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Dr. Nancy SpruillDirector of Acquisition Resources and AnalysisUnder Secretary of Defense (AT&L)
FY 14-15: Agency Priority Goal
Reform the DoD acquisition process
Priority Goal
Goal Overview
In the Better Buying Power (BBP) initiative announced in September 2010, the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)) directed the acquisition professionals in DoD to deliver better value to the taxpayer and warfighter by improving the way DoD does business. Next to supporting the Armed Forces at war, he stated that this was the President’s and Secretary of Defense’s highest priority for DoD’s acquisition professionals. USD(AT&L) pointed out their continuing responsibility to procure the critical goods and services U.S. Armed Forces need in the years ahead without having ever-increasing budgets to pay for them. It has taken years for excessive costs and unproductive overhead to creep into DoD’s business practices. The roadmap for addressing these problems includes targeting affordability, controlling cost growth, and promoting real competition. The USD(AT&L) re-emphasized the management philosophy of continued improvement when he introduced Better Buying Power 2.0 in November 2012. This announcement encompassed 36 initiatives organized into seven focus areas, and included a new focus area that reflected the importance of the total acquisition workforce. The basic goal of BBP; however, remains unchanged: deliver better value to the taxpayer and Warfighter by improving the way the Department does business.
The key challenge for DoD is to put its acquisition programs on sound footing from their beginning. DoD can guard against cost growth by ensuring a match between requirements and resources when the APB is established at program initiation or Milestone B. In other words, acquisition programs begin with mature technologies, adequate funding and personnel resources, and sufficient time to finish product development. Also, requirements must be achievable given those resource constraints and must be agreed upon and remain largely intact throughout the product development phase. DoD must guard against so-called “requirements creep.” Furthermore, disciplined and constant oversight is needed. The Services and program managers (PMs) also need to overcome any shortcomings in staff capabilities to perform the kind of portfolio analyses and systems engineering tradeoff analyses that would strengthen DoD’s ability to understand and control future costs from a program’s inception. Regarding competition, the most common reason for DoD noncompetitive awards is that one contractor is the only responsible source for the procurement. The challenge for DoD is to support and strengthen the supplier base to give the Government more supply options. The second most common reason is “authorized by statute.” For example, awards under the Small Business Administration’s 8(a) business development program.
Strategies
Implementation Strategies
For the competition measure, there is renewed focus on continual improvement in competition achievements within DoD. In September 2010, the Under Secretary for Defense for Acquisition, Technology and Logistics developed a plan to improve the overall rate of competition and the rate of effective competition through development of competitive strategies at each program milestone and removal of obstacles to competition.
USD(AT&L) reset agency priority goal 5.3.1-2E in FY 2014 to 58% based on FY 2013 achievements with one percentage point annual increases planned for future years. Component Competition Advocates were directed to address steps taken to improve competition in FY 2014 and plans for continued improvement in FY 2015. AT&L’s Defense Procurement & Acquisition Policy (DPAP) continues to work with component competition advocates to identify areas that lend themselves to improved competition with procurement of services identified as a focus area. USD(AT&L) memo on "Improving Small Business and Competition Opportunities in Services Acquisitions," dated March 13, 2012, seeks to increase competition and small business participation in identified Services’ portfolio groups.
USD(AT&L) memo “Actions to Improve DoD Competition,” dated August 21, 2014 prescribed a number actions to be taken. The first action addressed focusing senior leader attention through a recurring agenda item at meetings that would highlight competition measures to increase visibility and accountability. The first such B-SIG meeting was held on November 6, 2014 and focused on competitions results, tools, trends and guidance to increase competition. The Military Departments senior leaders each addressed their competition results and respective efforts to address competition. Competition is also forecasted as a quarterly agenda item at the B-SIG scheduled through FY 2016.
In December 2014, Defense Procurement and Acquisition Policy (DPAP) published “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense" which highlights various approaches that may be used to competitively fulfill requirements. DPAP initiated a Defense Federal Acquisition Regulation Supplement (DFARS)/Procedures, Guidance, and Information (PGI) Case 2014-P021 to address some of recommendations in the August 2014 USD memo. Other regulatory changes are under consideration. The guidance and requirements in this memorandum were incorporated in the DFARS, Procedures, Guidance, and Information (PGI) (Case 2014-P021) on April 20, 2015.
DPAP also initiated quarterly publication of “DoD Competition Reporting,” which is distributed to the Military Departments and Defense Agencies. The reports highlight the Component’s competition metrics and also include Analysis of Military Department’s Subcomponents.
On April 13, 2015, Acting Director DPAP signed a memorandum to the Components entitled “Noncompetitive Contracts Awarded Based on Urgency.” addressing three recommendations in GAO Report, GAO-14-304, "Federal Contracting: Noncompetitive contracts Based on Urgency Need Additional Oversight," dated March 25, 2014.
To prevent Major Defense Acquisition Program (MDAP) breaches, control cost growth, and reduce cycle time for newer programs, DoD has taken a number of initiatives. One key change is strengthening the front end of the acquisition process through new policy and procedural guidance. All programs must proceed into the process via a mandatory process entry point, the Materiel Development Decision. This will ensure programs are based on rigorous assessments of alternatives and requirements. Other changes that are designed to reduce technical risk are the requirements for a Preliminary Design Review and an independent review to certify the maturity of technologies before Milestone B.
DoD’s BBP initiatives focus attention on achieving affordable programs, control costs throughout the product lifecycle, incentivizing productivity and innovation in industry and government, the elimination of unproductive processes and bureaucracy, promoting effective competition, improving tradecraft in acquisition of services, and improving the professionalism of the total acquisition workforce. The initiatives under Better Buying Power 2.0 include:
Achieve Affordable Program
- Mandate affordability as a requirement
- Institute a system of investment planning to derive affordability caps
- Enforce affordability caps
Control Costs Throughout the Product Lifecycle
- Implement “should cost” based management
- Eliminate redundancy within Warfighter portfolios
- Institute a system to measure the cost performance of programs and institutions and to assess the effectiveness of acquisition policies
- Build stronger partnerships with the requirements community to control costs
- Increase the incorporation of defense exportability features in initial designs
Incentivize Productivity & Innovation in Industry and Government
- Align profitability more tightly with Department goals
- Employ appropriate contract types
- Increase use of Fixed Price Incentive contracts in Low Rate Initial Production
- Better define value in “best value” competitions
- When Lowest Price, Technically Acceptable is used, define Technically Acceptable to ensure needed quality
- Institute a superior supplier incentive program
- Increase use of Performance-based Logistics
- Reduce backlog of DCAA Audits without compromising effectiveness
- Expand programs to leverage industry’s Independent R&D
Eliminate Unproductive Processes and Bureaucracy
- Reduce frequency of OSD level reviews
- Re-emphasize Acquisition Executive, Program Executive Officer and Program Manager responsibility and accountability
- Eliminate requirements imposed on industry where costs outweigh benefits
- Reduce cycle times while ensuring sound investment decisions
Promote Effective Competition
- Emphasize competition strategies and creating and maintaining competitive environments
- Enforce open system architectures and effectively manage technical data rights
- Increase small business roles and opportunities
- Use the Technology Development phase for true risk reduction
Improve Tradecraft in Acquisition of Services
- Assign senior managers for acquisition of services
- Adopt uniform services market segmentation
- Improve requirements definition/prevent requirements creep
- Increase use of market research
- Increase small business participation
- Strengthen contract management outside the normal acquisition chain – installations, etc.
- Expand use of requirements review boards and tripwires
Improve the Professionalism of the Total Acquisition Workforce
- Establish higher standards for key leadership positions
- Establish stronger professional qualification requirements for all acquisition specialties
- Increase the recognition of excellence in acquisition management
- Continue to increase the cost consciousness of the acquisition workforce – change the culture
These initiatives reflect the recommendations from DoD and GAO research and evaluations. GAO’s annual report (dated 29 March 2012) on selected DoD weapon system acquisitions found that DoD has continued to make improvements in the knowledge that programs attained about technologies, design, and manufacturing processes at key points during the acquisition process. GAO pointed out that programs were beginning to implement new DoD acquisition reform initiatives such as developing affordability targets and preparing acquisition strategies that use competitive prototyping and ensure competition or the option of competition throughout the acquisition life cycle.
BBP 3.0, released in 2014, continues the focus on continuous improvement through a new emphasis on initiatives that encourage innovation and promote technical excellence. This version of BBP renews the focus on the capabilities the department provides to troops. Some of these focus areas carried over from BBP 2.0, because they are central to what the department is trying to achieve. BBP 3.0 is also aimed at strengthening the professionalism of the acquisitions corps and developing better relationships with industry through incentives and removal of barriers and red tape to ensure the department can achieve dominance while still controlling lifecycle costs.
Eight focus areas of BBP 3.0 include:
- Achieve affordable programs;
- Achieve dominant capabilities while controlling lifecycle costs;
- Incentivize productivity in industry and government;
- Incentivize innovation in industry and government;
- Eliminate unproductive processes and bureaucracy;
- Promote effective competition;
- Improve tradecraft in acquisition of services; and
- Improve the professionalism of the total acquisition workforce.
While some of the larger objectives remained the same. It’s no longer sufficient just to control lifecycle costs, as was the case under BBP 2.0. As adversaries have become more technically adept and new threats emerge, the acquisitions community has to be prepared to adjust as it plans new programs and ensure their programs will build dominant capabilities.
Progress Update
DOD 2015 Reform the DOD Acquisition Process - Goal Attainment Statement
The Department of Defense has made progress towards the "Reform the DOD Acquisition Process" agency priority goal. The Department continued to assess the 2015 performance results and ensured appropriate corrective actions were taken.
In 2015, for Major Defense Acquisition Programs there were no Nunn-McCurdy cost breaches, and the median cycle time change from the approved baseline as well as the average rate of cost growth met or exceeded performance expectations. The Department continues work to improve competition through the Better Buying Power initiatives by including competition as a recurring agenda item at Business Senior Integration Group (B-SIG) meetings. Senior leaders and acquisition executives continue to focus on competitions results, trends and guidance/best practices to increase competition.
On September 16, 2015, the Undersecretary of Defense for Acquisition, Technology, and Logistics, Mr. Frank Kendall released the third annual report on the Performance of the Defense Acquisition System to provide data and analysis so the Department of Defense can see how it is doing, measure the effectiveness of ongoing efforts to improve acquisition, and learn from past experience. This third annual report is available to view at: http://www.acq.osd.mil/fo/docs/Performance-of-Defense-Acquisition-System...
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Of four measures under “Reform the DoD Acquisition Process,” three measures met the FY2015, 4th quarter targets, and one measure missed its target:
Number of Major Defense Acquisition Program breaches: At the end of the fourth quarter of FY 2015, the Department met its target, as there were no cost breaches in the fourth quarter for reasons other than approved changes in quantity.
Median percent increase from the approved APB cycle time: (Target: less than 2%; Result: 0%). At the end of the fourth quarter, the Department continues to meet performance expectations.
Percentage of contract obligations that are competitively awarded: (Target 56%; Result: 52.4%) USD (AT&L) continues to emphasize the importance of maximizing opportunities for competitive contracting. Most recently at his June 25, 2015, Business Senior Integration Group (B-SIG) meeting, USD (AT&L) had the Service Acquisition Executives present progress to date. At the B-SIG, the Services attributed difficulties with achieving their goals to high value sole source FMS and “Bridge” contracts having a significant impact on the FY15 competition rates. Additionally, they indicated that contracts for major non-competitive shipbuilding and aviation programs driven by historical strategic decisions made years ago will continue to impact competition for the long term. The Services are conducting engagements at the Component and Command levels with the “Requirements”, “Acquisition” and “Contracting” communities. Army, in partnership with DAU, is planning the first Army-wide competition training workshop. Based on current projections, the Department does not anticipate making the FY15 goal.
The average percent cost increase for MDAPs was 0.41%. At the end of the fourth quarter, the Department continues to meet performance expectations.
The success in achieving these targets may be directly linked to the Better Buying Power (BBP) initiative announced by the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD (AT&L)) in September 2010, and re-emphasized in the November 2012 memorandum introducing Better Buying Power 2.0.
Of four measures under “Reform the DoD Acquisition Process,” three measures met the FY2015, 3rd quarter targets, and one measure missed its target:
Number of Major Defense Acquisition Program breaches: At the end of the third quarter of FY 2015, the Department met its target, as there were no cost breaches in the third quarter for reasons other than approved changes in quantity.
Median percent increase from the approved APB cycle time: (Target: less than 2%; Result: 0%). At the end of the third quarter, the Department continues to meet performance expectations.
Percentage of contract obligations that are competitively awarded: (Target 53%; Result: 51%) While the Department did not achieve the second quarter target of 53%, the competition rate made a notable improvement from 46.9% in the first quarter to 51.0% for the second quarter. Senior leaders and acquisition executives continue to focus on competitions results, trends and guidance/best practices to increase competition. At the February 19, 2015 B-SIG, the Air Force, Army, and Navy senior leaders addressed their competition results and respective efforts to improve competition. In the second quarter noncompetitive procurements for critical weapons systems and Foreign Military Sales buys continued to affect the Department's competition achievement.
The average percent cost increase for MDAPs was 0.30%. At the end of the third quarter, the Department continues to meet performance expectations.
The success in achieving these targets may be directly linked to the Better Buying Power (BBP) initiative announced by the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) in September 2010, and re-emphasized in the November 2012 memorandum introducing Better Buying Power 2.0.
Next Steps
No Data Available
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Performance Indicators
Median cycle time deviation from the previous year for active Major Defense Acquisition Programs (MDAPs) starting in FY 2002 and after
Average rate of acquisition cost growth from the previous year for Major Defense Acquisition Programs starting in FY 2002 and after
Number of MDAP breaches equal to or greater than 15 percent of current Acquisition Program Baseline (APB) unit cost or equal to or greater than 30 percent of original APB unit cost for reasons other than approved changes in quantity.
Percentage of contract obligations that are competitively awarded
Contributing Programs & Other Factors
DoD’s Military Departments – the Air Force, Army, and Navy – and Defense Agencies have a portfolio of about 81 ongoing major defense acquisition programs (MDAPs). MDAPs are defined as acquisitions having a dollar value estimated to require an eventual total expenditure for research, development, test and evaluation (RDT&E) of more than $480 million in FY2014 constant dollars or, for procurement, of more than $2.79 billion in FY2014 constant dollars.
Of the MDAPs, DoD categorizes nearly 38 as ACAT 1Ds because they are of special interest based on one or more of the following factors: technological complexity; Congressional interest; a large commitment of resources; criticality to achievement of a capability; or a joint (multi- Service) program. DoD categorizes the remaining 43 MDAPs as ACAT 1Cs. In FY2013 dollars, the total planned investment in these MDAPs was about $1.7 trillion as of December 31, 2013.
The key partners outside of DoD are other countries. They participate in international cooperative programs, which are acquisition programs or technology projects that include participation by one or more foreign nations, through international agreements, during any phase of a system's life cycle. International cooperative programs help to reduce weapons system acquisition costs through cooperative development, production, and support; and enhance interoperability with coalition partners. The United States has entered into cooperative programs with other nations for selected MDAPs. The largest international cooperative program is the Joint Strike Fighter (F-35), which has 11 international partners.
No Data Available
