programs, with undisciplined requirements, that are burdened by excessive process with little accountability must become a thing of the past.

Defense programs that deliver incremental capabilities on cost and on schedule must be the goal. This will happen if we are willing to let go of the status quo.

That 10 percent budget savings in the investment accounts sure would be nice to have in this tough fiscal environment.
Reader Comments

Re: Time Is Right to Clean Up Defense Acquisition

Dear Sir,

Thank you for your frank assessment of the state of acquisition in the Defense Department. The target of saving money benefits the Defense department (more technologies), military contractors (keep more jobs, develop more technologies), and citizens of the USA (rendering us all safer). We all benefit and must endeavor to achieve your objectives.

In support of these objectives, may I recommend that part of the acquisition improvement program include the Capability Maturity Model Integration (CMMI) for Acquisition. It comes from the same lineage as the CMMI for Development that has instigated measurable improvements in the disciplines of software, hardware, and systems engineering since 1999. It is a model containing process requirements stating “what” must be done, leaving it to the user to determine “how” the process requirement should be met based on the user’s context. It includes infrastructural requirements that ensure that solutions are well defined, trained, measured, maintained and remain reasonable over time.

It is very helpful in answering the question: “I have a mess, need to improve, but where do I begin”?

Some of the topics that require model user solutions are mentioned below. I would be happy to furnish you with further information if you wish.

Sincerely,

John Ryskowski

JFR Consulting
Cell 310 292 9288
Office 310 937 6077
jfryskowski@yahoo.com

- Acquisition Requirements Development (ARD) is to elicit, develop, and analyze customer and contractual requirements.

There are two types of requirements: customer requirements, which address the needs of relevant stakeholders for which one or more products and services will be acquired, and contractual requirements, which are the requirements to be addressed through the acquirer’s relationship with suppliers and other appropriate organizations. Both sets of requirements should address needs relevant to later product lifecycle phases (e.g., operation, maintenance, support, disposal) and key quality attributes (e.g., safety, reliability, maintainability).

The requirements included in the solicitation package form the basis for evaluating proposals by suppliers and for further negotiations with suppliers and communication with the customer. The contractual requirements for the supplier are baselined in the supplier agreement.
Requirements are refined throughout the project lifecycle. Design decisions, subsequent corrective actions, and feedback during each phase of the project’s lifecycle are analyzed for their impact on contractual requirements.
Requirements analyses aid understanding, defining, and selecting requirements at all levels from competing alternatives. Analyses occur recursively at successively more detailed levels until sufficient detail is available to produce contractual requirements and to further refine these requirements, if necessary, while the supplier builds or configures the product.
Involvement of relevant stakeholders in both requirements development and analyses gives them visibility into the evolution of requirements. Participation continually assures stakeholders that requirements are being properly defined.


- Agreement Management (AM) is to ensure that the supplier and the acquirer perform according to the terms of the supplier agreement. It involves the following activities:
Executing the supplier agreement
Monitoring supplier processes
Accepting the delivery of acquired products
Managing supplier invoices

The legal nature of many acquirer-supplier agreements makes it imperative that the project management team is acutely aware of the legal implications of actions taken when managing the acquisition of products or services.
The supplier agreement is the basis for managing the relationship with the supplier and defines the mechanisms that allow the acquirer to oversee the supplier’s activities. It is also the vehicle for a mutual understanding between the acquirer and supplier. When the supplier’s performance, processes, or products fail to satisfy established criteria as outlined in the supplier agreement, the acquirer may take corrective action.


- Acquisition Technical Management (ATM) is to evaluate the supplier’s technical solution and to manage selected interfaces of that solution and focuses on the following:

Conducting technical reviews of the supplier’s technical solution
Analyzing the development and implementation of the supplier’s technical solution to confirm technical progress criteria or contractual requirements are satisfied
Managing selected interfaces

Typically, these activities interactively support one another to gauge technical progress and allow effective management of project technical risks. Different levels of detailed analysis, depending on the development progress and insight required, may be needed to conduct technical reviews to the acquirer’s satisfaction. Prototypes, simulations, and technology demonstrations created by the supplier can be used to help gauge technical progress, gauge readiness for technical reviews, assess technical risks, and gain knowledge needed to manage selected interfaces.

Acquisition Technical Management activities involve measuring technical progress and the effectiveness of plans and requirements. Activities include the ones associated with technical performance measurement and the conduct of technical reviews. A structured review process should demonstrate and confirm completion of required accomplishments and exit criteria as defined in project planning and technical plans (e.g., the systems engineering management plan). These activities discover deficiencies or anomalies that often result in corrective action.


- Acquisition Verification (AVER) is to ensure that selected work products meet their specified requirements and addresses whether acquirer work products properly reflect specified requirements.

Verification is inherently an incremental process because it occurs throughout the acquisition of the product or service, beginning with verification of requirements and plans, progressing through the verification of evolving work products and culminating in the verification of the completed product.


- Acquisition Validation (AVAL) is to demonstrate that an acquired product or service fulfills its intended use when placed in its intended environment.

Validation activities are performed early (concept/explorations phases) and incrementally throughout the project lifecycle (including transition to operations and sustainment). These activities can be applied to all aspects of the product and its components in any of their intended environments, such as operations, training, manufacturing, maintenance, and support services. (Throughout the process areas, where the terms “product” and “product component” are used, their intended meanings also encompass services, service systems, and their components.)

End of topics

John Ryskowski on 07/01/2013 at 14:18

Re: Time Is Right to Clean Up Defense Acquisition

Agree that savings are probably very high, but don't believe the root cause of the cost (and schedule) is right. Lots of evidence to suggest that all players are incentivized to "oversell" and no consequences for poor performance and that leads to very inefficient and expensive consequences. War fighers want the next new technological capability and "sell it" as mature. Contractors propose they can do it for the time and $ provided because it makes stockhoders happy. PM's want the project because it means promotions. And Congressal reps want the $ in their district to keep their positions. A number of researchers have studied this in detail and nearly all agree it is all about the accountability/incentives/disincentives. Until we change the incentives for good performance (completion of initial stated capability within 10% of projected schedules and cost), we will continue our same sorry performance in DoD an other government orgainizations.

Tom Coonce on 07/01/2013 at 13:51

Re: Time Is Right to Clean Up Defense Acquisition

This is right on target. I see this every day. As a FAA Part 145 aircraft repair station, we perform heavy maintenance on military derivatives of civilian aircraft. But it costs 30%+ more and takes twice as long to complete the military aircraft than their civilian counterparts--all because of the enormous layers of administration, review and additional inspections. The taxpayer and the warfighter suffer, but the Army won't address the problem. It's easier just to cut capability (number of aircraft).

Gene Gunnin on 07/01/2013 at 11:31

Re: Time Is Right to Clean Up Defense Acquisition

Look at the incentive structure the acquisition workforce lives in. People are told to think long-term, but only short-term (within the annual performance review cycle) incentives exist. There is no penalty for selling tomorrow short to make today's numbers look good - just move before the fan needs cleaning again. (And senior people - program directors specificaly - move every 18-24 months, so it's pretty easy to get outta Dodge before your decisions come back to haunt you - if you have the guts to make decisions at all.) Contracting officers are famous for being zero-risk bottlenecks. 2Lts/Ensigns come into the acquisition workforce having zero operational or sustainment/support experience and are taught "common practice" as if it is "common sense."

Fix the incentives; fix the rewards and punishments (including punishments for failure to act AT ALL) and the results will follow.

Steven Glazewski on 07/01/2013 at 11:18

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