Pentagon Unveils New Procurement Rules Aimed at Regaining Tech Edge

With the release of a new procurement rulebook for how the Pentagon should invest in new technology, Defense Secretary Ashton Carter is looking to leave a lasting imprint.

The new policy, called“Better Buying Power 3.0” touches on many of the familiar themes of previous procurement reforms, such as the need to lower costs, expedite the acquisition cycle and motivate contractors to deliver better products. But more than any previous effort, BBP 3.0 is a call to arms to get the Defense Department out of a technological rut.    

“We all think this is one of the biggest issues facing the department and our nation,” Deputy Defense Secretary Robert Work said April 9 at a Pentagon news conference. “Since the beginning of World War II, all of our approaches in defense have assumed that we would have technical dominance over all of our adversaries.”

Carter spent time in Silicon Valley before being tapped as defense secretary and saw first hand the pace of technological innovation in the commercial sector. Much of that innovation has leapfrogged the U.S. military.

“I cannot overstate the sense of urgency that our new Secretary of Defense Ashton Carter has right now,” Work said April 8 at the Army War College. “There is a clock in his head. It's ticking down.  And he shares the sense of urgency, and he is determined to really try to make some significant and lasting changes over the next two years.”

One key goal is to make bold moves that will spur technological innovation, Work said. “We can't wait, as the pace of change and technological innovation will not allow us to simply graft incremental change onto the status quo.”

Some of the essential technologies the military needs to modernize — autonomous guidance systems, visualization, big data, biotechnology, miniaturization, advanced computing, additive manufacturing — were pioneered by the Defense Department in the 1970s and 1980s but have migrated to global commercial industries.

The challenge for the Pentagon is to find ways to recapture that technology and quickly inject it into its weapons programs, said Work. “We are going to have to integrate commercial technology faster. We have to make sure our acquisition workforce is as creative and innovative and vibrant as what we see in the commercial industry.”

How to induce fresh thinking in the procurement bureaucracy and attract new suppliers are central themes of BBP 3.0.

Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall unveiled a draft version in September. He released the implementation instructions April 9. Several months were allowed for public comments, particularly from congressional committees, think tanks and industry groups. It is the third of a series that began in 2010 when Carter introduced BBP 1.0, followed by 2.0 in 2012. The first two iterations dealt with contracting methods and with the process of buying things. BBP 3.0 is less about how the Pentagon acquires products and services, and more about what it needs to buy. It also adds new requirements for cybersecurity and calls for reducing red tape for defense contractors.

The new policy is largely in line with bipartisan proposals by the leaders of the Senate and House Armed Services Committees, which seek to lessen regulatory burdens on Defense Department buyers so they can be more agile and responsive to emerging needs.  

“We want to make it easier for people to do business with us,” Kendall said April 9. “We will use creative contracting. We’ll do more outreach to commercial firms. We want to tap into that flow of technology that is moving so much more quickly than our normal development cycle.”

The Pentagon needs to do a “more effective job of accessing and employing commercial technologies. Our potential adversaries are already doing so,” he said.

BBP 3.0 makes a big push for “open systems architectures” in weapons systems. One of the reasons the military is falling behind the technology curve is that systems are not engineered for easy upgrades. So what might be cutting-edge technology at the outset of a program becomes outdated by the time it gets in the hands of military service members. Kendall said the Pentagon should be able to update weapon systems in response to emerging threats, without having to start over with new a design.

Electronic warfare technology, for example, is advancing rapidly and U.S. systems should be designed to be easily retrofit with new countermeasures. Navy warships, which stay in service for decades, should be modified as anti-ship weapons become more sophisticated.

To do this, managers will be trained to negotiate intellectual property rights with vendors so the government owns the “interfaces” and can modernize systems with new components. Many commercial companies shun the defense market because they fear turning over their intellectual property, and Kendall is aware of that. “We want to do this is a way that is respectful of industry’s rights but also protects the government’s interests,” he said. “I think we’re doing a better job. Once upon a time we didn’t pay much attention to this. We didn’t manage it carefully.

The Pentagon’s industrial policy office will develop a handbook of “methods and best practices” by July 2015 to inform DoD managers on how to engage with commercial technology companies using existing authorities.

Experts said these initiatives are a good start, but it could take years to change a procurement culture where buyers and sellers view each other as adversaries. “We need to be reminded that we're on the same team,” said Beth McGrath, former Defense Department chief management officer who is now an industry consultant at Deloitte.

“We need to figure out how to break down barriers,” she said in an interview. “It starts with leadership, rewarding behavior, incentivizing properly,” she added. “Change is hard.”

Jeffrey Bozman, a government contracting attorney at Covington & Burling, said efforts like BBP 3.0 are worthy pursuits but the devil will be in the details. “One of the overarching concerns is making DoD a more attractive business partner,” he said. “It means figuring out a more effective way to ensure accountability without imposing new regulations.” Further, he said, “There has to be a better understanding of how much protection the government is willing to give to private sector intellectual property. In order to capitalize on cutting-edge technology, they can’t coerce companies to give up trade secrets.”

Susan Cassidy, also a contracting attorney at Covington, noted that the Pentagon made a similar push in the 1990s to get “agility” in procurement and embraced commercial contracting in a big way. In recent years, though, “DoD has been retracting from the more flexible commercial item procurement rules,” she said. Every federal agency is shifting to mostly commercial procurement models except the Defense Department, she said. DoD is more comfortable with its defense-unique procurement process which requires companies to disclose their internal cost data so the Pentagon can determine if the price it’s being charged is fair. That practice is the norm with traditional defense contractors but would not be acceptable to most commercial companies. “DoD often says they want to procure commercial but then they ask for technical data,” said Cassidy. ‘The government has to start thinking like a commercial customer.”

Topics: Procurement, Acquisition Reform, Defense Department