New DOD acquisition strategy sparks debate

Newly released guidelines call for better definition of requirements for acquiring services

In discussing the 23-point memorandum on acquisition reform released yesterday, Pentagon acquisition chief Ashton Carter outlined plans to restructure the way the Defense Department does business – and, perhaps above all, called for new ways to communicate needs and expectations.

“We don’t even have a standard way of talking about services in the department. It’s as though you were buying weapons and you never distinguished planes, ships and tanks,” Carter said at a briefing held Sept. 14 at the Pentagon. “There are a lot of different kinds of services. They all require different managerial structure. And we need to begin to manage to purpose in this area.”

The guidance, issued by Defense Secretary Robert Gates, establishes a standard taxonomy to address the issue, Carter said.

It's also raising questions in the defense contracting community about the best approaches to reforming DOD acquisition.


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Better communication is something the private sector can endorse, according to industry analysts. The establishment of dialogue is an important preface to the implementation of new guidelines for contracting and acquisition, which could end up being tough to swallow for some contractors who will be forced to play by new rules.

“We all appreciate the tenor – it’s collaborative rather than prescriptive,” said Stan Soloway, president and chief executive officer of the Professional Services Council. “Their commitment to work collaboratively with industry on implementing the strategies outlined is most gratifying.”

The implementation of the new guidelines is perhaps the crux of DOD’s acquisition troubles – analysts say that much of the guidance isn’t new, but actually familiar regulations that have failed to be properly implemented in the past.

“The general language is not dramatically new, but there are still a lot of policies and details to work through,” Soloway said. For example, government and industry have both been calling for a new incentive structure for contracting activity for years, he added. “These are important goals we all agree on,” he said.

Another aspect everyone in the defense contracting community seems to agree on is that the pending change in the status quo for acquisition may eventually extend beyond DOD. 

“The guidance is going to have significant impact on the way the government purchases IT services, systems, software and so on. It won’t be limited to DOD – DOD often takes the lead in acquisition strategies,” said Warren Suss, president of federal IT consultancy Suss Consulting.

According to Suss, the acquisition reform is going to accelerate some trends already being seen in the marketplace, particularly in the IT arena – such as a marked shift away from time and materials contracts to performance-based contracts.

“We’re already seeing agencies across DOD changing their acquisition strategies to fixed-price contracts,” Suss said. “The combined effect is going to change the competitive landscape.”

And competition within the contracting process is a key target for Carter and Gates, who stressed the need to improve competition as means of boosting efficiency and productivity.

“Competition is a major source of productivity in the defense industry, as it is in commercial industry. This guidance gives our managers some further direction in how to obtain real competition,” Gates said at the Pentagon briefing. He and Carter both highlighted measures designed to improve competition, including examining contracts that draw only one bidder -- $55 billion worth of contracts, according to Carter.

But not everyone agrees with DOD’s assessment of competition. Instead, some experts argue that solicitations that get few bids, even only one bid, may reflect contractors who understand the requirements and don't bid if they know they can't meet the needs. And according to Soloway, expansion of the Navy’s Preferred Supplier Program, which rewards contractors who have proven exemplary performance in the past with new contract awards, may actually harm competition.

Preferred Supplier "could exclude from competition new entrants to the Navy market by giving inappropriate weight to a bidder’s preferred supplier status,” Soloway said.

Furthermore, some say the government is taking on added burden with the new rules – and like the way acquisition has failed in the past by using old-school, large-scale approaches to new-school, small-system acquisition, creating another layer of oversight could cause headaches down the road.

“We’re operating in an uncertain environment, and a lot of these productivity enhancements work best in a steady-state environment. There’s definitely risk involved,” Suss said.

Reader Comments

Tue, Oct 5, 2010

Until people like Mr Carter understand that the true problem in Acquisition is the over bloated headquarter staffs, the ever increasing polices, processes, mandates etc that an acquisition program needs to negotiate there will never be true reform. Mr Carter has spent the last 2 decades of his life on staffs of various types. So his bag of tools is the hammer of policy. Every problem therefore looks like a nail. See a problem, make a policy, problem fixed. The world is not this simple. What he fails to see is that the ever increasing overhead of DoD Acquistion is the result of reform on top of reform on top of reform whose solution was new and better policies. If that approach worked so well why are we even discussing acquisition reform? The truth is this does not work. Drastic change is needed, not a new pile of policy documents. I laughed out loud as I read this document adding new policies here and there, restricting this or that, and then I read the header on 'reducing non-productive processes and bureaucracy.' Seriously? Did the folks who wrote the first 12 pages of this memo talk to the folks who wrote that part? True reform has to start with drastic cuts to headquaters, pushing decision making significantly lower than it is today, eliminating the barriers to truely saving costs by giving managers the flexibility they really need in directing their programs. The problem is these senior managers think only they can make a sound decision. From down in the trenches it is just the opposite. Does Mr Carter and his staff think these new restrictions are going to save 1 of every 4 acquisition dollars? Not a chance. In fact they may do just the opposite. Until they are serious about addressing the true problems and making real change, rearranging the chairs on the Titanic in the pattern they want versus the last guy will not save the ship. Meanwhile those of us down at the execution level can see what is coming, just like the last N times the 'reformers' did their thing. More processes, more overhead, more time and engery spent to try to accomplish the same thing. They ask us to 'do more with less' but wht we need is less of them and more freedom and flexibility to operate. It is a matter of trust and they just dont trust anyone but themselves.

Tue, Sep 21, 2010 Jeffrey D. Sacks, Chief Technology Officer, Access Systems, Inc. Reston, VA

Contractors need to find more effective ways to deliver projects, and leveraging best practice models can help. SEI has recently established a Capabilities Maturity Model for Services. SEI believes that companies with highly optimized project processes and measures will be able to consistently provide more effective delivery for their clients. This will also enable transparency end to end from within an organization through to the government.

Mon, Sep 20, 2010 Barry Virginia

I believe it can be argued that how an organization buys is directly correlated with how it is run. As long as DoD or any other major federal organization operates with an eye on legislators who want contracts for firms in their state or district; federal managers are evaluated on the size the level of the organizations under them; federal managers rarely suffer when they create a disaster of a contract; federal civilian managers cannot be fired for incompetence and are regularly promoted across organizations by departments just trying to get rid of them; major projects are rarely evaluated on their true value and success, but are often given more funding to cover up their failure... then, sadly, no amount of "new" procurement strategy will change very much.

Fri, Sep 17, 2010

In the discussion of Indirect Expenses in the 24-point article, the title was correct, but then it went on to talk about Overhead which is just one of many elements of Indirect Expenses and can be reallocated from Overhead to other areas at the will of industry (other examples of Indirect Expenses are General and Administative - G&A - and Fringe. Should Cost was used to DOD's advantage many years ago, but was forsaken due to the intense manpower it took by both program offices and industry.

Fri, Sep 17, 2010 D.C. Metro Area

T&M contracts are the exact correct type of contract to use when the Contract Types section prosciption is followed. Suss says Agencies are beginning to go to Fixed price. Well, not exactly - they, in many cases, have gone to Fixed Price Level of Effort or Firm Fixed Price Level of Effort and administer the contract exactly like a T&M contract. In other words, they are calling a pig a duck to get the bureaucrats in the headquarters and the Pentagon off of their back. Selecting contract types is supposed to be a contracting officer decision based upon the facts of the business situation. Got a lose-lose situaton here.

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