PRESIDENT'S PERSPECTIVE DEFENSE DEPARTMENT
Acquisition Reform Is a National Imperative
The key to getting better capability to warfighters faster is acquisition reform and regulatory modernization. This is obvious to everyone with even a casual interest in acquisition policy. It is easy to jump on the bandwagon, but actually moving forward in this area is extremely difficult.
I am not an acquisition expert by any means, but we do have some brilliant acquisition professionals working with the administration and Congress to address this issue. My intent here is to highlight that it is going to take time, considerable effort, tremendous brainpower, and some compromise for us to move forward. Acquisition reform is a national imperative.
To start to address the problem of how to fix the acquisition system, you have to understand the motivations of the different participants in the process. At their core, everyone wants to support the brave men and women that ensure freedom and security, but there are, of course, additional motivations.
The Defense Department and the services are interested in getting the newest and greatest capability to the field with as much capacity as possible with the resources they are given. The warfighter wants — and should have — the best training, technology and equipment that we can provide.
Lawmakers want to maintain their position of oversight and hold both industry and the Defense Department accountable to be good stewards of the taxpayers’ money. And of course they want jobs and prosperity in their states and districts.
Industry is interested in winning contracts and fulfilling the requirements of the agreement, maximizing financial performance and enhancing shareholder value.
Another consideration when talking about acquisition reform in the defense industry is the uniqueness of the defense market. There is only one buyer, with an increasingly smaller number of sellers. The Defense Department as the buyer is also the regulator and at times a very intense auditor, which can create significant barriers to entry, especially from small and even medium-size businesses.
Add to this congressional oversight and control of the “purse strings,” and the fact that the defense budget is a very large portion of the discretionary part of the federal budget, and you end up with volumes upon volumes of Defense Federal Acquisition Regulations.
One easy pitfall we must avoid is the comparison to commercial industry. A question often asked is “why can’t we do it like Apple did with the iPhone?” The answer is straight forward. While defense companies have the technology and strive to meet the department’s requirements, there are unique attributes of the defense industry I mentioned previously that are impediments to a commercial model.
The Defense Department is the single buyer. It sets the requirements and the budgets — along with Congress — and can even control the competition. In the case of Apple, they controlled the intellectual property, the requirement, the schedule, testing, supply chain and marketing while trying to meet the customer demand. It is just a different paradigm.
The final challenge is the rapid advancement of technology. For the acquisition process to function more effectively and efficiently, the requirements have to be held constant once the process starts. However in today’s environment, because of the length of time it takes to procure a weapons system, when the capability actually reaches the warfighter, it is three to four generations behind.
There is no easy answer to this challenge, but there are some things for which we can advocate that will start to address the issue. First and foremost is adequate and stable funding. We know that economies of scale and predictability drive down cost. You can get more for your money with multi-year buys, or to a lesser extent, block buys and procuring at the economic order quantity.
However in today’s environment, where defense funding is almost exclusively executed by continuing resolution, we can’t achieve even a single year of stable and predictable funding. This “funding death spiral” compounds costs and risks to schedule and performance. Somehow we have to find a way to budgetary compromise and get back into the practice of passing full authorization and appropriation bills prior to Oct. 1, and where it is possible get to economic order quantity and multiyear/block buys.
As I stated previously, we need to hold requirements steady, which of course is difficult with rapidly advancing technology. One way to address this is to speed the engineering, manufacturing and development process by doing significantly more prototyping and by conducting a portion of the systems engineering before the full program of record. You can then potentially spiral in capability with each lot buy and then constantly refresh technology. While this approach will not work in every case, it will significantly help in some instances.
I also believe that we can always improve on our shared communication, cooperation, trust and understanding between the department and industry. For a period of time, because of bad behavior by a few individuals, we limited the dialogue between the customer and industry thereby hurting everyone. There is an ethical and fair way to have robust dialogue between the warfighter and the companies producing the capability to defend the nation.
The National Defense Industrial Association can provide that platform for the legal and ethical exchange of information by bringing government, industry and academia together to discuss and develop solutions to the most challenging issues.
As a defense industry association, NDIA will emphasize acquisition improvement and we intend to be a critical facilitator in realizing the solutions to more efficient and effective acquisition practices to support our warfighters.
Topics: Acquisition, Acquisition Programs, Defense Contracting, Defense Department
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