GOVERNMENT CONTRACTING INSIGHTS ACQUISITION PROGRAMS

Panel Urges Acquisition System Reform

7/25/2017
By Sandy Hoe and Alex Hastings

Photo: iStock

The 2016 National Defense Authorization Act established the Section 809 Panel to address fundamental problems with how the Defense Department acquires goods and services to support its warfighters.

It recently released an interim report and supplement advocating in broad strokes for a host of improvements to the acquisition system to better streamline the process and increase industry offerings to the government. 

In meeting with over 200 government and industry representatives, the interim report found that the acquisition system creates obstacles that make it unattractive for small and large businesses alike to offer their goods and services to the government. It explained that “the United States’ ability to maintain technological, military and economic superiority is being challenged,” as our adversaries are recognizing vulnerabilities in our forces and the ability to respond through modernization.

Thus, the Pentagon’s acquisition procedures must be improved to achieve “a degree of agility that DoD is not currently able to deliver,” it said.

To achieve this agility, the interim report recommended several improvements.

One is to improve the adaptability of the acquisition system. The panel observed that the strategic threat has evolved over the years and is currently focused on “peer competitors, mid-tier regional adversaries and non-state actors capable of threatening U.S. interests.” In particular, “Russia and China have embarked on rapid modernization efforts and are aggressively challenging U.S. interests around the world.” 

This threat, combined with the fluid and interconnected nature of world markets, requires an acquisition system that can adjust quickly to evolving threats. This agility requires the ability to procure “fundamentally different capabilities on different timelines.” For instance, the acquisition system must allow for rapid procurement of existing technologies to support the warfighter in theater, while also allowing for acquisition of research-and-development services to ensure the department has access to the latest technology. These different types of acquisitions require greater nimbleness in Pentagon procurements.

The report also called for improving Defense Department and commercial customer relationships. “The era of the traditional defense industrial base is over” and, unlike in the past, the DoD is increasingly dependent on “boutique” defense companies and non-defense companies, it said. Because the department no longer dominates in many sectors, doing business with smaller defense and commercial companies requires that it become a “more sophisticated buyer” by understanding market dynamics and the interests of these companies.

It also recommended improving the allocation of resources. It pointed out that although the United States has the largest military budget in the world and is the largest funder of R&D efforts, other countries such as China and Russia are gaining ground. From 2000-2015, the U.S. defense budget grew 40 percent, while the budgets of China and Russia have quintupled and tripled, respectively. 

Because the U.S. budget is not slated to grow at rates comparable to other countries, the interim report stressed the importance of the department allocating resources effectively, especially by better aligning requirements with budgeting and acquisition policy.

Another recommendation was to simplify the acquisition procedure. 
The interim report recognized the need to improve the attractiveness of doing business with the Defense Department when conducting relatively small-value transactions. 

To that end, the panel recommended simplifying the acquisition process in several ways. First, the thresholds for the simplified acquisition procedures should be raised. Second, the Federal Acquisition Regulation clauses applicable to such procedures should be reevaluated and reduced. It pointed out that more FAR clauses must be considered, and potentially applied, in simplified contracting as compared to time and materials  contracting, despite the fact that such contracting typically poses a greater risk to the government. 

It identified early examples of clauses that should no longer be used, such as the FAR 52.223-18: Encouraging Contractor Policies to Prohibit Text Messaging While Driving. It pointed out that 46 states and the District of Columbia already prohibit texting while driving, meaning this clause is “no longer needed.” 

Finally, the report asked for the empowerment of the Defense Department workforce. It observed that allocating funds and entering into contracts are often driven by arbitrary deadlines or outside pressures, rather than by sound business sense. 

Further, according to the report, “program advocates have strong incentives to underestimate program acquisition costs.” To address these issues, hardworking acquisition officials must be empowered and incentivized to improve the acquisition system. This would include creating an acquisition system that is more simple, understandable and executable. Additionally, acquisition officials should be permitted to develop requirements and allocate funds based on sound business rationales, rather than arbitrary deadlines and outside pressures.

Going forward, the Section 809 Panel stated it would “put forth recommendations that will address the root causes of systemic acquisition problems, rather than just their symptoms.” It vowed to “take a big bite into real change, rather than just nibble around the edges.”

The interim report proposes a platform for reforms that could have a significant positive impact on the acquisition system and result in an increased desirability to conduct business with the department. That said, although the areas identified for improvement show promise, the Section 809 Panel does not plan to provide actionable recommendations to improve these areas until it releases its final report in August 2018. In the meantime, contractors may consider offering such recommendations to the Section 809 Panel.

Sandy Hoe is senior of counsel and Alexander Hastings an associate at Covington & Burlington LLP. Note: Covington is outside general counsel to the 809 Panel.

 

Topics: Acquisition, Acquisition Programs, Contracting, Government Contracting Insights

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