Acquisition reform is a major component of the Department’s Defense Reform Initiative and the President’s National Performance Goals 2000. Acquisition reform will continue to play an important role in meeting the warfighter’s needs, smarter and faster, with products and services that work better and cost less and are obtained from a globally competitive national industrial base.

DoD has worked and will continue to work with Congress to make improvements and refinements to DoD’s acquisition system. Acquisition reform legislative initiatives find their basis in the Section 800 Panel Report, the National Performance Review, and the Defense Reform Initiative. In addition, the Department works closely with industry in developing its legislative program.

Acquisition reform items of interest from the FY 1998 National Defense Authorization Act include:

To ensure that information about Acquisition reform initiatives gets to the front-line professional, the Department developed a four-part strategy utilizing satellite broadcasts, e-mail (Acquisition Reform NOW), Internet (Acquisition Reform Home Page), and hard copy materials (Acquisition Reform TODAY). Materials are developed on acquisition reform initiatives in conjunction with industry and then provided to the Defense Acquisition University, which incorporates the changes into the University curriculum. In time, additional media will be added to the information distribution system.

The Defense Acquisition Deskbook is an electronic reference system designed to make current and accurate policy and related information readily available to the Defense acquisition community. In addition to serving as a source document for mandatory direction and discretionary guidance, samples, and lessons learned, this consolidation of information is driving significant improvements in several areas of the overall acquisition process. Specific benefits already derived include integration of information from many sources and higher visibility into the quantity of regulatory information.

Integrating a wide range of information has provided the front-line acquisition professional access to practices and experience from across the entire Department. This system now includes contributions from across the Services, defense agencies, and the start of cooperation with the National Aeronautics and Space Administration and the Department of Transportation. This common core of information is tearing down cross-component barriers to cooperation and communications. Additionally, by increasing the visibility of the myriad of regulatory information, the Deskbook is making the inherent redundancies more apparent and serving as a catalyst for the review and reduction of current documentation. The final result is a better informed corps more able to exercise professional judgment.

The Department has identified 12 specific goals as the cornerstones of its National Performance Review Reinvention Impact Center. Each goal identifies a measurable outcome with significant return to the Department in terms of reducing cost and time. Achieving the Year 2000 Goals will enable the Department to increase its investment accounts and realize required modernization without requiring a topline increase in budget authority. Ten of the 12 goals are discussed in this chapter.

The key measure for this goal is the average elapsed time from program start to initial operational capability, measured in months, for all Major Defense Acquisition Programs (MDAPs) in development for a given calendar year. The 1996 baseline is 132 months, which represents the average cycle time for 58 MDAPs started before 1992. Reducing the average elapsed time by 25 percent will necessitate a reduction from 132 to 99 months. Recent efforts in acquisition reform appear to be succeeding at driving program schedules downward. These efforts include the use of advanced concept technology demonstrations; initiatives to provide program stability through secure, long-term funding; management of program oversight through integrated product teams; and the extensive use of Commercial off-the-Shelf hardware or Non-Developmental Items. Programs initiated after 1992 have a current (predicted) cycle time of 89 months. More work is needed to understand the complex web of factors that lengthen programs. DoD’s plan is intended to address crucial scheduling problems and offer concrete steps to ensure that DoD’s acquisition cycle time goal can be met, and even exceeded.

During Operations Desert Shield/Storm, the responsiveness of the logistics system was degraded by thousands of duplicate orders placed because operational units had inadequate visibility over the status of their requisitions, particularly for critical items. Moreover, an enormous amount of materiel was shipped to the theater, but was not readily available to U.S. forces because of poor control and visibility of these assets. Such problems reduced the readiness of combat forces. Responding to these problems, DoD designated the Army as executive agent to develop a Joint Total Asset Visibility (TAV) program for DoD.

The goal of these TAV programs is to develop a capability which provides DoD users with timely, accurate information on the location, movement, status, and identity of units, personnel, equipment, and supplies. Much of DoD TAV capability will be achieved by accessing already existing or evolving Service/Agency TAV capabilities and business systems. Asset visibility will be measured as the percentage of DoD worldwide inventory using the Supply System Inventory Report in then-year dollars that are visible to the single Integrated Material Manager. The baseline in 1996 was 50 percent.

The time it takes from the date a customer prepares a requisition until the customer acknowledges receipt of the respective item is far too great if the requisition must be satisfied through the wholesale logistics system rather than from assets on hand at the customer’s local military installation. Reductions in the wholesale logistics pipeline enable DoD to improve readiness, while reducing inventory and costs. In addition to order-receipt time, the Department is working to reduce cycle times across all elements of the supply chain. These efforts include greater reliance on both electronic contracting to reduce administrative lead times and flexible manufacturing to reduce production lead time. In addition to this National Performance Review goal, DoD has established aggressive goals to reduce the total supply chain lead time from 557 days in 1996 to under 50 days by 2010.

Beginning in 1997, DoD will be measuring the performance of the wholesale logistics pipeline in a uniform manner. Using actual data that shows how the wholesale system responds to specific customers and various types of requisitions, DoD will be able to identify causes of delay in satisfying customer requirements and take corrective action to expedite the processing of requisitions and the movement of materiel to the armed forces and the activities that support those forces.

The primary objective of current DoD efforts is to build predictability into the performance of the wholesale logistics system, and thereby establish customer confidence in that system. Of equal importance is the fact that the measurement system is expected to be a valuable diagnostic tool for logistics managers. Previous measures have only reflected the performance of the wholesale system relative to selected consumable items. With further experience, DoD may elect to focus on other measures (e.g., the median or mode) if they prove to be better indicators of normal logistics response time.

The key metric for this goal is the elapsed time (in days) from customer requisition to delivery of the materiel utilizing the wholesale system. Data will be assembled on a quarterly basis to monitor progress and guide improvement actions. The average for the reporting periods will be arrayed. The baseline for 1997 was an average logistics response time of 36 days.

The Army Audit Agency estimates savings of $92 per transaction when supplies or services are procured with the government-wide purchase card. The Under Secretary of Defense (Comptroller), Principal Deputy Under Secretary of Defense (Acquisition and Technology), and Deputy Under Secretary of Defense (Logistics) have all issued guidance aimed at increasing usage of the purchase card in order to expand these projected savings while simplifying the overall purchasing and payment process and to provide better service. The purchase card was used for 5 million of the 7.7 million DoD micropurchases in FY 1997.

In order to reach the goal of 90 percent usage for micropurchases by the year 2000, several initiatives have been undertaken. Effective October 1, 1997, all contracting officers will be required to use purchase cards for micropurchases except in narrowly defined circumstances. In addition, all military departments and defense agencies have been directed to remove nonessential technical screening requirements and reduce the categories of items which require such screening controls for purchases made with the government-wide purchase card. Use of the this card will be expanded, especially in business with the Defense Automated Printing Service.

Departmental performance will be determined by monitoring the number of simplified acquisitions valued within the micropurchase threshold, other than purchase card transactions, as reported to the Federal Procurement Data System (x) and the number of card transactions within the micropurchase threshold as reported by the card issuing financial institution (y). Together, these figures will depict total simplified acquisition micropurchases (z). The performance to the goal will be obtained by dividing the purchase card transactions by the total (y/z).

DoD is committed to providing high quality education and training to DoD acquisition community. Continuing acquisition education and training activities ensure that previously certified acquisition members are familiar with new policies and business practices and maintain the currency that a first-class work force needs. The major objectives are to provide and assure participation in continuing education and training activities for DoD acquisition work force. The primary metrics for this goal, with a baseline year of 1997, are:

Since 1988, the Department allowed the weapons modernization accounts to decrease while the force was restructured to meet post-Cold War requirements. Additionally, unanticipated contingency and other unplanned operating expenses caused a steady migration of funds from the investment accounts to Operation and Maintenance accounts. This lower level of investment initially was appropriate as the force was right-sized by retirement of older equipment and systems. Now, equipment has aged to the point that replacement is needed, but the level of procurement expenditures is inadequate. An increase to at least $54 billion annual procurement in 2000 is needed to achieve the required balance towards a goal of $60 billion in 2001.

The Report of the Quadrennial Defense Review provides an overview of how this will be accomplished. Specifically, this goal will be achieved by realistic operational and support programming; force structure cuts; streamlining infrastructure; and additional base closures. The key metrics for this goal are the procurement account and DoD total obligational authority. The baseline is FY 1997 ($44.3 billion). Procurement accounts will be arrayed as then-year dollars and as a percent of the total obligational authority.

Paper transactions encompass all business and information exchange between DoD and its suppliers. Since 1983, DoD has been reducing its reliance on paper transactions for technical data through the Continuous Acquisition and Life-cycle Support (CALS) program. CALS is DoD’s primary proponent for the development of weapon system integrated data environments that enable paperless program management and electronic transactions of program and technical data. In the business area, DoD is implementing electronic contracting procedures. Currently, DoD completes over 30,000 Electronic Commerce/Electronic Data Interchange (EC/EDI) transactions per month across 25 value added networks, and actively support Access America and its specific implementation actions. DoD’s electronic commerce program includes methodologies and solutions that support paperless business applications for program managers in procurement, finance, acquisition, transportation, logistics, and other support activities where cycle time reductions are essential. DoD electronic commerce infrastructure will be interoperable with the evolving federal electronic commerce infrastructure and technologies and will adopt best practices from industry.

This goal reflects DoD’s commitment to employing electronic commerce to:

The goal encompasses the transition of paper transactions that currently occur in the areas of solicitation, contracts, data deliverables, disbursement, and payment to electronic form. The primary metric for this goal is the number of paper transactions as a percent of total transactions in the contracting, data deliverables, government acceptance (DD 250) disbursement, and payment areas. The initial baseline is 17 million transactions in FY 1996. Data will be disaggregated into paper transactions and electronic transactions to calculate the ratio. Data will be assembled on a quarterly basis to monitor progress, report success, and guide improvement actions.

DoD is reducing the acquisition work force consistent with current force structuring. The recent report to Congress, Right-sizing DoD Acquisition Workforce, responded to concerns that the work force might be too large. As the report indicated, the Department’s plan should result in a 25 percent smaller acquisition work force over the period FY 1996 to FY 2000. Section 906 of the National Defense Authorization Act mandated the FY 1996 reduction of 15,000 personnel (acquisition organization less depot skilled trades). The actual reduction was 23,802 (military and civilian). Restructuring efforts will result in elimination of duplicate functions, consolidation of organizations, simplification of procedures, improved professionalism, streamlined processes, and increased efficiency throughout the Department.

Management restructuring and acquisition reform initiatives have streamlined many management tasks and activities, enabling the reduction of manpower requirements at the staff levels and in program offices. The successful implementation of integrated product teams has improved communication and reduced the need for numerous oversight program reviews and evaluations of program activities. As an example, the Defense Acquisition Pilot Programs have experienced significant reductions ranging from 27 to 47 percent in their full-time staffs. Acquisition process improvements will be continuously implemented over the next several years to streamline processes and reduce the manpower requirements. The key metrics for this goal include the number of personnel in acquisition related work force and the number of layers of management. The baseline year is FY 1997.

The primary purpose of this goal is to improve the visibility into total ownership costs. In 1995, DoD established total life-cycle cost as equal to performance with the promulgation of a Cost as an Independent Variable (CAIV) policy. DoD efforts to fully implement CAIV have been hampered by limited visibility into true ownership costs. DoD currently relies on the Visibility and Management of Operating and Support Costs (VAMOSC) system to provide item level cost insight. However, Service differences in implementation and lack of process costs limit the applicability of VAMOSC data on a Department-wide basis. To fully implement CAIV and to assist in reducing near-term operational and support costs, process and product costs must be available and visible.

In April 1997, the Service logistics chiefs unanimously reaffirmed the lack of a robust and/or widespread cost accounting system as the single largest impediment to controlling and managing life-cycle cost. In May-June 1997, preliminary planning meetings were conducted to review cost accounting systems issues.

The National Defense Stockpile (NDS) inventory is a stock of strategic and critical materials (S&CMs) to meet military, industrial, and essential civilian needs during a national emergency when domestic and foreign supplies are projected to be insufficient. The total current value of the 1997 Stockpile is $5.3 billion. Since prices of individual commodities in the Stockpile are subject to market fluctuation, the total value of the Stockpile inventory is also subject to change.

The NDS has bought and sold S&CMs based on a biennial Report to Congress on NDS requirements which evaluates the nation’s needs for various S&CMs for purposes of national defense. Congress must approve the recommendations in the Report before disposals or acquisitions can occur. With the end of the Cold War, NDS requirements have dropped from $7 billion to $43 million.

Excess NDS materials are disposed of through public sale using competitive contracting procedures and, where no market exists, by other disposal methods. Once DoD receives disposal authority from Congress, it prepares an Annual Materials Plan (AMP), which lists the maximum amounts of each material that DoD would sell under ideal market conditions. The Plan is submitted to an inter-agency Market Impact Committee (MIC), which reviews and frequently recommends changes in disposal levels. The MIC, composed of various federal agency representatives, advises Stockpile managers on the projected domestic and foreign effects of all NDS disposals proposed to be included in AMPs. The MIC also reviews comments received in response to notices of proposed NDS disposals published in the Federal Register. MIC comments and reviews are forwarded to Congress along with proposed AMPs. AMP sales are not permitted until Congress has reviewed each AMP. By law, DoD must make maximum feasible efforts to avoid an undue market disruption. Approximately half the time, actual sales lag behind the maximum amounts in the AMP because of market conditions.

Based on disposal authority granted by Congress, sales from 1991 to 1996 were $1.8 billion. In 1996, the top selling materials were cobalt, tin, and nickel, accounting for about 60 percent of total sales. Revenues or payments to the government for the material sold usually occur when the buyer takes delivery of the material, which often lags six months or more after contract award. Therefore, in any given calendar year, on average 60 percent of revenues are collected for contract awards in that year. The objectives of this goal is to reduce the Stockpile inventory through disposals of Stockpile materials, mostly through sales. The stated National Performance Review goals are defined in terms of the dollar value of disposals in NDS inventory. This focus on disposals is important because the value of the inventory varies with market price fluctuations. For example, the book value of the NDS inventory declined only $300 million in the three years between September 1993 and September 1996, notwithstanding actual NDS sales of about $1.6 billion during the same period. This apparent anomaly is accounted for by wide swings in commodity prices during these years. Cobalt, as a significant measurable example, went from under $10/lb to nearly $30/lb due to civil war in Zaire at a time when the Stockpile had more than 40 million pounds of cobalt in its inventory.

There is approximately $21 billion (acquisition cost) of DoD-owned plant equipment, special tooling, and special test equipment in the possession of defense contractors. Ensuring sound business practices for providing, accounting, controlling, and disposing of government property in the possession of contractors is a long-standing issue within DoD. DoD has established a Government Property in the Possession of Contractors Integrated Process Team to review problems associated with government property in the possession of contractors.

The team provided recommendations to an Executive Review Group regarding proposed policies, procedures, and follow-on actions necessary to improve physical and financial control of government property provided to defense contractors for contract performance. Some of the recommendations affect the public and must be published in the Federal Register to obtain public comment prior to implementation.

DoD will meet its 3-year goal by implementing a strategy to curtail the growth of government property in the possession of contractors and reduce inventories of such property. The strategy builds upon DoD’s ongoing acquisition reform efforts directed towards greater use of commercial suppliers, which should result in greater reliance on contractor equipment and less use of government equipment. This strategy includes the following key actions: revising the acquisition regulations if, following public comment, it is feasible to do so, and implementing guidance to reduce the growth of government property in the possession of contractors; articulating the reduction imperative to both government and industry; and conducting a review of existing inventory and disposal of all unneeded property.

The key measurement for tracking progress towards the goal of reducing excess government property is the total dollar amount of government property in the hands of contractors at the end of the year as measured in FY 1996 constant dollars. The dollar amount of equipment disposed of will also be tracked in FY 1996 constant dollars. The baseline dollar amount of equipment residing with contractors was $21 billion in 1996.

The supply inventory is too high to support the declining force structure. From a high point in 1989 of $107 billion, current plans are to reduce supply inventories to $48 billion by 2003 ($56 billion by 2000) (in constant 1995 dollars).

Each military department and the Defense Logistics Agency are reducing supply inventories by improving equipment reliability, reducing logistics response times, acquisition lead times, and other cycle times. They are also reducing supply inventories by improving their requirements processes, by selective outsourcing of weapon system support and other functions, by reducing retention levels in some cases, by having stock shipped directly to the end user by the vendor, and by examining more closely what is being held on the shelf as opposed to disposing of inventory being held in support of weapon systems no longer in use by U.S. forces and those of U.S. allies. The Department continues to draw down supply inventories to match reductions in force structure. The key metric associated with this goal is the value of the supply inventory measured in constant FY 1995 dollars ($70 billion).

Cost growth in major defense acquisition programs is a concern to DoD. Cost growth can be a result of many reasons, including technical risk, schedule slips, and optimistic cost estimating. One of the goals of acquisition reform is to reduce cost growth from all causes.

DoD tracks the rate of cost change in major acquisition programs. It examines the percentage increase or decrease in the total acquisition cost of the common set of acquisition category I programs reported to Congress in Selected Acquisition Reports from one year to the next. Values are adjusted to remove virtually all effects of changes in quantity and inflation rates. The resulting metric measures what current estimates would have been had there been no change in quantity or inflation rates since the last President’s Budget.

This goal assumes cost increases are inherently bad, regardless of cause. The purpose of the goal is to focus on the net cost impact on MDAPs of all of the Department’s activities, and to encourage the components and the Office of the Secretary of Defense to take whatever steps are necessary to either control cost growth directly or to take action to offset the impacts of forces DoD does not control. Responses are expected to include both specific cost control initiatives and process changes. The objective is to keep the metric below 1 percent annually.

The key metric for this goal is the annual rate of MDAP cost change. Each year the MDAP total cost change will be calculated for each year by summing the total cost change of common programs between the prior year and the current year (adjusting for quantity and economic changes) and dividing by the total current estimate of the common programs for the prior year. This metric will track MDAPs and provide a Department-wide measure of program efficiency and cost improvements. The baseline year is 1997 (+.04 percent variance).

The Single Process Initiative (SPI) is the continuation of the process begun in June 1994 to transform the Department’s acquisition system from a specification, how-to, based environment to a performance-based environment. It is tied to the Department’s focus on promoting the integration of the nation’s civil and military industrial bases. In 1995, the Secretary of Defense directed DoD to accept the submission of contractor proposals/concept papers to reduce the contractor’s multiple, government-directed business or manufacturing processes at a given site to a single process, where possible. By eliminating duplicative processes, the contractor also eliminates duplicative overhead and becomes more competitive in the global marketplace. As this competitiveness increases, DoD realizes two advantages. First, application of the SPI techniques contributes to establishing a reliable source of supply or service to the government that can more readily survive periodic budgetary anomalies. Second, DoD gains 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 modifies all applicable government contracts via block change procedures to ensure that the mutual benefits associated with this streamlining effort are not offset by administrative expense.

In its second year, SPI is emerging as a formidable vehicle to reduce Total Ownership Cost. DoD has received nearly 1,200 proposed process changes from over 250 contractors DoD-wide, resulting in nearly 700 modified processes and over $332 million in cost savings/avoidance.

The single most significant change to be made to the way DoD solicits, evaluates, and awards government contracts since the Federal Acquisition Streamlining Act is the Federal Acquisition Regulation (FAR) Part 15 Rewrite. A government-wide team, led by DoD, was formed to rewrite the procedures for negotiating contracts. Significant effort was made to work with industry to develop a process which accommodates the needs of all parties. The rule makes changes in four major areas: pre-competitive range communications between offerors and the government; the criteria for advancing an offerer to the competitive range; competitive negotiations; and proposal revisions. The impact of these changes should be a better understanding between the government and the contractor about the government’s requirement, a better quality product or service, better pricing, and an overall reduction in cycle times.

The Department obtained legislation in FY 1997 that extended 10 U.S.C. 2371, section 845 of Public Law 103-160, other transactions authority for certain prototype projects, to the military departments and other designated officials. This authority provides relief from most procurement statutes and the FAR, providing the Department tremendous flexibility in negotiating agreement terms and conditions. DoD designated the defense agencies as authorized users of this authority. Guidelines for the use of this prototype authority were signed on December 14, 1996.

The President’s Management Council (PMC) identified performance-based contracting (PBC) as an initiative with significant potential payback to the federal government. The PMC believes that by utilizing performance-based descriptions for requirements and a number of other devices in service contracts, a minimum of 15 percent could be saved over nonperformance-based contracting. To implement this initiative, the Department developed training, a checklist for use in PBC contracting, and guidance for incorporation in the Defense Acquisition Deskbook. The Department has submitted a plan to the Office of Federal Procurement Policy for further implementation of PBC. Performance-based contracting is one of the initiatives the Department plans to use to achieve savings to be credited to the modernization accounts.

DoD needs a system that allows and encourages flexibility, innovation, and risk management while reducing the amount of energy expended on administering a fair, effective, and responsive personnel management system. In the FY 1996 National Defense Authorization Act, Congress provided for a civilian acquisition work force demonstration project to determine the feasibility or desirability of proposals for improving the personnel management system.

The Secretary of Defense chartered an Army-led process action team to design a demonstration program evaluating new personnel management policies. The team is composed of functional and personnel specialists from the Services and agencies responsible for acquisition, representatives from the Office of the Under Secretary of Defense (Personnel and Readiness), and the Office of Personnel Management. The team has completed a Federal Register notice which creates a system responsive to the Department’s needs while supporting the personal and professional development of the work force.

Virtually every major study of the major defense acquisition program process in recent years has cited instability as a key contributor to cost and schedule growth in DoD systems. One of the leading causes of instability is volatile funding profiles. These changing profiles result from a variety of factors and competing Departmental priorities.

Program stretchout is deleterious for two reasons. It increases overall program cost by deviating from carefully planned baselines designed to ensure DoD develops and produces weapon systems in an efficient manner, and it ties up resources in the outyears that could have been used for other projects. These funding instabilities are the major cause for long-term growth in weapon systems costs and schedules.

As an outcome of the Quadrennial Defense Review, the Department is establishing a prudent outyear acquisition program stability reserve to offset the kinds of cost growth associated with the risk inherent in complex, technologically advanced programs. A reserve of this nature is a more efficient use of resources over the long term since the Department will reduce the destabilizing effects on other programs and the attendant cost growth. Initially, the Department will start at $250 million in FY 2000 and ramp up to $1 billion by FY 2003. This reserve will be used to only fund those cost increases that arise due to technical difficulties. It is not intended to pay for increases in program quantities or to fund additional requirements or capabilities.

The crafting of performance-based operational requirements documents is a key element of the Department’s acquisition reform effort. To ensure the training provided to requirements writers is consistent with that objective, the Joint Requirements Oversight Council Review Board chartered a Requirements Training Tiger Team in July 1997 to investigate. The team consists of members from the Services, the Office of the Secretary of Defense, and the Joint Staff, whose primary focus will be on joint MDAPs with recommendations to all levels of the requirements writing process.

The Department of Defense recognizes the critical role small, small disadvantaged, and women-owned small businesses play in accomplishment of the defense mission. DoD is committed to fostering small business participation in every aspect of its vendor base. Recognizing the need for increased efficiency and economy driven by continuing resource reductions and the trend to use requirements consolidation as one strategy to obtain cost reductions and streamlining, the Department issued guidance addressing factors that should be taken into account when requirements consolidation is considered. This guidance is aimed at balancing the potential benefits which may result from the consolidation of contract requirements with the Department’s commitment to ensure small businesses full participation in DoD’s acquisition programs.

Section 5001(b) of Federal Acquisition Streamlining Act of 1994 included an annual report requirement to Congress relating to achievement, on average, of 90 percent of cost, performance, and schedule goals for major and non-major programs. DoD was also directed to decrease, by 50 percent or more, the average period for converting emerging technology into operational capability.

As of September 30, 1997, all but five of 85 MDAPs are meeting more than 90 percent of the aggregate number of cost, schedule, and performance goals for that program. The five exceptions are Chemical Demilitarization, Maneuver Control System, Advanced Field Artillery Tactical Data System, Joint Standoff Weapons, and Theater High Altitude Area Defense, which are being reviewed by the military departments.

At the law’s enactment date (October 13, 1994), the average period for converting emerging technology into operational capability for major programs was calculated to be 115 months from program initiation dates to initial operating capability dates for all current major programs. As of September 30, 1995, this average period declined to 113 months. For the following year, the period increased to 115 months. As of September 1997, this period has not changed.

The calculation of the average period of 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 new acquisition reform process. MDAPs started since 1992 have an average period of 86 months for converting emerging technology into operational capability, which is two months less than reported last year. These more recent programs have been able to fully employ regulatory reform, including specification streamlining, procurement reform, and integrated product teams to reduce cycle time.

Total ownership cost is the sum of all financial resources necessary to organize, equip, and sustain military forces sufficient to meet national goals in compliance with all laws; all policies applicable to DoD; all standards in effect for readiness, safety, and quality of life; and all other official measures of performance for DoD and its components.

DoD urgently needs to reduce the total ownership costs of its systems to sustain force modernization and recapitalization. Total ownership costs of systems have increased dramatically over the years. Over 60 percent of the cost of a weapon system is incurred after it is fielded. As DoD retains ownership of weapon systems for longer periods of time, the cost of supporting these systems grows. DoD is taking three actions to reduce the total ownership cost. First, DoD is integrating the management of development and production for systems with the management of operations and support. The purpose of this integration is to provide a total ownership focus to development so that trade-offs can be made between investments in development and reduced costs in support. Second, DoD is reforming the logistics process by reducing logistics response time and reducing the logistics footprint. This effort is especially important for the support of legacy systems that will continue in inventory for many more years. Third, DoD is developing a system that will provide improved insight into total ownership costs and allow management the opportunity to have the information necessary to make more informed decisions.

The Department has embarked on a major initiative to completely reengineer its transportation documentation and financial processes. The goal is to establish a thoroughly streamlined business process that significantly improves the efficiency and timeliness of DoD’s procedures for moving, billing, paying, and maintaining in-transit visibility of its materiel, people, and personal property. Several pilot programs were initiated in October 1997 to improve transportation accounting, simplify documentation, and test credit vehicles for paying selected transportation bills. Concurrently, a full-time Reengineering Team has been established to develop a strategy to completely reengineer the Department’s overarching transportation documentation and financial process by February 1998.

Over the past year, the Department has been working to develop a definitive transportation acquisition policy to bring consistency to the varied transportation acquisition processes that have evolved over time. The policy will seek to strike a balance between DoD transportation readiness goals and the objectives of the Federal Acquisition Streamlining Act. The policy will require that commercial transportation providers commit to support DoD contingency requirements through participation in DoD readiness programs, such as the Civil Reserve Air Fleet and Voluntary Intermodal Sealift Agreement, as a condition for receiving DoD business, and that carriers provide access to their in-transit data. The policy will also require that DoD use best-commercial practices and best-value evolution procedures to acquire transportation services.

DoD has initiated two programs to test improvements in the way DoD obtains moving services for military families’ personal property. The Military Traffic Management Command (MTMC) is initiating a Personal Property Pilot Program in early 1998 to test a reengineered concept of operations jointly established by DoD and industry representatives. Utilizing a FAR-based contract with a best value award will improve the quality of personal property transportation service to military families by requiring full replacement value, on-time pickup and delivery, and reduced loss and damage. MTMC’s aim is to provide improved service through competitive, long-term contracts. The Army is testing a concept at Hunter Army Airfield, Georgia, which provides service members a relocation package that includes household goods management and commercial relocation services, (e.g., home finding and home selling/buying). This is a quality of life initiative that changes the way the Army relocates its members. Army members will no longer have to integrate their own moves. The Hunter test offers services that positively impact quality of life, e.g., full replacement value coverage for loss/damage, residence/office counseling, and direct claims settlement within 30 days. The Hunter test is a model for DoD that seeks to outsource non-core competencies and reduce infrastructure. If successful, DoD intends to expand the project to other installations.

DoD is integrating environmental concerns into the acquisition reform process and helping reduce weapons system life-cycle costs that are driven by environmental requirements, while also improving environmental performance. About 80 percent of the hazardous materials used by DoD are attributable to the acquisition process. DoD’s emphasis is on reducing costs and meeting existing or emerging compliance requirements by preventing pollution at the source. At the heart of these integration efforts are sound business practices, for example, the Joint Group on Acquisition Pollution Prevention (JG-APP), which was established by the Joint Logistics Commanders to work with industry to eliminate hazardous materials in the manufacturing of weapon systems. JG-APP helps acquisition program managers adopt new materials and processes that reduce the use of hazardous materials at contractor design and manufacturing facilities. This effort has helped in overcoming barriers to pollution prevention by fundamentally reengineering the approval process for pollution prevention projects in acquisition programs.

In DoD Directive 5000.1, the Department lists the policies and principles that guide all defense acquisition programs. One of the principles sets forth the Department’s environmental management policy. To implement DoD’s policy, DoD Instruction 5000.2 requires that every weapon system program conduct environmental, safety, and health (ESH) analyses. The ESH analyses must be initiated at the earliest possible time in the acquisition process and updated continually throughout the life cycle of the program. The analyses provide the information needed for a program manager to understand the environmental issues that are important to the program and the public, and to develop a strategy for integrating ESH issues.

Acquisition reform continues to be an important element of the Department’s strategy to meet the requirements of the warfighter, by buying smarter and faster and getting better products at a cheaper price. Acquisition reform is a continuous process, focused on identifying and eliminating impediments to new and innovative business processes, as well as incorporating best practices from the marketplace.