Chapter 12
ACQUISITION REFORM
The Department of Defense has long recognized the need to find ways to streamline its acquisition system and reduce the cost of the acquisition process both to DoD directly, by reducing DoD's administrative costs, and indirectly, by reducing the costs of DoD's supplier base and thus the amount of money DoD pays for supplies and services received. Complicating DoD's desire to streamline the acquisition system and reduce costs is DoD's obligation to ensure the integrity of the system, both in terms of the system's treatment of the supplier base and in terms of the way in which the taxpayer's dollars are spent.
For many years, DoD suggested to Congress that congressionally imposed government unique requirements, terms, and conditions made it impossible for DoD to make any significant headway in streamlining the acquisition system and processes. Congress responded to this suggestion in the National Defense Authorization Act of 1990, by directing that DoD organize a panel of representatives from government, industry, and academia to study the laws impacting acquisitions and make recommendations about those statutes. The panel finished its work, identifying over 600 statutes that applied to acquisition within the Department. The panel reviewed almost 600 laws pertaining to acquisition and procurement, almost 300 of which were recommended for repeal or amendment. DoD submitted the panel's report to Congress in January 1993. This report forms a large part of DoD's foundation for reforming the acquisition process.
During 1993, the Vice President reviewed the way the government operates and made recommendations for improvement. His report is now known as the National Performance Review (NPR). One chapter of the NPR deals with problems in the way the government's acquisition system responds to its internal customers. The report found that DoD acquisition is a rules laden system which stifles, rather than encourages, risk management.
Based on the recommendations of the panel and the NPR, DoD developed a vision for reforming DoD's acquisition system. The vision was shared with Congress in February 1994 and was entitled Acquisition Reform -- Mandate for Change. In that document, the Secretary of Defense identified the need to move DoD from its web of laws and regulations to guiding principles. The vision also identified the need to reengineer the entire system, one process or step at a time, to ensure that DoD would become the smartest, most efficient, most responsive buyer of best value goods and services that meet the warfighters' needs, relying upon a globally competitive national industrial base to satisfy DoD's requirements.
In the execution of this vision, DoD formed teams of people from throughout the Department, civilian agencies and, where permitted, industry to identify problems, recommend solutions, and develop implementation plans. For the first time, DoD worked hand-in-hand with its industry counterparts to satisfy mutual interests.
ACQUISISTION REFORM LEGISLATION
DoD will continue to work hard with the Administration and Congress to ensure that it can take full advantage of the improvements already made. DoD seeks additional legislative changes that will allow it to fully benefit from the work done by both the panel and the NPR. DoD also seeks legislation that allows the Department to maintain its commitment to the small business community and helps that community become an integral part of a globally competitive national industrial base.
Many of the important recommendations made by the NPR were codified in the Federal Acquisition Streamlining Act of 1994 (FASA). A number of significant pieces of legislation further advance the changes made by the FASA. The first among these is the Clinger-Cohen Act of 1996 (the Act, formerly known as the Federal Acquisition Reform Act of 1996 (FARA) and the Information Technology Management Reform Act of 1996 (ITMRA)), signed into law in February 1996. The Act provides a number of significant opportunities for DoD to further streamline and reduce nonvalue added steps in the acquisition process. Among the most significant changes authorized by the Act is a test of the use of simplified acquisition procedures (SAPs) for commercial items between the simplified acquisition threshold (SAT) of $100,000 and $5 million. This should allow DoD to reduce its administrative costs, and the overhead costs for DoD's vendor base, for purchases of relatively low risk items. This change should also give the Department greater access to the commercial marketplace by eliminating government unique requirements previously cited by industry as a barrier to doing business with DoD. The Act also provides the authority for contracting activities to use SAPs for all requirements between $50,000 and the SAT while the government works to fully implement Electronic Commerce/Electronic Data Interchange (EC/EDI).
The Act also provides substantial relief from cumbersome processes that add little value, but significant cost, to the acquisition of information technologies. The passage of the Act allows DoD to focus on the appropriate use and management of information technology resources. It should also reduce the amount of time an information technology acquisition takes by reducing the number and frequency of protests, while moving the Department in the direction of the use of sound acquisition strategies.
The final piece of significant legislation was the FY 1996 Defense Authorization Act, in which Congress provided DoD authority to align the preparation of independent cost estimates with the level of milestone decision authority.
ACQUISISTION REFORM IMPLEMENTATION
5000 Series Rewrite
The new policy and procedures resulting from DoD's initiative to rewrite
the DoD 5000 series represent dramatic change in almost every major aspect
of the way DoD traditionally does business. The major accomplishments of
the new policy and procedures include:
DEFENSE ACQUISISTION PILOT PROGRAM
The FY 1995 Defense Authorization Act authorized the Secretary of Defense to designate five programs to participate in the Defense Acquisition Pilot Program. The five programs are Joint Direct Attack Munitions, Fire Support Combined Arms Tactical Trainer, Joint Primary Aircraft Training System (JPATS), Commercial Derivative Engine-F-117 Engine, and Non-Developmental Airlift Aircraft. The pilot programs were afforded statutory relief under provisions of the FASA. In addition, the Under Secretary of Defense for Acquisition and Technology (USD(A&T)) designated certain medical, subsistence, and clothing items of the Defense Personnel Support Center and the C-130J program as regulatory relief-only pilot programs. All seven of the aforementioned programs were granted regulatory relief by the USD(A&T). These pilot programs are realizing substantial progress in demonstrating that, through the use of commercial products and commercial practices, military items can be acquired with improved development and delivery schedules, and at reduced contract costs and substantial gains in in-house efficiencies.
DEPARTMENT OF DEFENSE DUAL USE APPLICATIONS PROGRAM
The Department is seeking ways to decrease the cost of new systems by incorporating technologies used by the commercial sector. This is accomplished, in part, through the Dual Use Applications Program (DUAP). DUAP is structured to build on previous experiences with dual-use technology development programs (e.g., experience from the Technology Reinvestment Project) and allows the Services to develop and utilize technologies, processes, and products available to the commercial sector for military benefit. Inserting dual-use technologies during system development will result in increased affordability and performance for military applications; inserting commercial products and processes to upgrade existing military systems will lead to decreased support costs.
COMMERCIAL ADVOCATES FORUM
The Deputy Under Secretary of Defense (Acquisition Reform) established a new electronic Commercial Advocates Forum to accelerate implementation of the new DoD responsibilities to advocate the acquisition of commercial items and commercial practices use, while challenging and eliminating remaining barriers. The forum was launched as an active on-line community on Acquisition Reform Acceleration Day, May 31, 1996, (at URL http://www.acq.osd.mil/ar/cadv.htm) to facilitate communication with and among procuring activity commercial advocates.
ACQUISISTION REFORM TRAINING
The education and training of the workforce are absolutely essential to effectively institutionalize DoD's major priority of accomplishing acquisition reform initiatives. Acquisition reform education and training are a major priority. In each of the required acquisition reform training plans, DoD encouraged the use of multidisciplinary teams to develop and present training to the workforce. DoD seeks to get the right message to the right people at the right time using the most effective method. A draft plan was developed to institutionalize this process within DoD.
Throughout 1996, the Department conducted and sponsored activities and events to educate and train the acquisition community's workforce. There were 11 satellite broadcasts covering FASA implementation, the SAT and Federal Acquisition Computer Network (FACNET), the Single Process Initiative (SPI), the Overarching and Working-level IPT Process, and EC/EDI. These broadcasts informed and educated the acquisition community on the new reforms. The satellite broadcasts included educational videos and an opportunity for workers in the field to ask questions, on the air, of a panel of experts in the various reform areas. Field response to these programs has been very positive.
The hallmark education event for 1996 was the Department's Acquisition Reform Day on May 31, 1996. This was an unprecedented event where the Department's entire acquisition community ceased normal operations and focused on discussing the institutionalization of acquisition reform initiatives. Commanders and managers at all levels took time out from their busy schedules to educate their personnel on pertinent acquisition reform changes and conduct open discussions of those changes. The purpose was to inform, discuss, and provide the Department leadership with feedback regarding what is working, not working, and needs improvement. The Acquisition Reform Day feedback also identified areas of concern and recommendations for further improvements of the acquisition processes. That data has been fully analyzed and acted upon. Acquisition reform must be a continuous improvement process -- if the Department is to achieve and maintain its goal of being a world-class provider of goods and services.
DEFENSE ACQUISISTION DESKBOOK
The Defense Acquisition Deskbook is an automated reference tool that provides acquisition information for all functional disciplines and all Services and DoD agencies. It is designed to provide easy access to the most current acquisition information and provides value in four ways. First, it provides a powerful impetus to reviewing regulatory guidance to determine what is mandatory and what is discretionary by providing a place for the identification of alternative practices and for capturing lessons learned. Thus, an empowered workforce can use its judgment on how to meet the objectives established in the guiding principles. Providing an information source that separates mandatory information from discretionary information leads to a streamlined regulatory regime.
Second, it ties together the acquisition community at all levels. The Deskbook includes guiding principles covering all acquisition disciplines and alternative practices used by all components, at all levels, and from all disciplines. Further, the Deskbook displays this information to every user in the Department. The expected result is a reduction in duplicative policies and an increase in the use of practices that reduce acquisition time and cost.
Third, it provides a direct, timely, and unfiltered link between DoD leaders and the front-line practitioner. In the regulatory based system where regulatory guidance was passed from the top to the bottom, each layer added interpretation and additional guidance. Thus, the practitioner did not know the real intent, the possible variations inherent in implementation, and the limitations on the guidance as it was initially promulgated. Allowing the practitioner to see the guidance as it was originally written, and allowing the practitioner to ask questions or provide comments through the Deskbook's bulletin board, ensures that the intent of the policy initiator is received by the policy implementer. Just as important, the policy implementer can inform the policy initiator of any unintended consequences.
Finally, the Deskbook is more than just a source of information that can be accessed quickly. It is a key to the most important part of acquisition reform -- cultural change. One of the barriers to changing acquisition process is the difficulty in getting the message out as it is intended. By being an impetus for a reexamination of the current regulations, by allowing insight across the acquisition community, and by providing direct, unfiltered information to the entire workforce at the same time, the Deskbook creates cultural change. It does this by giving each member of the acquisition workforce the knowledge to do his or her job better and the freedom to ask questions and challenge assumptions.
SINGLE PROCESS INITIATIVE
In 1994, the Secretary issued a policy memorandum that fundamentally changed the way in which the Department described its requirements. The Secretary directed that performance specifications be used in all acquisitions unless approval was obtained to use a military specification or standard. This requires DoD to describe its requirements in terms of the performance desired and permits industry to offer DoD marketplace solutions that satisfy DoD's requirements. It also permits rapid access to technologies and reduces DoD's costs by allowing the Department to share overhead costs with industry's commercial customers. While this was a significant shift in the Department's behavior, it provided no relief for the tens of thousands contracts DoD previously awarded, which by virtue of their including numerous military-unique and component-unique specifications and standards require the use of multiple processes for essentially the same activity in the same contractor facility.
The Secretary issued guidance in December 1995 known as the Single Process Initiative that allows DoD to start eliminating multiple processes within contractor facilities. The Secretary directed DoD to accept the submission of contractor proposal/concept papers to reduce the contractor's multiple, government-directed business or manufacturing processes at a given site to a single process, where possible. Not only do the DoD contractors benefit from adoption of these process-oriented proposals, but DoD clearly benefits as well. By eliminating duplicative processes, the contractor also eliminates duplicative overhead and becomes more competitive in the global marketplace. As competitiveness increases, DoD realizes two advantages. First, application of the SPI technique contributes to establishment of a reliable source of supply or service to the government that can more readily survive periodic budgetary anomalies. Second, it helps DoD gain access to better and more advanced technologies in which the contractor has the opportunity and incentive to invest, maintain, and improve its global market share. The SPI program also ensures that the mutual benefits associated with this streamlining effort are not offset by administrative expense, by causing applicable government contracts to be modified via block change procedures.
GOVERNMENT PURCHASE CARD
DoD established a process action team (PAT) to look at ways the government purchase card can be promoted within the Department for micro-purchases, interdepartmental transfers, and as a payment vehicle for purchases over $2,500. At the same time, the Comptroller established a similar team to look at accounting and finance impediments to greater use of the purchase card. The teams were guided by a number of goals which included removing impediments to the use of the purchase card; streamlining funding and accounting for card purchases and payments; providing appropriate flexibility for use; and ensuring internal controls protect the government from fraud, waste, and abuse. The teams developed a simplified process for purchase card use with the thrust toward placing the card in the hands of the end-user organizations where it can be efficiently used to fulfill requirements, in keeping with a specific NPR recommendation.
ELECTRONIC COMMERCE/ ELECTRONIC DATA INTERCHANGE
In October 1993, the President issued a memorandum entitled Streamlining Procurement through Electronic Commerce. From July to September 1993, a DoD PAT developed an implementation plan to maximize the use of electronic commerce in contracting. The Deputy Secretary of Defense approved the 19 PAT recommendations on December 20, 1993. The report also formed the foundation for the federal government's process action team recommendation to implement Electronic Commerce in Contracting.
The Department has also worked closely with the Office of Federal Procurement Policy and other agencies to help implement the President's October 1993 memorandum. The Department is participating in a new effort under the aegis of the President's Management Council with a subgroup called Electronic Process Initiatives Committee (EPIC), to help focus top level management attention on electronic commerce. The EPIC is designed to address the many rapid changes occurring in the electronic environment, to ensure business process reengineering is central to modernization of government operations, and to improve customer access and services.
While the Department has run into a number of problems establishing an effective infrastructure to permit electronic commerce, over 80,000 FACNET compliant transactions are occurring each month. In November/December 1996, the Defense Information Systems Agency implemented a much more robust infrastructure that will provide 100 percent accountability, 99.5 percent throughput, and an average speed of service of 58 transactions per minute under a traffic load of 50,000 transactions per day. This capability will allow both larger dollar value and more complex contracts to participate in the EC/EDI process.
Use of electronic commerce for procurement was broadened beyond the scope of the initial PAT recommendations to include orders placed electronically against catalogs and indefinite delivery/indefinite quantity contracts, electronic payment, transactions compliant with FACNET requirements, and Web-based contracting actions. Improvements in DoD's infrastructure, as well as improvements in the use of various procurement methods will continue to be made within the Department.
One area with significant government-wide effect is the Department's plan for a Centralized Contractor Registration (CCR) data base -- a minimum data set of information on federal government partners. Defense is analyzing whether the central repository can be utilized to fulfill needs of other agencies, such as the Small Business Administration and Treasury, as well as providing one single place where all contractor related data, including items such as certifications and representations could reside. The goal of CCR is to minimize the administrative burden of data collection for both industry and government agencies, irrespective of whether a contractor is capable of conducting business electronically. In October 1996, the CCR reached a milestone, with the addition of the capability for contractors to register through a direct dial up modem or via the DoD EC Program Office World Wide Web as well as through the 27 DoD certified Value Added Networks. Approximately 5,000 vendors are currently registered in the CCR with a goal of registering another 250,000 by September 30, 1997.
SMALL BUSINESS ISSUES
The Department is committed to the full participation of small business in a globally competitive national industrial base. Small businesses provide the Department with a substantial resource in the form of access to high technologies and technological breakthroughs that consistently comes from the innovative and vibrant small business community. The decision by the Supreme Court in Adarand vs. Pena forced DoD to reevaluate the manner in which the federal government ensures opportunities for small disadvantaged business. The Department is working with the Administration and the Justice Department to explore new ways of ensuring the continued participation of small disadvantaged businesses in DoD's vendor base.
The results of these initiatives and others will provide meaningful participation by small business, small disadvantaged business, and women-owned small business in a globally competitive national industrial base. These small business initiatives will continue to provide DoD access to leading edge technologies and reliable, customer oriented, quality driven small business vendors.
STATUTORY REPORT
Section 5001(b) of FASA included an annual reporting requirement to Congress relating to the achievement, on average, of 90 percent of cost, performance, and schedule goals for major and nonmajor programs. It also requires DoD to decrease by 50 percent or more, the average period for converting emerging technology into operational capability.
As of September 30, 1996, all but two of 81 Major Defense Acquisition Programs (MDAPs) are meeting more than 90 percent of the aggregate number of cost, schedule, and performance goals for that program. The two exceptions are All Source Analysis System and Chemical Demilitarization programs, both of which are being reviewed for restructuring. Of the 490 nonmajor programs that have been reviewed by the Services, all but 16 programs have met the 90 percent criteria. These programs have been either rebaselined or are being reviewed by appropriate milestone decision authorities.
At the law's enactment date, October 13, 1994, the average period for converting emerging technology into operational capability for major programs was 115 months by comparing program start dates initial operating capability dates for all current major programs. As of September 30, 1995, this average period declined to 113 months. As of September 30, 1996, the average period increased back up to 115 months. This increase of two months since last year was largely due to schedule extensions of six specific programs (Comanche, Combat Service Support Control System, National Air Space Traffic, Patriot Advance Capability-3, JPATS, and Theater High Altitude Area Defense). These schedule extensions were deemed appropriate based upon funding availability and technical progress.
The average period for all MDAPs described above includes a significant number of older programs that were structured and developed using the traditional acquisition process. A more accurate assessment of the effects of DoD's acquisition reform efforts would be to concentrate on those programs that were initiated under the acquisition reform process. Since 1992, 31 MDAPs have been initiated as new starts or modification/upgrade programs. The average period for converting emerging technology into operational capability of these programs is 88 months. These more recent programs are able to fully employ regulatory reform, such as specification streamlining, procurement reform, and integrated product teams to reduce cycle time. The Services have reviewed 490 nonmajor programs and found the average period to be 67 months, about 24 percent shorter than that of the MDAPs.
CONCLUSION
DoD has not finished reengineering the acquisition system, but it has come to the end of the beginning. The Department is in the process of evaluating changes already made and looking at areas where inroads have barely been made. These areas include logistics, financial management, test and evaluation, and requirements processes. There are more cost reductions to be realized, efficiencies to be achieved, and better technology to be acquired and provided to the warfighter.
