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Chapter 14

ACQUISITION REFORM

The Department has adopted a vision of becoming a world–class buyer of best value goods and services from a globally competitive, industrial base. To accomplish and maintain this vision, the Department must accelerate incorporating the attributes of world–class commercial entities into its processes for acquiring goods and services. These attributes include rapidly inserting commercial technology into products, basic business process improvements, creating a learning organization whose workforce is continually educated and trained to operate in the new environment, and institutionalizing improvements through change insertion. Acquisition and logistics reform, partnered with the Department’s Defense Reform Initiative and the President’s National Performance Goals 2000, is the Department’s catalyst for and architect of continuous, integrated process improvement and change that provides the warfighter with goods and services better, faster, and cheaper.

DEFENSE ACQUISITION GOALS 2000

The Department has identified 12 specific goals (Table 17) as the cornerstones of its National Partnership for Reinventing Government High Impact Agency efforts. 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 top–line increase in budget authority. The Department has already achieved 7 of the 12 year 2000 goals. The remaining goals are either on schedule, or ahead of schedule, for attainment in 2000. All goals but 6 and 8 (discussed in chapter 15) are addressed in this chapter. All of the data for the goals below are current as of September 30, 1999, except as specified.

Goal 1

The Department needs to field new systems in much less time. A shorter acquisition cycle time will reduce cost growth and accelerate modernization efforts.

The goal is to reduce the acquisition cycle time of new programs by 25 percent. That means the average cycle time of new programs, which started since 1992, will be less than 99 months by the end of 2000—25 percent reduction from the recent historical average of 132 months.

Since 1992, the Department has employed acquisition reforms such as using commercial items and the latest computer technologies in designing, manufacturing, and managing programs. They have helped reduce cycle time, but the Department has done more to reduce cycle time further. It has emphasized the use of shorter acquisition cycle time in approving new programs and closely monitors acquisition, programming, and budgeting to limit cycle time growth.

In addition, the Department is changing the way it manages programs in order to achieve shorter acquisition cycle time. Specifically, the Department is emphasizing the urgency of near–time requirements and the availability of proven technologies as key criteria in authorizing new programs. This means the Department can now satisfy warfighter needs incrementally—by infusing new technologies, as they become available, with each subsequent contract lot.

The Department has made significant improvements in reducing average acquisition cycle time. It has already achieved its goal of 25 percent reduction (i.e., 99 months). Department assessments as of September 30, 1999, show an average weapon system acquisition cycle time of 95 months for those major defense acquisition programs started since 1992. The reduction is largely due to starting more modifications and upgrade programs and to more fully employing regulatory reform, including specification streamlining, procurement reform, and integrated product teams in managing acquisition programs. The Department will continue its efforts to reduce cycle times even further.

Table 17

Defense Acquisition Goals 2000

Goal 1

New weapons in less time. Deliver new major defense systems to the users in 25 percent less time.

Goal 2

Improve logistic supply services. To achieve visibility of 90 percent of DoD materiel assets while resupplying military peacekeepers and warfighters and reducing average order to receipt time by 50 percent.

Goal 3

Simplifying buying of goods and services. Simplify purchasing and payment through use of purchase card transactions for 90 percent of all DoD micropurchases while reengineering the processes for requisitioning, funding and ordering.

Goal 4

Educating the defense acquisition workforce. Create a world–class learning organization by offering 40 or more hours annually of continuing education and training to the DoD acquisition related workforce.

Goal 5

Modernizing defense. With no top–line budget change, achieve annual defense procurement of at least $54 billion toward a goal of $60 billion in 2001.

Goal 6

In the spirit of fostering partnerships and community solutions, DoD will compete the disposal of 50 percent of the surplus property baseline and privatize 30,000 housing units. (See Chapter 15, Infrastructure.)

Goal 7

Decreasing paper transactions. Decrease paper transactions by 50 percent through electronic commerce and electronic data interchange.

Goal 8

Reduce total release of toxic chemicals by a further 20 percent. (See Chapter 15, Infrastructure.)

Goal 9

Streamlining the workforce. Eliminate layers of management through streamlined processes while reducing the DoD acquisition related workforce by 15 percent.

Goal 10

Providing improved visibility of total ownership costs. Define requirements and establish an implementation plan for a cost accounting system that provides routine visibility into weapon system life–cycle costs through activity–based costing and management. The system must deliver timely, integrated data for management purposes to: permit understanding of total weapon costs; provide a basis for estimating costs of future systems; and feed other tools for life cycle cost management.

Goal 11

Reducing excess inventory. Dispose of $2.2 billion in excess National Defense Stockpile inventories and $3 billion of unneeded government property while reducing supply inventory by $12 billion.

Goal 12

Minimizing weapons cost growth. Minimize cost growth in major defense acquisition programs to no greater than one percent annually.

Goal 2

Through continued development of the DoD Total Asset Visibility Program, the Department will have direct access to timely, accurate information about the status, location, and movement of units, personnel, supplies, and equipment in order to improve its support of the warfighter.

The Department is using automated information systems to reduce delivery times by increasing the volume of electronic, vice paper, transactions with vendors. Additionally, the Department plans to reduce order–to–receipt times by using commercial practices such as contracting with vendors to provide direct support, and using faster transportation services to deliver customer orders. All these steps enable DoD to meet the warfighter’s needs more rapidly, while improving military readiness and reducing the size of the inventory.

The Department met its goal of better logistic supply services. Substantial gains have been made in providing cross–Service visibility of assets, and there has been significant reduction in the time it takes to deliver products to customers. In September 1999, inventory managers were able to track and identify 94 percent of the DoD inventory. The average number of days it takes for the warfighter to receive an order has decreased from 36 days in 1997 to the goal of 18 days in September 1999.

Goal 3

A purchase of less than $2,500 is called a micropurchase. The Department has adopted the use of the government–wide commercial purchase card to allow users to purchase goods and services directly from vendors provided the amount is below the micropurchase threshold. Although the amount varies, every study has shown significant savings from using the government–wide commercial purchase card.

The September 1999 data shows the Department has already exceeded its 2000 goal and is using the government–wide commercial purchase card for 92 percent of micropurchases.

Goal 4

The Department has undergone dramatic changes in how it buys goods and services. Many changes are based on best commercial practices. These practices are often very different from the way DoD performed jobs in the past. DoD offers quality education and training to help buyers adjust to this new environment.

DoD will meet the three–year goal of educating the defense acquisition workforce by having buyers take a mandatory 40 hours of continuing education annually, or 80 hours over two years. The Department is, however, rapidly expanding its use of computing and telecommunications technology to provide more cost–effective and timely training via satellite and the interactive environment of the Internet. Through the fourth quarter of FY 1999, 72 percent of the workers in the acquisition workforce have taken at least 40 hours of continuing education and training.

Goal 5

After the Cold War, DoD decreased defense spending dramatically. This reduction was particularly significant in the buying of new weapons and equipment. Over the intervening years, however, the budget for buying new weapons was further reduced by unplanned events, such as regional conflicts, peacekeeping, and humanitarian missions.

Today, the defense inventory needs to be replaced. Since the level of technology used by potential adversaries has increased, DoD needs to continue fielding new weapons and equipment to maintain its technological edge.

To meet the Department’s goal of modernizing defense, the annual budget for new weapons and equipment needed to increase to at least $54 billion in 2000 and $60 billion by 2001.

DoD is striving to achieve the goal of modernizing defense by fully implementing the recommendations of the Quadrennial Defense Review and continuing with the Defense Reform Initiative (DRI). The DRI provided that more money would be available for buying new weapons and equipment by better planning for operating and support costs, further cutting troop levels, reforming business practices, streamlining the workforce, and closing additional military bases.

The Department achieved both its $54 billion and its budgeted $60 billion goal in procurement funding in 2001.

Goal 7

Industry is rapidly moving toward electronic commerce and electronic data interchange. DoD is setting up computer networks for all people, removing regulations and other barriers to exchanging information electronically, and improving business practices to take advantage of information technology advancements.

The Department’s goal for paperless transactions will improve efficiency and effectiveness, reduce processing times and costs, and provide more timely insight. The goal is to limit paperwork, provide timely payments, minimize repeated requests for the same information, make DoD information more accessible through electronic media, improve data accuracy, and make communications with industry easier and faster. DoD has a three–year effort to increase paperless electronic business transactions and improve business practices. The Department is capitalizing on electronic contracting, program management, and logistics support information. Within the contracting function, DoD has met its year 2000 goal. In 1997, 72 percent of transactions were paper–based. In September 1999, only 36 percent of contracting transactions were paper–based.

The business efficiencies of digital transactions will significantly reduce the total costs of owning, operating, and maintaining weapons and equipment. The Department is measuring progress and studying additional actions to better support the customer and save money. The Department is developing additional measures for progress in the digital program management and logistics support areas. DoD has demonstrated a completely paperless file of all the information used to purchase spare parts, demonstrated a paperless electronic exchange of engineering information between Navy engineers and spare parts managers at inventory control points, and achieved dramatic reductions in the amount of paper–reported maintenance actions. Several program offices have already implemented paperless operations, and the Department has developed plans to conduct paperless program management by 2002.

Goal 9

Since 1989, DoD has reduced the acquisition workforce by over 40 percent. By streamlining organizations further, DoD will reduce its 1997 baseline workforce by an additional 15 percent by September 2000. DoD is resizing the workforce to match the workload more efficiently. The Department is eliminating redundant jobs and simplifying procedures.

By September 1999, the Department had reduced its acquisition manpower by about 14 percent since 1997. Additional reductions in 2000 will achieve and exceed DoD’s 15 percent goal.

Goal 10

In 1995, DoD established total life–cycle cost as equal to performance with the promulgation of a Cost as an Independent Variable (CAIV) policy. Department 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 weapon system level cost insight; however, Services’ differences in implementation and lack of process costs have previously limited the applicability of VAMOSC data on a department–wide basis.

Current near–term action is the development of a strategy and plan for DoD–wide implementation of activity–based costing/activity–based management (and/or other approaches deemed appropriate to the core objective of providing visibility into total operational costs). VAMOSC improvement activities are also being considered as a potentially significant contribution to increased management visibility of weapon system costs. The ultimate goal is to provide one or more systems together which will constitute a system that is not only comprehensive but also practical and accessible to ultimate users in 2000.

The military departments and defense agencies are preparing their respective implementation plans for the directed new cost accounting process. The plans will be submitted and DoD–wide implementation of the new process will begin at the start of FY 2000.

Goal 11

The National Defense Stockpile is a large inventory of strategic and critical materials set aside for a national emergency. The market value of the 1997 stockpile was $5.3 billion. DoD can sell or otherwise dispose of excess inventory after receiving the proper authority from Congress. By law, however, DoD must try to avoid causing undue market disruption. The goal is to dispose of $2.2 billion in excess stockpile inventories by the end of FY 2000. As of September 1999, the Department had sold over $1.5 billion worth of excess strategic and critical materials. To achieve the goal, however, the Department will need new congressional authority for additional material as well as a continued robust world market. DoD is aggressively marketing its inventory of critical and strategic materials. The Department is working closely with Congress and industry to ensure a good price for the inventory without unfairly undermining the commercial market.

The Department is also working to reduce the amount of DoD property held by defense contractors. DoD often loans contractors government tooling or equipment to perform defense unique tasks. Since the 1980s, the original value of property in contractor hands has grown in spite of repeated efforts to curb growth. The goal is to dispose of $3 billion worth by 2000. As of the fourth quarter of FY 1999, DoD has disposed of $4.57 billion in unneeded special tooling and equipment, surpassing its goal. In the future, to reduce the amount of government property held by contractors, DoD will rely on commercial suppliers to use their own equipment.

Finally, DoD is looking to reduce excess inventories to match the current needs of reduced troop levels. From a 1989 high valued at $107 billion, DoD inventories declined to $68 billion in 1997. The Department established a goal to reduce this even further to $56 billion by 2000. To reduce excess supply inventory, the Department is being more selective in what it buys and how it buys. DoD is improving equipment reliability, decreasing order and delivery times, and bypassing government warehouses. In September 1999, the Department’s on–hand supply inventory was valued at $55 billion, meeting and exceeding the year 2000 Goal.

Goal 12

The Department’s goal is to minimize cost growth of major new weapons by achieving greater program stability. To control the cost growth, the Department is monitoring major weapons programs quarterly, focusing on cost growth when making programming and budgeting decisions, and looking closely at how much money programs are asking for in the program acquisition process.

The Department has effectively met the 2000 goal for two of the last three years. Based on the President’s Budget submission, 1998 showed a slight cost growth of 0.1 percent. DoD actually had a slightly negative cost growth at minus three–tenths of a percent in 1999. In the 2000 President’s Budget submission, DoD missed its goal, showing an overall cost growth of 3.1 percent, due primarily to unforeseen growth in several Army and Ballistic Missile Defense Organization programs. Projections for the President’s Budget submission for 2001, however, indicate that the Department will once again be below the 1.0 percent cost growth threshold with an overall cost increase of 0.9 percent.

CHANGE MANAGEMENT

Since the establishment of the Defense Acquisition Goals 2000, the Department of Defense has undertaken a number of significant initiatives and has, in some cases, established additional goals. Each of the following sections describes those initiatives. The Department convened a study group to help implement a Section 912(c) of the National Defense Authorization Act for Fiscal Year 1998 recommendation to enhance commercial business environment education and training. The DoD study group’s experience is summarized in the Department’s report, The Commercial Business Environment: Accelerating Change through Enterprise Teaming. The group coalesced around a business model employed by world–class corporations to manage and accelerate change. The goal is to harness the Department’s myriad improvement efforts, using the business model to transform the Department into a learning organization and fashion new cross–functional teaming roles. The study group recommended using this model in the acquisition context, then broadening its use after proven successes. The Department is currently engaged in several pilot programs to test one step of the business model, validating its effectiveness in communicating and implementing a vision for improving selected defense projects. The Department plans to expand the use of the business model in the future. In addition, the Department expects to develop a knowledge management infrastructure, which is another key aspect of the business model.

CIVIL MILITARY INTEGRATION

Civil military integration is critical to meeting future military, economic, and policy objectives. In order to accomplish civil military integration of a national industrial base, DoD must be able to adopt the business processes of world–class customers and suppliers and stop applying government–unique terms and conditions on its contractors to the maximum extent practicable. Civil military integration objectives are designed to take acquisition reform to a new level and focus on the long–term emphasis on commercial solutions to military requirements. DoD has developed a strategic plan targeted at reducing that distinction and attracting commercial companies to the defense sector. This plan includes a set of initiatives, policy, and behavioral and cultural changes which together will enable the Department to achieve these goals.

CYCLE TIME REDUCTION

The ability of the United States to preserve its technological advantage is at risk because modernization, modification, and logistics support cycles are so long. Because much of this technology is available commercially, potential adversaries may field it first. When DoD fields a new weapon system today, many embedded subsystems are obsolete. DoD cannot continue to have 10–year weapon acquisition cycles when the underlying technology becomes obsolete in two to five years or less. Similarly, DoD cannot afford logistics support cycles many times longer than the commercial counterparts.

DoD has established three objectives to drive cycle time reduction:

· The average systems acquisition cycle time (measured from program start to initial operating capability) for all program starts in FY 1999 and beyond will be 25 percent initially and 50 percent in the outyears.

· Logistics response time will be reduced from an average of 36 days (in FY 1997) to 18 days by FY 2000.

· Repair cycle times for end items and reparable parts will be reduced by 10 percent initially and 25 percent in the outyears. By FY 2001, DoD will establish a goal for customer wait time, a more accurate measure than reduction in cycle time for repairs, and begin reporting against it. The customer wait time goal will replace the cycle time reduction goal now being used.

Although many initiatives affect cycle time, the following two initiatives will be major contributors to achieving these objectives.

DoD will adopt a new approach to systems acquisition where price and schedule play a key role in driving design development. The Section 912(c) studies on Requirements and Acquisition; Command, Control, and Communication Integration; and Price–Based Acquisition, along with the Defense Science Board study of Integrated Test and Evaluation have identified a number of changes that must take place in the requirements, systems acquisition, and test systems to reduce cycle time. The warfighter must be in a position to place a dollar value on improved capability and choose among potentially dissimilar alternatives. Warfighter requirements must be flexible and respond to both the needs of the user and the technological state of the possible, until a decision is made to enter product development and production. That decision will not be made until technology is mature and risks are understood. New products evolve incrementally, so that the warfighter has improved capability in each increment while a more flexible programming and budgeting system does not require the acquisition community to lock in design until two or more years in advance of technologies being available for use. Because of the incremental nature of design and the maturity of technology, products can be acquired using price rather than cost with a view towards incentivizing continual price reductions. A workforce that has extensive market knowledge determines fair and reasonable prices. Information is created and exchanged in an integrated data environment. The end result will be newer technology in the hands of the warfighter sooner. There will be fewer dollars idling in the acquisition pipeline.

DoD will transform its mass logistics system to a highly agile, reliable system that delivers logistics on demand. The logistics transformation effort is the critical link between modern warfighting and modern business practices. The Section 912(c) study on Product Support has shown that product support can be optimized as a strategic advantage by focusing on customer service, integrating supply chains, capitalizing on rapid transportation, and exploiting electronic commerce. When applied to Defense, this equates to integrated logistics chains focused on readiness and rapid service to the warfighter customer. Providers would be selected competitively based on best value. Long–term partnerships would be formed with a subset of preferred providers. Many products procured today can be replaced by the purchase of services so that the contractor is charged with keeping the product technologically current while the warfighter receives increasing capability with improved readiness. Program Manager insight into support costs can leverage the reduction in cost by identifying opportunities to improve reliability or move to the purchase of availability, even for legacy systems.

EXPANDED SINGLE PROCESS INITIATIVE

Transitioning the Department to a Performance Based Business Environment, maximizing the use of commercial items and practices, is a key step toward achieving civil military integration. The Single Process Initiative (SPI) is the mechanism the Department has chosen to implement changes to existing contracts. Over the past two and one half years, the SPI has expedited the transition of existing contracts to common best processes, making a positive impact on the way the Department conducts business, by facilitating industry consolidation and plant modernization, encouraging innovation, and encouraging subcontractor reform. While a solid beginning has been established with this initiative, particularly in the transition of at least 225 (up from 140 last year) facilities to the ISO 9000 quality standard, the Department has a long way to go. The replacement of multiple government–unique management and manufacturing processes with common, best, facility–wide processes that adopt best practices drawn from both commercial and government experience is an objective that requires a long–term vision.

The Principal Deputy Under Secretary of Defense (Acquisition, Technology, and Logistics) chairs an SPI Council, which includes the Component Acquisition Executives and representative from corporate management councils and industry associations, to facilitate this reform initiative. To date, this Council has approved a commercial packaging pilot at Allied Signal and General Electric, and chartered a commercial integrated product team to explore problems with commercial item implementation. This Council will ensure that cross cutting industry procurement reform issues get high–level management’s attention.

DoD continues to emphasize integrating suppliers into a performance–based business environment as well. To assist in this integration, industry is working with the supplier base to facilitate supplier reform and acceptance of best practices. Additionally, several defense contractors have initiated corporate Single Process Initiative Management Councils designed to expedite reform and facilitate best practices. Councils serve to expedite the spread of common best practices among defense contractors and the sectors in which they operate, thus further facilitating the integration of the defense industrial base and improving access to best value goods and services. Accomplishments in Single Process Initiatives have resulted in significant benefits to the Department that include both actual savings and cost avoidances as well as non–monetary benefits such as improved response times, longer product mean time between failures, technology insertion, and general modernization of the items being acquired.

To date, SPI has involved more than 330 separate contractor facilities representing in excess of 1,722 proposed changes and 1,242 contract block change modifications. SPI empowers industry to capitalize upon the best of government or industry processes or practices and adopt a standard way of doing business that is mutually beneficial and cost efficient.

GOVERNMENT PROPERTY

Reform of government property practices is an essential component of civil military integration. One of the Department’s objectives is to establish an accurate accounting of current property assets while concurrently reducing the number of both new and existing assets. Defense Acquisition Goal 2000 number 11 stipulates the Department’s goal for reducing the inventory of government property. To assist in attaining this goal, steps taken by DoD include establishing a policy designed to ensure that the Department ends the practice of taking title to special tooling and test equipment with an acquisition cost under $5,000 and all general purpose equipment, and permitting contractors to use commercial practices to manage government property in their possession. An Integrated Product Team has been formed to develop detailed implementation guidance for the Department that integrates financial and property management practices. In addition, new proposed regulations are being issued which will enable a significant streamlining of DoD’s government property management practices, eliminate barriers those practices now present to commercial companies doing business with DoD, and facilitate rapid disposal.

PAST PERFORMANCE

Confidence in a prospective contractor’s ability to satisfactorily perform is an important factor in making a best–value source selection decision. One method of gaining this confidence is the evaluation of a prospective contractor’s performance on recently completed or ongoing contracts for the same or similar goods or services. Past Performance Information (PPI) is very useful in motivating contractors to improve their performance because of the potential use of that information in future source selections. It is equally useful as a means of communication, providing feedback, and justifying additional performance incentives for ongoing contracts.

DoD policy is to collect PPI using a consistent management approach across the designated business sectors categorized as key or unique. DoD has developed a guide for the collecting and using past performance information that includes established business sectors, common assessment elements, and ratings to standardize the methodology used to rate contractor performance under defense contracts. Buying activities share PPI, while ensuring it is managed as source selection sensitive information, with other government buying activities to the maximum extent possible.

Source selection authorities are given maximum latitude to focus on those specific areas of contractor performance that will provide the best predictors for successful performance of the instant acquisition. Evaluation of PPI is tailored to fit the needs of each specific acquisition. DoD is currently implementing an automated PPI retrieval system to access decentralized PPI data with Web–based technology.

PERFORMANCE–BASED ACQUISITION

The President’s Management Council identified performance–based acquisition as an initiative with significant potential payback to the federal government and one which has been identified by the National Partnership for Reinventing Government as being essential to increasing the efficiency of government.

As the Department moves into the 21st century, the amount of goods DoD buys will be greatly reduced. In addition to the increased use of service contracts, the services being acquired by DoD are becoming increasingly more complex. The increased reliance on service contracts will require the Department to significantly change the way it acquires services. The Department has begun moving from traditional military specifications and standard requirements to performance–based contract requirements. Performance–based contracting requirements move contract products and services to commercial solutions by focusing upon the purpose of the work to be performed rather than the manner in which it is to be performed. The next steps will involve addressing milspecification/standard reform for reprocurement items to facilitate logistics reform.

The Secretary directed formation of the 912(c) Services team to evaluate the future acquisition environment and determine the appropriate training and tools which the acquisition workforce would need in order to structure and procure services in the most effective manner. Performance–based requirements and the use of best commercial practices provide the Department the means to break from traditional contractual processes to better leverage competitive opportunities, mitigate risk, and better manage its supplier base. Therefore, the vision for DoD acquisition programs will be towards the objective of managing suppliers and not supplies.

The Department of Defense spends a significant amount of its annual procurement budget in services. As compared with traditional service contracting methods, performance–based service acquisition offers a significant opportunity to shorten the acquisition lead–time, reduce costs, and increase customer satisfaction. The use of performance–based service acquisition by the Department continues to yield significant rewards.

Performance–based acquisition facilitates the Department’s access to leading edge commercial technology and is an objective consistent with the goals of the Government Performance and Results Act. The Department reports its progress to Congress through the Office of Management and Budget.

REDUCTION IN TOTAL OWNERSHIP COSTS

Total ownership cost of a weapon system encompasses development, production, operations, support, and disposal. In all ownership categories, costs are too high and can be reduced substantially if DoD better emulates the best practices of the public and private sectors. DoD’s initial approach is to set and achieve total ownership cost reduction targets in a series of pilot programs. Targets will be extended to all programs and become increasingly more aggressive as lessons learned are applied across all systems.

DoD has established the following objectives for total ownership cost reduction:

· For systems in acquisition, surpass or achieve aggressive CAIV unit cost and total ownership cost targets that are 20–50 percent below historical norms.

· For fielded systems, reduce the logistics support cost per weapon system per year compared to FY 1997 baselines as follows: 7 percent by FY 2000, 10 percent by FY 2001, and a stretch target of 20 percent by FY 2005. The FY 1997 baseline total is $82.5 billion.

The Program Manager Oversight of Life Cycle Costs Section 912(c) study found that Program Managers’ accountability for life cycle issues can be improved by increasing visibility into related processes, giving them either direct control or, as a minimum, a strong influence over trade–offs among research and development, acquisition, and operating and support costs. They must be held directly accountable for resources they directly control. Where operational or economic considerations dictate sharing resources, individual Program Managers must be held accountable for clear and timely articulation of actions to reduce life cycle costs of their systems. Continuing partnerships involving the users, developers, and the support establishment will produce the best value for the available resources. Reducing the cost of fielded systems, while improving readiness, is an especially difficult, but very important, challenge.

STATUTORY REPORT

Section 50001(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, 1999, all but seven Major Defense Acquisition Programs (MDAPs) are meeting more than 90 percent of the aggregated number of cost schedule and performance goals for that program. The seven exceptions are Advanced Threat Infrared Counter Measures/Common Missile Warning System, B–1B–Conventional Mission Upgrade Program, Joint Air–to–Surface Standoff Missile, Navy Area Theater Ballistic Missile Defense, Patriot Advanced Capability–3, Sense and Destroy Armor Munition, and Space–Based Infrared System. A timely review of these programs is being performed in accordance with Title 10, United States Code Section 2220(c) and appropriate determinations will be made based on those reviews.

As enacted by law on 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, 1999, this average period declined to 110 months. 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 initiated under the new acquisition reform process. MDAPs started since 1992 have an average period of 95 months for converting emerging technology into operational capability. This reduction is due to starting more modification and upgrade programs to fully employing regulatory reform, including specification streamlining, procurement reform, and integrated product teams to reduce cycle time.

TEST AND EVALUATION

In June 1999, the Department took important steps to improve the acquisition process of new weapon systems for an earlier operational view by strengthening the role of the Director, Operational Test and Evaluation (DOT&E). The primary thrust is to empower involvement by DOT&E and the Operational Test Agencies to support development of operationally effective and suitable weapons earlier in the program life cycle through reorganization and leadership changes within Office of the Secretary of Defense. These changes will facilitate implementation of the test and evaluation themes the Secretary has encouraged: early involvement by the operational tester, leveraging developmental test and evaluation and training events for operational assessments, increased use of modeling and simulation to supplement testing, and participation by operational testers in Advanced Concept Technology Demonstration (ACTD) programs. In this way, the Department expects to improve progress towards realizing acquisition goals and Joint Vision 2010.

DOT&E and the Operational Test Agencies will be in a better position through their enhanced roles to become involved in acquisition programs from the earliest possible time to provide operational advice and assessments to program managers and contractors, as well as determine the adequacy of the test and evaluation infrastructure to support the associated test and evaluation programs. While resources to implement this approach are being reviewed for full initiation in FY 2000, the Department is also initiating actions to streamline the research, development, test, and evaluation infrastructure as reported to Congress in July 1999.

WORKFORCE ISSUES

The number of people in the acquisition workforce and supporting the acquisition workforce in acquisition organizations continues to decline sharply. Qualitatively, DoD’s needs will continue to change as well. In the future, DoD will need managers to manage suppliers, not supplies, and engineers to design systems, not components. A smaller, differently skilled workforce will have to be well educated, fully trained, and continuously learning. A unified organizational structure for the Defense Acquisition University (DAU) was approved in September 1999 to replace the current consortium of Service and DoD schools. The unified structure will enable DAU to achieve economies and improve quality in training and educating the acquisition workforce. Under the new structure, DAU will aggressively pursue competitive sourcing of DAU functions on a best–value, risk–free basis. During 1999, the Department implemented a program of continuous learning to enable the acquisition workforce to remain current professionally and add new skills. The Department plans to invest nearly $36 million in this program in FY 2000, with further funding programmed for future years. This investment in a smaller workforce will help its members meet the challenges of the new millennium.

Training the Acquisition Workforce

In an era of diminishing resources, the Department can no longer afford to continue training employees in traditional methods. Because of the need to get timely information to the acquisition workforce, other training methods and approaches must be utilized. Through the use of Web–based training, satellite training broadcasts, and other distance learning methodologies, the Department is able to deliver critical acquisition information to the acquisition workforce in a timely manner and at reasonable costs. During 1999, DAU developed its first eight Web–accessible courses, including the most popular, and plans another 12 courses in FY 2000. DAU plans to add other Web–based courses in future years, while continuing classroom training where appropriate. Over the past three years, the Department has conducted approximately 16 interactive satellite training broadcasts as a means to provide the acquisition workforce with timely, consistent, and relevant information. The broadcasts focus on regulatory changes, cultural changes, and new acquisition processes. The broadcasts include educational videos, panels of industry and government experts, and opportunities for frontline professionals to ask questions on the air. Through satellite training, the Department is able to simultaneously reach several thousand people with consistent and timely acquisition reform information so that employees can make the best decisions and take the most effective actions.

INTEGRATING ENVIRONMENT, SAFETY, AND HEALTH INTO THE ACQUISITION PROCESS

More than 80 percent of DoD’s hazardous waste is generated in the production, operations, and maintenance of weapons systems. By integrating environment, safety, and health (ESH) considerations into the acquisition reform process, DoD is helping reduce weapons system total ownership costs driven by hazardous wastes and other environmental requirements, while also improving performance. At the heart of the integration efforts are sound business practices such as the Institutionalization of Pollution Prevention to Achieve Compliance program, which is developing new tools and guidance to shift the focus from end–of–pipe controls to pollution prevention solutions to fulfill environmental legal requirements. Also, the Joint Logistics Commanders established the Joint Acquisition Sustainment Pollution Prevention Activity to work with depots and industry to eliminate hazardous materials in manufacturing weapon systems. These efforts will help in the implementation of long–term pollution prevention improvements.

DoD Regulation 5000.2 provides mandatory guidance for defense acquisition programs. It requires that every weapon system program integrate ESH considerations into its systems engineering and cost estimating processes.

CONCLUSION

Acquisition and logistics reform represents a significant cultural change for the Department’s acquisition, logistics, and technology workforce. Senior management is committed to ensuring that all the Department’s business communities become fully knowledgeable about the flexibility of acquisition and logistics reform and the direct benefits of accelerating reform progress across the Department’s acquisition and logistics processes. DoD’s efforts have been encouraging and show promise, but the commitment and hard work to accelerate progress on outcome–driven performance measures must continue into the 21st century. Everyone must become partners in promoting reform across the Defense business enterprise. The real cultural revolution will occur when the Department successfully adopts performance–based, commercial business processes and practices to field the most technologically advanced, best–equipped, and most mission capable fighting forces in the world to come.

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