GETTING
DEFENSE
ACQUISITION
RIGHT
e Honorable Frank Kendall
Published by the Defense Acquisition University Press
Fort Belvoir, Virginia
1
3
Table of Contents
viii Acknowledgments
Introduction
Chapter One: Getting Policy Right
39 Chapter Two: Building Professionalism
in the Acquisition Workforce
65 Chapter ree: Managing
Technical Complexity
93 Chapter Four: Working With Industry
127 Chapter Five: Responding to
External Forces and Events
179 Chapter Six: Measuring Progress in Improving
Acquisition
203 Conclusion
i
ii
Getting Defense Acquisition Right
10
15
21
25
32
41
44
49
53
62
71
73
79
89
Articles From Defense AT&L Magazine
“Better Buying Power Principles—What Are ey?,”
January-February 2016
“Original Better Buying Power—David Packard Acquisition Rules
1971,” May-June 2013
“e Challenges We Face—And How We Will Meet em,”
November-December 2012
“Innovation in the Defense Acquisition Enterprise,”
November-December 2015
“Real Acquisition Reform (or Improvement) Must Come From
Within,” May-June 2016
“What Does It Mean To Be ‘a Defense Acquisition Professional’?,”
March-April 2014
“Ethics and Acquisition Professionalism—It Is All About Trust,”
September-October 2014
“Program Manager Assessments—Professionalism Personied,”
July-August 2015
“Improving Acquisition From Within—Suggestions From Our
PEOs,” July-August 2016
“What Really Matters In Defense Acquisition,”
January-February 2016
“e Optimal Program Structure,” July-August 2012
“Risk and Risk Mitigation—Don’t Be a Spectator,”
January-February 2015
“e Trouble With TRLs (With anks to Gene Roddenberry and
David Gerrold),” September-October 2013
“Manufacturing Innovation and Technological Superiority,”
September-October 2016
100 “Our Relationship With Industry,” November-December 2013
104 “Use of Fixed-Price Incentive Firm (FPIF) Contracts in Develop-
ment and Production,” March-April, 2013
109 “DoD Use of Commercial Acquisition Practices—When ey
Apply and When ey Do Not,” September-October 2015
iii
82
6
7
T C
114 “Tying Prot to Performance—A Valuable Tool, But Use With
Good Judgment,” May-June 2015
121 “Getting ‘Best Value’ For the Warghter and the Taxpayer,”
March-April 2015
142 “Moving Forward,” January-February 2013
144 “What Lies Ahead,” July-August 2013
149 “Protecting the Future,” May-June 2014
153 “Technological Superiority and Better Buying Power 3.0,”
November-December 2014
156 “Our eme for 2016—Sustaining Momentum,” March-April
2016
174 “When and When Not to Accelerate Acquisitions,”
November-December 2016
189 “Better Buying Power—A Progress Assessment,” July-August 2014
207 “Adventures in Defense Acquisition,” January-February 2017
Article from The ITEA Journal
“Perspectives on Developmental Test and Evaluation,” March 2013
Figures and Tables
6 Figure 1. Better Buying Power 1.0
Figure 2. Better Buying Power 2.0
Figure 3. Better Buying Power 3.0
179 Figure 4. Contract Cost Growth on Highest Risk (Major)
Programs
181 Figure 5. Prots of the Six Largest DoD Primes
182 Figure 6. Percent of Major Programs With Cost Reductions
183 Figure 7. Major Programs Crossing Critical Congressional
Cost-Growth resholds
iv
Getting Defense Acquisition Right
67
96
97
184 Table 1. Root Causes for Major Programs Crossing Critical Con-
gressional Cost-Growth resholds or Other Major Problems
185 Figure 8. Planned Length of Active Development Contracts for
Major Programs
186 Figure 9. Planned Major Information System Development Time
186 Figure 10. Contract Schedule Growth on Highest Risk (Major)
Program
187 Figure 11. Cost Growth on Highest Risk (Major) Programs Started
in Dierent Budget Climates
E-mails, Correspondence and Statements
4 Under Secretary Frank Kendall’s Memorandum for the Acquisi-
tion Workforce, Jan. 7, 2015
Kendall E-Mail about 2016 Program Executive Ocer Assessment
Kendall Statement on Consolidation in the Defense Industry, Sep-
tember 30, 2015
Joint Statement of the Department of Justice and the Federal Trade
Commission on Preserving Competition in the Defense Industry,
autumn of 2015
128 Kendall letter to Senator John McCain, June 13, 2014
133 Kendall Memorandum on “Department of Defense Management
of Unobligated Funds; Obligated Rate Tenets,” September 10, 2012
136 Kendall E-Mail to Acquisition, Technology, and Logistics person-
nel titled “Guidance During FY13 Sequestration and Furloughs,”
July 9, 2013
163 Kendall Letter to Service Secretaries and Chiefs on Defense Ac-
quisition
200 Foreword from the Fourth Annual Report on the Performance of
the Defense Acquisition System, October 24, 2016
v
Dedicated to all the professionals, in the military, government,
and industry, who create and sustain the products our military depends
upon to keep us free and secure,
And to Beth, Scott, Eric, and James, for the sacrices they have made so
that I could make my very limited contributions to that eort.
vi
Getting Defense Acquisition Right
FRANK KENDALL
Under Secretary of Defense
for Acquisition,
Technology, and Logistics
Frank Kendall was conrmed by
the U.S. Senate in May 2012 as the
Under Secretary of Defense for Ac-
quisition, Technology, and Logis-
tics. In that position, he has been
responsible to the Secretary of De-
fense for all matters pertaining to
acquisition; research and engineer-
ing; developmental testing; contract
administration; logistics and mate-
riel readiness; installations and environment; operational energy; chemi-
cal, biological, and nuclear weapons; the acquisition workforce; and the de-
fense industrial base. He is the leader of the Department of Defense (DoD)
eorts to increase the DoD’s buying power and improve the performance
of the defense acquisition enterprise. Prior to this appointment, he served
from March 2010–May 2012 as the Principal Deputy Under Secretary and
also as the Acting Under Secretary.
Mr. Kendall has more than 45 years of experience in engineering, manage-
ment, defense acquisition, and national security aairs in private industry,
government, and the military. He has been a consultant to defense indus-
try rms, nonprot research organizations, and the DoD in the areas of
strategic planning, engineering management, and technology assessment.
Mr. Kendall formerly was Vice President of Engineering for Raytheon
Company, where he was responsible for directing the management of the
company’s engineering functions and internal research and development.
Before joining the administration, Mr. Kendall was a managing partner
at Renaissance Strategic Advisors, a Virginia-based aerospace and defense
sector consulting rm. In addition, Mr. Kendall is an attorney and has been
active in the eld of human rights, working primarily on a pro bono basis.
Within government, Mr. Kendall held the position of Director of Tacti-
cal Warfare Programs in the Oce of the Secretary of Defense and the
position of Assistant Deputy Under Secretary of Defense for Strategic De-
fense Systems. Mr. Kendall is a former member of the Army Science Board
and the Defense Intelligence Agency’s Science and Technology Advisory
Board and he has been a consultant to the Defense Science Board and a
F K B
Senior Advisor to the Center for Strategic and International Studies. Mr.
Kendall also spent 10 years on active duty with the Army serving in Ger-
many, teaching Engineering at West Point and holding research and devel-
opment positions.
Over the course of his public-service career, Mr. Kendall was awarded
the following federal civilian awards: e Defense Distinguished Public
Service Award, Defense Distinguished Civilian Service Medal, the Secre-
tary of Defense Meritorious Civilian Service Medal, the Presidential Rank
Award of Distinguished Executive (Senior Executive Service), the Presi-
dential Rank Award of Meritorious Executive (Senior Executive Service),
and the Army Commander’s Award for Civilian Service. He also holds the
following military awards from the U.S. Army: the Meritorious Service
Medal with oak leaf cluster, Army Commendation Medal, and National
Defense Service Medal.
Mr. Kendall is a Distinguished Graduate of the U.S. Military Academy at
West Point, as well as an Army War College graduate, and holds a mas-
ter’s degree in Aerospace Engineering from the California Institute of
Technology, a master’s degree in business administration degree from the
C.W. Post Center of Long Island University, and a juris doctorate from the
Georgetown University Law Center.
vii
Acknowledgments
I would like to acknowledge the many operational, government acquisi-
tion, and industry professionals who contributed to the content of this vol-
ume through more than 45 years of experience, collaborative discussion
and idea sharing. I am particularly indebted to the support of the Service
Acquisition Executives and the entire AT&L sta, particularly my Deputy,
the Honorable Alan Estevez, who all played an important role in the cre-
ation of the articles included in this volume. Many thanks go out to the Ac-
quisition Policy Analysis Center Team led by Dr. Phil Anton who brought
data and analysis to the world of acquisition policy. anks also to CAPT
Dan Mackin, my Military Assistant, who served as my advisor and editor-
in-chief, assisted by President Jim Woolsey and the ne team at the Defense
Acquisition University.
viii
1
Introduction
“ere are two ways of spreading light:
to be the candle or the mirror that reects it.”
—Edith Wharton
For most of my adult life, a span of over 45 years, I have worked on some
aspect of the operation, development, production, and support of Ameri-
can weapon systems. e so-called “defense acquisition system” has pro-
duced a long series of diverse advanced technology-based products that
are widely recognized as the best in the world. At the same time, however,
this acquisition system has come under constant criticism and numerous
attempts at “acquisition reform.”
Some of the criticism is well founded, and some of the acquisition reform
eorts have produced positive results. Others have had the opposite eect.
In my role as Under Secretary of Defense for Acquisition, Technology, and
Logistics (USD[AT&L]) for several years, I have worked hard to pass on to
the rest of the acquisition workforce of the Defense Department (DoD), and
to all the stakeholders in defense acquisition, some of the hard-won lessons
of my decades of experience in the development of new defense products.
is volume assembles some of the results of that eort, organized by logi-
cal topics and preceded by a summary of the specic items discussed.
During my tenure as Under Secretary, I have written and published a short
article dealing with some aspect of defense acquisition management roughly
every 2 months. ese articles were published in the DoD’s Defense AT&L
magazine and also sent to the acquisition workforce by e-mail. Roughly 5
years in, it occurred to me that this body of work could be integrated into a
short volume in a way that might be useful to both acquisition profession-
als and also to anyone looking for a deeper understanding of the subject. In
looking back over the last several years, it also occurred to me that there were
a handful of other items that were produced during the course of my tenure
that should be included to provide a more complete picture.
is volume begins with acquisition policy and then discusses the most
important ingredient for successful programs: people—more specically,
the acquisition professionals who work in government and industry.
2
Getting Defense Acquisition Right
Following these sections, some specic aspects of managing technical com-
plexity in large programs are addressed. Because almost all of our weapons
systems are designed and produced by private industry under government
contracts, the next section deals with the relationship between government
and industry, and how that should be managed for mutual benet—while
supporting our warghters and protecting the American taxpayers’ invest-
ments in defense systems. Next, the subject of outside inuences on defense
acquisition is covered, including the impact of budget pressures, legislative
initiatives, and customer desires. e “customer” for Defense Acquisition is
the military operator, and this relationship is addressed in detail. e pen-
ultimate chapter deals with measuring progress. It addresses the questions
of how we know if things are getting better or worse. Acquisition policy has
been changed many times, oen out of frustration when results were not
what was desired. But have those changes had any impact? Finally, I try to
draw some general conclusions from the preceding chapters. Readers are en-
couraged to enter or leave this volume at any point based on their interests—
the whole volume, each chapter, and each article in a chapter, can be read in
its entirety or individually.
3
Chapter One
Getting Acquisition
Policy Right
“Experience is never limited and it is never complete;
it is an immense sensibility, a kind of huge spider-web of the nest
silken threads, suspended in the chamber of consciousness and catching
every air-borne particle in its tissue.”
—Henry James
Here is all the acquisition policy we ought to need:
• Set reasonable requirements.
• Put professionals in charge.
• Give them the resources they need.
• Provide strong incentives for success.
Unfortunately, there is a whole universe of complexity in each of those
four items. Because of that complexity, because of our imperfect results
in delivering new capabilities, and because of the interests of a wide array
of stakeholders, formal acquisition policy in the United States is expan-
sive and embedded in multiple publications. e basic acquisition policy
document for the Department is a DoD Instruction, DoDI 5000.02, titled
“e Defense Acquisition System.” It has been rewritten numerous times
during my career, but the underlying substance has never really changed
much. New product development is new product development. e major
decisions are generic—starting risk reduction, starting design for produc-
tion, and starting production itself. When I came back into government in
2010 as the Principal Deputy to then Under Secretary Ashton Carter, I was
resolved to not rewrite 5000.02 again … but then I did. I personally wrote
the basic document and heavily edited the dozen or so enclosures that com-
prise half of the content.
I was motivated partly by the fact that a number of legislative changes had
to be implemented in 5000.02 but most of all I wanted to use the document
to communicate some overarching principles. e most important of these
principles was the necessity to thoughtfully tailor program plans to address
4
Getting Defense Acquisition Right
the unique circumstances and nature of the product being created. Form
follows function, not the reverse. Another motivator was the implementa-
tion of the Better Buying Power acquisition improvement initiatives my
predecessor and I had put in place in 2010 and that I modied signicantly
in 2012 as Better Buying Power 2.0 (and again in 2014 as 3.0) As I discuss
in more detail below, I was also concerned about the morass of statutorily
required regulations our managers were tasked to comply with. My intent
was reected in the cover letter that I put out with the new DoDI 5000.02—
which is reproduced here:
5
Chapter One: Getting Acquisition Policy Right
In addition to DoDI 5000.02, there are many regulatory provisions that
govern federal and defense contracting. ese are embedded in the thou-
sands of pages of the Defense Federal Acquisition Regulation (DFAR) gov-
erning defense contracting. ese rules have to be administered by our
contracting professionals and managers. As new legislation is passed or
new Executive Orders are issued, the DFAR is constantly updated to reect
that new guidance. e trend is almost entirely in the direction of adding
volume to the regulation, not reducing it. In response to legislative direc-
tion, I recently chartered a 2-year eort to review the DFAR with the hope
that it can be dramatically streamlined. is is a very worthwhile endeavor,
but I hold only limited hope for its success—every provision in the DFAR is
rooted in some stakeholders’ belief that it will accomplish a desired result,
oen a result only indirectly associated with defense acquisition itself.
During the last several years, the DoD has used an evolving set of acquisi-
tion policy initiatives that then Under Secretary Carter and I started in
2010. As noted above, they were called the “Better Buying Power” initia-
tives and were mentioned in the DoDI 5000.02 cover letter. Over the last
few years, I have used a management philosophy of continuous improve-
ment to modify these initiatives; some have been dropped, and some have
been added. As we have learned from our experience and made progress,
we have kept the most signicant initiatives but shied our eorts to em-
phasize other areas needing improvement. As of 2016, there had been three
versions or releases of Better Buying Power initiatives. e latest version,
Better Buying Power 3.0, continues the highest payo initiatives from earli-
er versions, addressing cost consciousness, incentives, and building profes-
sionalism in particular, and adds an emphasis on increasing technical ex-
cellence and innovation. All three iterations are summarized in Figures 1,
2, and 3 so that you can track both the continuity and the change in policy.
6
Getting Defense Acquisition Right
Figure 1. Better Buying Power 1.0
Figure 2. Better Buying Power 2.0
7
Chapter One: Getting Acquisition Policy Right
Figure 3. Better Buying Power 3.0
e underlying premise, and one I continue to strongly advocate, has al-
ways been that acquisition improvement would be incremental, that there
was no “acquisition magic” that could be applied to all situations and that
could dramatically improve results. e Better Buying Power initiatives
sweat the details; that’s where progress has to be achieved. As a result, there
is a large number of initiatives, and more detailed implementation actions
behind each initiative. All of the Better Buying Power releases, however,
have been based on some underlying principles that I decided were worth
articulating. e rst piece in this chapter describes those acquisition man-
agement and policy principles. e list of principles is presented in this
article in its original sequence. I was correctly chastised aer I published
the article for not putting people and professionalism rst on this list, and I
subsequently made this important modication to the sequence.
e process of creating cutting-edge weapon systems isn’t new. e pace
of change in technology advances accelerated dramatically in the 19th
and, particularly, the 20th centuries. is trend continues today in the
21st century. However, the American reliance on technological superior-
ity for military advantage really didn’t take shape until World War II and
aerward. With this reliance came the problems associated with accepting
technological risk in new products, problems that we still confront—cost
increases, schedule slips, and sometimes failure to deliver an acceptable or
8
Getting Defense Acquisition Right
aordable product. In 1971, the year I graduated from West Point, David
Packard was Deputy Secretary of Defense. is is the David Packard who
helped found Hewlett-Packard, and who led the “Packard Commission,”
which inuenced the acquisition reform legislation that accompanied the
Goldwater-Nichols reforms of 1986. Deputy Secretary Packard published a
set of “Acquisition Rules.” I had this list put on posters and hung in the Pen-
tagon meeting room where the Defense Acquisition Board (the committee
that advises the Under Secretary on major acquisition decisions) meets. I
consider this list to be the original Better Buying Power. It is discussed in
the second piece in this chapter.
e next article in this chapter is a more detailed discussion of some of what
I have referred to as “core” elements of all the Better Buying Power initiatives.
Written shortly aer the second version—Better Buying Power 2.0—this ar-
ticle goes into more detail about these core concepts. ey include aordabil-
ity constraints on requirements and designs, the use of “should cost” to ac-
tively target costs for reduction, and the importance of dening “best value”
so that industry is motivated to oer optimized product designs in line with
warghter priorities. ese concepts should be core elements of acquisition
policy and embedded deeply in the Department’s culture. Instilling these
values and concepts in the workforce and into the DoD culture was a priority
throughout my tenure as USD(AT&L) and a major reason that I stayed much
longer then my predecessors.
e overarching goal of defense acquisition is to give our warghters a sig-
nicant military advantage over any opponent they might face. One key to
meeting that goal is the ability to create innovative, even game-changing
products that enable innovative operational concepts. e need for con-
tinuing technological superiority was the motivator for the third version
of Better Buying Power. Starting with Secretary Hagel’s Defense Innova-
tion Initiative, later endorsed by Secretary Ashton Carter, for the last few
years we have been emphasizing the importance of innovation across the
Department. Secretary Carter’s innovation initiatives included the Defense
Innovation Unit Experimental or DIU-X, the Strategic Capabilities Oce,
and the Force of the Future personnel initiatives. Deputy Secretary Robert
Work introduced the concept of a ird Oset Strategy. All three of us
have been working toward the common goal of encouraging, seeking, and
integrating more innovation into our processes. In the next article in this
chapter, I took up the subject of innovation and discussed the ingredients
needed in an organization for innovation to occur. ey include technical
expertise, freedom, risk tolerance, persistence, and teamwork or collabora-
tion. I closed with a discussion of the need for capital (funding). While the
development of good ideas is essential to innovation, so too is the need for
money to convert those ideas into reality. In my view, all the focus on in-
9
Chapter One: Getting Acquisition Policy Right
novation by the Department over the last few years may have obscured the
fact that our fundamental problem has not been lack of ideas, but the lack
of resources to make them into products.
e nal piece in this chapter is the most recent. It was written in part in
reaction to the latest round of acquisition reform coming from the Con-
gress. is article discusses the basic structure in which acquisition policy
must operate, points out some of the inherent limitations in legislative at-
tempts to improve acquisition, and charges our acquisition professionals
with the goal that ultimately only they can achieve—lasting and signicant
improvement in our acquisition performance. e next section will take
up the topic of those acquisition professionals who are central to executing
any improvement eort.
10
Getting Defense Acquisition Right
Better Buying Power Principles—
What Are ey?
Reprinted from Defense AT&L: January-February 2016
Inevitably, whenever any senior leader embarks on a set of initiatives in-
tended to improve an organization’s performance and labels that set of ini-
tiatives, he or she can expect one reaction for certain. at reaction is what
I would describe as genuecting in the direction of the title of the initiative
by various stakeholders who are trying to show the leader that they are
aligned with his or her intent.
Sometimes—usually, I hope—this is sincere and backed up by real actions
that reect the intention of the initiative. Sometimes it is just, for lack of a
better word, gratuitous. Better Buying Power (BBP) is no exception. One
form this takes is assertions, which I see oen enough to be writing this
piece, that the recommended course of action is consistent with “BBP prin-
ciples.” (Presumably, the idea is that this will lead to instant support, but
that is not a reliable assumption.)
I nd this amusing, because so far as I know we’ve never articulated any
BBP principles. When I do see this in a brieng, I ask the presenter what
those principles are. So far, no one has been able to articulate them very
well.
Under the circumstances, it seems like a good idea for me to provide some
help answering this question. So here are some BBP principles. I also want
to thank the 24 acquisition experts in the Defense Acquisition University’s
fall 2015 Executive Program Manager’s Course who provided a number of
suggestions for this list and article.
The Principles Suggested by Acquisition Experts:
• Principle 1: Continuous improvement will be more eective than radical
change.
• Principle 2: Data should drive policy.
• Principle 3: Critical thinking is necessary for success; xed rules are too
constraining.
• Principle 4: Controlling life-cycle cost is one of our jobs; staying on bud-
get isn’t enough.
• Principle 5: People matter most; we can never be too professional or too
competent.
• Principle 6: Incentives work—we get what we reward.
11
Chapter One: Getting Acquisition Policy Right
• Principle 7: Competition and the threat of competition are the most ef-
fective incentives.
• Principle 8: Defense acquisition is a team sport.
• Principle 9: Our technological superiority is at risk and we must respond.
• Principle 10: We should have the courage to challenge bad policy.
Principle 1
Continuous improvement will be more eective than radical change. All of
BBP is based on this concept. It’s the reason there have been three editions
of BBP. We make incremental change focused on the biggest problems we
see. en we monitor the results and evaluate progress. We drop or modify
ideas that aren’t working, and we attack the next set of problems in order
of importance, priority or expected impact. ose ideas and policies that
work are not abandoned for the next shiny object we see. I have seen any
number of acquisition reform fads that had little discernible impact on the
acquisition performance of the Department of Defense (DoD). Some had
adverse impacts. During my career, we have had the following: Blanket
Firm Fixed Price Development Contracting, Total Quality Management,
Reinventing Government, and Total System Performance—to name just
a few.
I generally am not a fan of broad management theories and slogan-based
programs. Sometimes they contain sound ideas and policies—but they sel-
dom outlast the leaders who sponsor them, and the hype associated with
them usually exceeds their value. e complexity of acquiring defense
products and services makes simple solutions untenable; we have to work
hard on many fronts to consistently improve our results.
Principle 2
Data should drive policy. Outside my door a sign is posted that reads, “In
God We Trust; All Others Must Bring Data.” e quote is attributed to
W. Edwards Deming, the American management genius who built Japan’s
manufacturing industry aer World War II. e three annual reports on
e Performance of the Defense Acquisition System that we have published
are based on this premise. It is dicult to manage something you cannot
measure. Despite the noise in the data, it is possible to pull out the cor-
relations that matter most and to discover those that have no discernible
impact. As we have progressed through the various editions of BBP guided
by the results of this analysis, we have adjusted policy, such as preferred
contract type and incentive structure.
Principle 3
Critical thinking is necessary for success; xed rules are too constraining.
is principle was the core concept behind BBP 2.0, which was subtitled
12
Getting Defense Acquisition Right
“a guide to help you think.” Our world is complex. One-size-ts-all cook-
book solutions simply don’t work in many cases. e one question I most
oen ask program managers (PMs) and other leaders is “Why?” When we
formulate acquisition strategies, plan logistics support programs, schedule
a series of tests, decide which technology project to fund or do any other
of the myriad tasks that acquisition, technology and logistics professionals
are asked to do every day, we have to apply our skills experience and under-
standing of cost, benets, and relative priorities to arrive at the best answer.
ere is no shortage of policy or history to assist us, but at the end of the
day we have to gure out the best course of action in a specic circum-
stance, balancing all the complex factors that apply to a given situation.
Principle 4
Controlling life-cycle cost is one of our jobs; staying on budget isn’t enough.
is idea, that managing cost is a core responsibility, is at odds with a long
history of focusing on execution (spending) in order to maintain budgets.
e idea introduced in BBP 1.0 of “should cost” was intended to compel
our managers (all of our managers) to pay attention to their cost structure,
identify opportunities for savings, set targets for themselves and do their
utmost to achieve those targets. I am hopeful that this idea is becoming in-
stitutionalized and, what is more important, is becoming part of a culture
that values proactive eorts to control cost. Once in a while, I still see token
savings targets. But, for the most part, our managers are implementing this
concept and doing so eectively. One cautionary note is that this does not
imply we should make poor decisions that result in short-term savings at
the expense of high long-term costs.
Over the last 5 years, we have billions of dollars in savings that we can point
to. In all cases, those dollars have gone to higher-priority Service, portfolio
or program/activity needs. e result is more capability for the warghter
at less cost to the taxpayer.
Principle 5
People matter most; we can never be too professional or too competent.
We introduced an entire section on building professionalism in BBP 2.0. It
was a major oversight that former Under Secretary of Defense for Acquisi-
tion, Technology, and Logistics Ashton Carter and I le this out of BBP 1.0.
Improving over time the expertise, values and competencies of our pro-
fessionals is the best way to improve defense acquisition, technology and
logistics outcomes. is was never intended to imply that the workforce is
not already professional—of course it is. But more is better, and every one
of us can be better at what we do—including me. e best statutes, pro-
cesses and policies in the world will not by themselves make us or anyone
in industry better managers, engineers, business people or logisticians. We
13
Chapter One: Getting Acquisition Policy Right
should all constantly increase the DoD’s professionalism, for ourselves and
the people who work for us.
Principle 6
Incentives work and we get what we reward. Policies related to incentives
are found everywhere in the various editions of BBP, most obviously those
associated with contract types and incentive structures. Others include
the use of open systems, how we manage intellectual property, the mon-
etization of performance in source selection, and the use of prototypes to
encourage innovation. In BBP 1.0 and BBP 2.0, we focused on getting the
business incentives right. In BBP 3.0, we focused on incentives to innova-
tion and technical excellence.
Principle 7
Competition and the threat of competition provide the most eective in-
centive. All businesses exist in large part for the purpose of making a prot
for their investors. e opportunity to gain business through competition
and the threat that an existing market position will be lost as a result of
competition are powerful motivators. One thing I enjoyed about my time
working in the defense industry was the simplicity of the metric and the
fact that everyone in the rms I worked with understood that metric: If
something increased prot, it was good; if it didn’t do so, it wasn’t good.
When we rolled out the rst set of BBP initiatives, industry was concerned
that we were waging a “war on prot.” at was never our intention. What
we wanted and still want to do is align prot with the desired performance
for the warghter and the taxpayer. Many BPP initiatives are designed to
foster competition or the threat of competition.
Principle 8
Defense acquisition is a team sport. Over the three editions of BBP, we have
pointed to the importance of close cooperation and coordination between
participants and stakeholders. e importance of the requirements and in-
telligence communities were highlighted in BBP 2.0 and 3.0, respectively.
e nonacquisition leaders who are responsible for much of the DoD’s ser-
vice contracts are another important community. Defense acquisition can
only be successful and ecient if all participants recognize and respect
other participants’ roles and responsibilities.
Principle 9
Our technological superiority is at risk, and we must respond. is fact is
the reason for BBP 3.0. e combination of cutting-edge, strategic and in-
creasing investments made by potential adversaries, coupled with our own
budgetary stress and global commitments, are causes for alarm. We need
14
Getting Defense Acquisition Right
to do everything we can to maximize the return on all our investments in
new capability, wherever those investments are made. BBP 3.0 focuses on
all the ways in which we expend research and development (R&D) funding
(DoD laboratories, industry independent R&D, contracted R&D, etc.) and
on the opportunities to spend those funds more productively. e Long-
Range Research and Development Planning Program recommendations
are intended to provide guidance on how to achieve this. BBP 3.0 also in-
cludes the increased use of experimental prototypes and other measures
designed to spur innovation—such as early concept denition by indus-
try and monetary incentives to industry to develop and oer higher-than-
threshold performance levels. We need to reduce cycle time, eliminate un-
productive bureaucracy, and increase our agility by accepting more risk
when it is warranted. All of these measures are BBP initiatives.
Principle 10
We should have the courage to challenge bad policy. One of Deming’s prin-
ciples was that successful organizations “drive out fear.” He meant that a
healthy organizational culture encourages members to speak out and con-
tribute ideas and inform management about things that are not as they
should be. We should not be afraid to speak up when we see bad policy, or
policy applied too rigidly where that clearly isn’t the best course of action.
We should not be afraid to oer creative ideas or to challenge conventional
wisdom, and we should encourage others to do so as well. None of the BBP
initiatives, or their more detailed implementation guidance, are intended
to apply in every possible situation. All of us should be willing to “speak
truth to power” about situations in which policies simply are not working
or will not achieve the intended result. e annual PM Program Assess-
ments that I started last year and included in BBP 3.0 proved to me that the
chain of command has a lot to learn from the very professional people on
the front lines of defense acquisition. is applies to all the professionals
who support or work for those PMs also. Continuous improvement comes
from the willingness to challenge the status quo.
15
Chapter One: Getting Acquisition Policy Right
e Original Better Buying Power—
David Packard Acquisition Rules
1971
Reprinted from Defense AT&L: May-June 2013
In this article, I thought I would give us all a break from our budget woes,
sequestration, and continuing resolutions—issues I hope will be resolved
before this goes to print.
In 1971, I graduated from West Point. is was also the same year that
David Packard, the Packard in Hewlett Packard, who was then the Deputy
Secretary of Defense (there was no Under Secretary for Acquisition), pub-
lished his rules for Defense Acquisition. I wouldn’t say there has been noth-
ing new under the sun since then, but some things do endure.
Recall that by 1971 we had already been to the moon, and the digital age,
enabled by solid state electronics, had just begun. By the fall of 1971, I
was at Caltech where I designed logic circuits using solid state integrated
components that included a few specic logic functions—several orders of
magnitude from current technology, and I was reducing experimental data
using the rst engineering math function digital calculator. My slide rule
had become obsolete. Deputy Secretary Packard’s rules, however, still reso-
nate. I recently had them put on a poster and hung it in the Pentagon in the
room we use for Defense Acquisition Board (DAB) meetings. Here they are
with a little commentary from both David Packard and me. You should
recognize a number of areas of overlap with Better Buying Power.
1. Help the Services Do a Better Job. Improvement in the development
and acquisition of new weapons systems will be achieved to the extent the
Services are willing and able to improve their management practices. e
Services have the primary responsibility to get the job done. OSD oces
should see that appropriate policies are established and evaluate the per-
formance of the Services in implementing these policies.
I continue to struggle with achieving the appropriate degree of sta “over-
sight,” but I certainly agree with this sentiment. Services manage programs.
As Defense Acquisition Executive (DAE), I set policy and I make specic
decisions about major investment commitments for large programs, usu-
ally at Milestone Reviews. e sta supports me in those decisions, and I
expect solid independent “due diligence” assessments for those decisions
16
Getting Defense Acquisition Right
from the sta of the Oce of the Secretary of Defense (OSD). All other sta
activities should be about helping the Services be more eective, ensuring
that our policies are well dened, and getting feedback on what works and
what needs to be improved in our acquisition practices.
2. Have Good Program Managers with Authority and Responsibility. If
the Services are to do a better job, they must assign better program man-
agers to these projects. ese managers must be given an appropriate sta
and the responsibility and the authority to do the job, and they must be
kept in the job long enough to get something done.
I don’t know anything more basic and important to our success than this
imperative. Having seen more than 4 decades of defense acquisition policy
changes, I am absolutely convinced that nothing matters as much as com-
petent, professional leadership. Once you have that, the rest is details. It
was my concern for the professionalism of the acquisition workforce that
led to the inclusion of an additional category of initiatives focused on our
workforce in BBP 2.0. We have a lot of good, even great, extremely dedi-
cated, professionals working in Defense Acquisition. But we need a deeper
bench, and every one of us can improve on our own abilities. In the tough
budget climate of today, managers at all levels, including Military Depart-
ment and Agency leadership, should pay a great deal of attention to re-
taining and managing our talent pool. At the tactical level, I’m looking
for some opportunities to take a “skunk works”-like approach to a pilot
program in each Service. e key to implementing this approach, however,
and what I want to be sure of before I authorize it, will be a highly qualied
and appropriately staed government team that will be with the project
until the product is delivered.
3. Control Cost by Trade-os. e most eective way to control the cost of
a development program is to make practical trade-os between operating
requirements and engineering design.
e aordability as a requirement element of Better Buying Power is in-
tended to provide a forcing function for just this purpose. I’ve seen several
variations of this; during my rst tour of duty in OSD, we used “Cost as an
Independent Variable” to try to capture this idea. e approach we are us-
ing now relies on the aordability caps (which are based on future budget
expectations—not on cost estimates) that we are establishing early in the
design process or product life cycle (Milestones A and B). e requirement
to deliver products that meet the aordability caps is intended to force re-
quirements prioritization and trade-os among competing needs. I plan to
insert a Requirements Decision Point prior to Milestone (MS) B to help fa-
cilitate this. I will continue to put these aordability caps in place and will
17
Chapter One: Getting Acquisition Policy Right
be enforcing them over the next several years. For non-ACAT I programs,
the Services and Agencies should be doing the same.
4. Make the First Decision Right. e initial decision to go ahead with
full-scale development of a particular program is the most important de-
cision of the program. If this decision is wrong, the program is doomed
to failure. To make this decision correctly generally will require that the
program be kept in advanced development long enough to resolve the key
technical uncertainties, and to see that they are matched with key operat-
ing requirements before the decision to go ahead is made.
I have long regarded the decision to enter Engineering and Manufactur-
ing Development (EMD) as the single most important decision in a pro-
gram’s life cycle. e name has changed several times over my career,
and Deputy Secretary Packard refers to it as full-scale development—but
we are talking about the commitment to go on contract for design of a
producible product that meets stated requirements, engineering devel-
opment test articles, and for the tests that will be necessary to conrm
performance prior to starting production.
At this point, we are committing to on average about 10 percent to 20
percent of the product’s life-cycle cost to years of development work, and
to getting a product that we will eld ready for production. Among the
most disturbing sources of waste in our system are the programs we put
into EMD, spend billions on, and then cancel—sometimes before EMD is
complete and sometimes aer some initial production. Part of getting this
decision right (in addition to aordability) is having the risk associated
with the product and its requirements under control and suciently un-
derstood and reduced so EMD can be executed eciently and successfully.
In recent years, we have focused on the Technology Readiness Level (TRL)
as a metric for maturity. I nd this metric to be useful, but not adequate
to the task of assuring readiness to enter EMD, and not a substitute for a
thorough understanding of the actual risk in the program—necessary but
not sucient, in other words. In addition to technology risk, we have to
manage engineering and integration risks. More importantly, we have to
deeply understand the actual risk, what it implies, and what the tools are
to mitigate it before and during EMD. I commissioned a review of pro-
grams transitioning from Technology Development into EMD over a year
ago and discovered we are not paying adequate attention to the actual risk
associated with the actual product we intend to acquire. In many cases,
industry was not being incentivized to reduce the actual risk in a product it
would produce; it was being incentivized to claim a TRL and to do a dem-
onstration. is isn’t necessarily the same thing as reducing the risk in an
actual product. e label of a TRL isn’t enough to ensure that the risks of a
18
Getting Defense Acquisition Right
product development are under control; we have to look deeper. is deci-
sion is too important to get wrong.
5. Fly Before You Buy. Engineering development must be completed before
substantial commitment to production is made.
If you have read any article about the F-35 Joint Strike Fighter in the last
year, you probably saw a quote of my comment about “acquisition mal-
practice.” I was talking specically about the decision to enter production
well before the rst ight of a production representative EMD prototype.
e earlier Milestones in our Materiel Development Decisions (MDD) sys-
tem for weapons acquisition—MS A and MS B—generally are based on
planning documents and analysis. MS B also is based on risk-reduction
activities, but if these have been completed, the balance of the review is
about intended business approaches, engineering, test planning, and fund-
ing adequacy. e decision to enter production at MS C is dierent. Here
the emphasis is on whether the design meets requirements and is stable. I
would regard this decision as a close second to the EMD decision in impor-
tance. Once we start production, we are eectively committed, and it will
be very dicult to stop. I seriously considered stopping F-35 production a
year ago, but I believe I made the right decision to continue. We shouldn’t
put ourselves in the position of having to make that sort of a choice.
Before the commitment to production, the ability to meet requirements and
the stability of the design should be demonstrated by developmental test-
ing of EMD prototypes that are close to the production design. Some degree
of concurrency usually is acceptable; all testing doesn’t usually have to be
complete before the start of low-rate production. e degree of concurrency
will vary with the urgency of the need for the product and the specic risks
remaining. But as a general practice, we should “y before we buy.”
6. Put More Emphasis on Hardware, Less on Paper Studies. Logistics
support, training, and maintenance problems must be considered ear-
ly in the development, but premature implementation of these matters
tends to be wasteful.
Most of the costs of our products are neither development nor production
costs. It is support costs that predominate. ese costs do need to be con-
sidered up front, early in the requirements and design processes and as the
acquisition strategy is being formulated. ey drive considerations of the
data and property rights we will acquire and the implementation of open
systems and modular designs (all features of Better Buying Power). While
we should avoid setting up support functions too much in advance of need,
we also should ensure that the ability to meet support requirements is de-
signed in and tested at the appropriate places in the development program,
19
Chapter One: Getting Acquisition Policy Right
and we must ensure that an adequate budget will be available to sustain the
product. Better Buying Power’s aordability caps on sustainment costs are
designed to ensure that these upfront analyses are conducted early in de-
velopment, preferably while there is still competition for the development
work, and before the design concept has matured to the point that trade-
os to improve supportability no longer are possible.
7. Eliminate Total Package Procurement. It is not possible to determine
the production cost of a complex new weapon before it is developed. e
total package procurement procedure is unworkable. It should not be used.
Total Package Procurement is one of those acquisition ideas that come
along occasionally and are embraced for a time until it becomes apparent
they are not panaceas. I’m speculating, but I would guess the Deputy Sec-
retary had seen some disasters come out of this approach. e idea is to get
prices (as options, presumably) for the production run at the time we start
development. I’m not quite as pessimistic as Deputy Secretary Packard was
about the ability to predict production costs, but I’m pretty close. We are
tempted occasionally to ask for production prices as options at the time we
are doing a competitive down-select for EMD. is is tempting because we
can take advantage of competitive pressure that we will lose aer we enter
EMD. While I wouldn’t close out this idea entirely as Deputy Secretary
Packard did in this rule, I think we have to consider this approach carefully
before adopting it. ere are other ways to provide incentives to control
production costs, and we need to consider the full range of options and the
pros and cons and the risks associated with them before we decide on an
acquisition strategy or a contract structure for a specic product. BBP 2.0
takes this approach.
8. Use the Type of Contract Appropriate for the Job. Development con-
tracts for new major weapons systems should be cost-incentive type con-
tracts. (a) Cost control of a development program can be achieved by better
management. (b) A prime objective of every development program must be
to minimize the life-cycle cost as well as the production cost of the article
or system being developed. (c) Price competition is virtually meaningless
in selecting a contractor for a cost-incentive program. Other factors must
control the selection.
We seem to work in 20-year cycles. In 1971, David Packard supported the
use of cost-plus contracts for development. About 20 years later in the late
1980s, we tried a policy or requiring rm xed-price contracts for devel-
opment. I lived that dream from the perspective of having, in the early
1990s, to extricate the Department from the disasters that ensued—not
least among them the Navy’s A-12 program cancellation, which still is in
litigation more than 20 years later. Fast forward another 20 years, and we
20
Getting Defense Acquisition Right
are seeing suggestions of using this approach again. Recently, I wrote at
length about the times when a xed-price development approach might be
appropriate, and I won’t repeat that material here. ere are times when
xed price is the right approach to development contracts, but it is the ex-
ception rather than the rule. I completely agree with David Packard that
costs can be controlled on a cost-plus contract by better management. It re-
quires hands-on management and a willingness to confront industry about
excessive and unnecessary costs or activities. It also requires strong incen-
tives to reward the performance we should expect, coupled with the will
and expertise to use those incentives eectively. e importance of control-
ling life-cycle costs has been discussed earlier. I don’t entirely agree that
price competition is meaningless in selecting a contractor for a develop-
ment contract, but I do agree that other factors should usually be of greater
signicance to the government. Most of all, I fully concur with Deputy
Secretary Packard’s overarching point: Use the contract type appropriate
for the job. If you get a chance to attend a DAB or DAES meeting, or just to
come into the Pentagon, you can see David Packard’s rules on the wall in
Room 3B912. ey still resonate. We have tough jobs, and the professional-
ism needed to do them eectively is a constant. ere are no rules that can
be a substitute for that.
21
Chapter One: Getting Acquisition Policy Right
e Challenges We Face—
And How We Will Meet em
Reprinted from Defense AT&L: November-December 2012
“Supporting the warghter, protecting the taxpayer”—these words were
suggested by my military assistant for a small sign outside the door to my
oce in the Pentagon. ey succinctly express the challenges those of us
who work in defense acquisition, technology, and logistics face in the aus-
tere times we have entered. We will have to provide the services and prod-
ucts our warghters need and protect the taxpayers’ interest by obtaining
as much value as we possibly can for every dollar entrusted to us.
is is nothing new; we have always tried to do this. Going forward, how-
ever, we will have to accomplish this goal without reliance on large overseas
contingency funding and in the face of continued pressure on defense bud-
gets brought about not by a change in the national security environment,
which is increasingly challenging particularly with the emergence of more
technologically and operationally sophisticated potential opponents, but
by the policy imperative to reduce the annual budget decit.
Hopefully, the specter of more than $50 billion in sequestration cuts next
year will be avoided, but, even if it is, we can expect the pressure on defense
budgets to increase. Last winter, the department published new strategic
guidance as well as a budget designed to implement that strategy. Like all
budgets, this one did not make any allowance for overruns, schedule slips,
or increases in costs for services beyond the standard indices assumed by the
Oce of Management and Budget, indices that oen are exceeded. We have
our work cut out for us today and for as far into the future as we can see.
e overriding imperative of obtaining the greatest value possible for the
dollars entrusted to us is not just an acquisition problem; it encompasses all
facets of defense planning, as well as execution of acquisition programs and
contracted services. We have to begin by understanding and controlling
everything that drives cost or leads to waste. e budgeting/programming
and requirements communities are as important to success as our planning
and management and industry’s execution of acquisition contracts. e
quest for value includes an understanding of: (1) the constraints we must
live within; (2) a willingness to prioritize our needs and accept less than we
might prefer; (3) an understanding of the relative value of the capabilities
we could acquire; and (4) an activist approach to controlling costs while we
22
Getting Defense Acquisition Right
deliver the needed capability. Only the last of these is solely an acquisition
responsibility.
For the last 2 years, and as part of the original Better Buying Power initia-
tive, we required that aordability caps be placed on programs entering the
acquisition process. ese caps are not the result of anticipated costs; they
are the result of an analysis of anticipated budgets. Here is a simple example
of what I mean: If we have to maintain a eet of 100,000 trucks that we
expect to last 20 years, then we will have to buy an average of 5,000 trucks
per year. If we can only expect to have $1 billion a year to spend on trucks,
we must buy trucks that cost no more than $200,000 each. at $200,000 is
our aordability cap. Aordability is not derived from cost; it dictates cost
constraints that we have to live within. e source of the type of analysis il-
lustrated here is generally not the acquisition community; it comes primar-
ily from force planners and programmers, working in collaboration with
acquisition people. We have aordability caps on a number of programs
now, both for production costs and sustainment costs. Our greatest chal-
lenge going forward will be to enforce those caps.
To achieve aordability caps, we will need a willingness to identify and
trade o less important sources of cost. In other words, we will have to
prioritize requirements, identify the costs associated with meeting those
requirements, and drop or defer the capabilities that do not make the af-
fordability cut. is is a simple formula, but one the department has been
reluctant to act on in the past. Too oen, our history has been one of start-
ing programs with desirable but ambitious requirements, spending years
and billions of dollars in development, and perhaps in low rate produc-
tion, and then nally realizing that our reach had exceeded our grasp. e
most recent example of this is the Expeditionary Fighting Vehicle, which
was canceled aer many years in development because it was unaordable.
ere are many others.
e acquisition community and the requirements communities must work
together to understand priorities and make these choices as early as possible.
Delay in confronting dicult trade-os will only lead to waste. If a 1 percent
or 2 percent change in a performance goal will result in a 10 percent or 20
percent cost reduction, that trade should be considered as early as possible.
Conguration Steering Boards are one mechanism to address requirements
trade-os, but they must meet oen, be empowered, and have the data they
need to make informed decisions. When the aordability of the full require-
ments for a new product that hasn’t been developed yet is uncertain, industry
must be given prioritized requirements so that its oerings can be optimized
to meet the highest-priority user needs within the cost cap. Again, this takes
close cooperation between communities and the willingness on the part of
23
Chapter One: Getting Acquisition Policy Right
the requirements community to articulate priorities and to take into consid-
eration the costs of meeting less essential requirements.
One situation I have seen on occasion in the last few years, and one I ex-
pect we will see more in the future, is the case in which “best value” has
to be clearly dened. Oen in these cases there is a competition between
companies oering dissimilar capability levels based on existing products
that may be modied to meet a need. e Air Force tanker program is an
example of this: Both oerings were based on commercial aircra and both
could meet the basic requirements, but they also had diering capabilities
with disparate military utility as well. In situations like this, the onus is on
us, primarily on the user, to determine the value to the government of the
dierent levels of capability and to apply that understanding objectively in
the source selection process. Dening the value of a capability to the cus-
tomer (what the customer is willing to pay for something) has nothing to
do with the cost of the capability. Read that last sentence again—it is very
important. In the KC-46 tanker situation, the Air Force determined that
it was only willing to pay up to 1 percent more for the extra features that
might be oered. Again, this had nothing to do with what those features
cost. e bottom line is that, in the austere times we can expect going for-
ward, we will need to understand how much we are willing to pay in total
(the aordability cap) and how much of a premium we are willing to pay for
additional capability beyond the threshold requirement. We will also have
to communicate these parameters clearly to industry.
If we have constrained our appetites to what we can aord and to what we
consider best value, now we have to execute more eectively than we have
in the past. Historically, we have overrun development programs in the
high 20 percent range, and we have overrun early production lots by almost
10 percent. is has to stop. It will not stop because of any one thing we
do or any one set of policies. If controlling acquisition costs were easy, we
would have done it decades ago.
Soon I will be publishing the next round of Better Buying Power initia-
tives (BBP 2.0), perhaps by the time this article goes to press. However, the
central idea of Better Buying Power is not the list of specic management
practices or policies we are currently emphasizing. e central idea is that
we must all continuously look for ways to improve how we do business and
the outcomes we achieve. We have to understand our costs; we have to look
for opportunities to reduce them; and we have to attack unnecessary costs
as the enemy of the department that they are. e whole idea of “should
cost” management approaches and goals reects this concept. So too do the
various policy, management, and contracting initiatives we are pursuing
under the Better Buying Power rubric and throughout everything we do.
24
Getting Defense Acquisition Right
We should not be content with staying within our budgets. It is not our
job to spend the budget. It is our job to provide our warghters with the
greatest value we can for every penny of the money the taxpayers provide
to us. If we keep this always rmly in mind, we will successfully meet the
challenges we face.
25
Chapter One: Getting Acquisition Policy Right
Innovation in the Defense
Acquisition Enterprise
Reprinted from Defense AT&L: November-December 2015
Innovation has become a very popular word lately. Former Secretary of
Defense Chuck Hagel announced the Defense Innovation Initiative about
a year ago. At about the same time, the dra Better Buying Power 3.0 set
of initiatives, focusing on technical excellence and innovation, were pub-
lished for comment. Deputy Defense Secretary Robert O. Work has led the
eort to develop an innovative “ird Oset Strategy.” Most recently, Sec-
retary of Defense Ashton Carter announced the opening of the Defense
Innovation Unit—Experimental, or DIU-X, in California’s Silicon Valley.
President Obama has led the administration’s successful opening of several
Manufacturing Innovation Institutes, most of which are sponsored by the
Department of Defense (DoD). And more institutes are on the way.
Today it is possible to obtain advanced degrees at major universities in the
elds of innovation and entrepreneurship. Many books and articles have
been written on innovation, perhaps none more well-known than Clay-
ton Christianson’s “e Innovators Dilemma.” I would like to add a few
thoughts to that body of work by making some very unscientic (meaning
unsupported by data) comments on the ingredients needed to foster and
encourage innovation—and on the extent to which the DoD acquisition
enterprise has or does not have those ingredients today.
e rst and absolutely necessary ingredient is knowledge. Technical inno-
vation is itself, almost by denition, a new idea. But new ideas are rooted in
the knowledge that makes the new idea conceivable and practical. Part of
Better Buying Power 3.0 involves increased support for education in STEM
(science, technology, engineering, and mathematics). Our educational sys-
tem provides the foundation of our knowledge, but that is just the begin-
ning. Experience, exposure to a wide and diverse range of technical elds,
and continuing in-depth study are all important. For the more exciting
areas of technical innovation today, this knowledge is increasingly highly
specialized and deep. I recently visited the Massachusetts Institute of Tech-
nology and spoke to researchers in the elds of biological process-based
materials production, novel computational architectures, and autonomy.
ese are areas in which it is not possible to enable innovation unless one
has a deep knowledge of the science and associated technology. I believe
that we are in the early stages of some explosive growth in the products that
26
Getting Defense Acquisition Right
these and other technologies will make possible, but some very specialized
advanced technology work will have to be accomplished to achieve that po-
tential. Once that occurs, innovative applications of these technologies will
be created at an exponential rate. In many cases today, the DoD is not the
primary nancial supporter of the relevant work. Nevertheless, the DoD’s
basic research program still represents an important contributor, and it
provides a basis by which the DoD can shape and capitalize on new techni-
cal knowledge as it is created. By reaching out to nontraditional sources,
such as through the DIU-X, the DoD intends to increase its knowledge of
the possibilities that commercial cutting edge technology can oer to DoD.
My second ingredient is freedom. By this, I mean the freedom to have a
new idea and to take action in pursuit of that idea. I mean the freedom to
fail and start again. I also mean freedom from bureaucratic constraints.
Our free enterprise system provides this ingredient on a national scale, and
it is the most powerful economic engine ever created. e United States
stands out as a place where it is amazingly easy to start a new business. I’ve
done it a couple of times.
Within the DoD, one of our most eective and successful institutions—the
Defense Advanced Research Projects Agency (DARPA)—is a living testa-
ment to the value of freedom. I zealously guard DARPA’s freedom from the
many parts of the DoD that see DARPA’s budget as an opportunity to fund
something they need. e whole concept of DARPA is that the organization
has the freedom to choose its own high-risk but high-payo investments.
In DoD more broadly, we set strategic goals for technology investment, re-
quire a certain fraction of the Services Science and Technology work to be
in these areas and leave those organizations the freedom to choose their
own priorities for the balance of their work. Within DoD, we also allow our
contractors to pursue Independent Research and Development (IR&D) as
an allowable overhead cost with very little constraint.
I made industry a little nervous recently by proposing in Better Buying Pow-
er 3.0 to increase the DoD’s oversight of this work. e fundamental concern
of industry partners has been the possible loss of freedom to make their own
IR&D investment decisions. at was never my intent. I once ran a major
defense contractor’s IR&D program, and I appreciate industry’s perspective.
I appreciate the value, to industry and the DoD, of allowing industry to place
its own bets on technology that might increase a rm’s competitiveness.
Aer carefully considering several alternatives, the policy I propose would
merely require industry to brief an appropriate DoD ocer or ocial prior
to and aer concluding an IR&D project, and to document that the meet-
ing occurred as part of the accounting for the project. is policy would
27
Chapter One: Getting Acquisition Policy Right
not require sponsorship or approval of an IR&D project by a DoD ocial,
but it would require industry to communicate directly with appropriate
DoD personnel and to obtain feedback on the proposed work and to com-
municate the results when the work is complete. is should not constrain
industry’s freedom in any way that current regulations and statutes don’t
already require, and it will provide the benet of ensuring more frequent
and eective communication between industry and government.
Human Intangibles
My next two ingredients enter the area of what I will call subjective hu-
man intangibles. ese intangibles also are manifested in what we call or-
ganizational cultures. One could generate a pretty long list of the human
qualities needed for successful innovation. e list might include innate
intelligence, creativity or the ability to think “out of the box” and curios-
ity, to name just a few such qualities. ese address the capacity to have a
new idea. A great deal of work has gone into structuring organizational
environments to encourage and foster creativity. is can include physical
arrangements, workplace layouts, and a range of approaches intended to
foster cultural norms that support creativity.
Some companies use problem-solving tests to identify candidates with
high creativity. I believe all this work has merit, but I also think its goal is
to select creative people and to draw out the inherent creativity that people
either do or do not possess. I’m only going to mention two human qualities
that I think have great importance, and that DoD managers at all levels
should be especially conscious of: risk tolerance and persistence.
Accepting Risk
I was asked by a reporter during an interview 2 or 3 years ago if the DoD
was taking too much risk in its programs. My response was that we are not
taking enough risks. With respect to our major programs, I nd myself
pushed in two directions simultaneously by the political winds in Wash-
ington. At the same time that I am told the expectation for all our pro-
grams is to have no schedule slips or cost overruns, I also am told that we
should go much faster in our programs and not have so much oversight. I’m
sorry, but you can’t have it both ways.
To me, both perspectives miss the point. Development of new products,
particularly a new generation of cutting-edge and militarily dominant
systems, cannot be made risk free. If we want risk-free defense acquisi-
tion, we should just buy fully developed products from other countries.
If, on the other hand, we want the best military in the world, and one in
which our warghters always have innovative and dominant equipment,
then we are going to have risk in our programs.
28
Getting Defense Acquisition Right
One of our program managers’ most important responsibilities is to un-
derstand and proactively manage the risk inherent in any development
program. (I wrote about that responsibility in an article in the July-August
2015 issue of Defense AT&L magazine.) To borrow a line from the movies,
the secret of life is balance. We have to balance risk against urgency and
resource constraints. If we are too cautious, our programs will take forever
and be too modest in their ambitions. If we gamble wildly, we will waste
precious resources and not meet our objectives.
At the enterprise level in DoD today, there is strong support for accepting
the risk of embarking on a number of what I will call advanced technology
demonstration programs. e recently completed Long Range Research
and Development Planning Program has recommended several advanced
technology demonstration programs for consideration in the Fiscal Year
(FY) 2017 budget. Similarly, the Strategic Capabilities Oce is proposing
demonstration programs based on novel applications of currently elded
systems or those in development. In the FY 2016 budget, I was able to se-
cure funding for the Aerospace Innovation Initiative that will culminate
in X-plane-type and propulsion technology demonstrators that will cre-
ate options for the systems subsequent to our current Joint Strike Fighter
program. is fall, all of these demonstration proposals will collide with
budget reality at the President’s Budget request level. Needless to say, if se-
questration occurs, that collision will be even more violent. In some cases,
we could reasonably accept more risk and move directly into Engineering
and Manufacturing Development (EMD) programs instead of pursuing
concept demonstration programs, but we simply don’t have the resources
to conduct those EMD programs.
Persistence
e other intangible characteristic successful innovators demonstrate is
persistence. When innovators encounter obstacles, they nd ways through
or around them. Two obvious historical examples are omas Edison and
his quest for a practical light bulb, and the Wright brothers and their pur-
suit of controlled, powered ight. (David McCullough has written a new
book chronicling the Wright brothers’ tenacious pursuit of powered and
controlled ight.)
e DoD has sometimes been criticized for sticking with programs that
encounter problems. e F-35 ghter is a current example. Earlier ones
in my experience include the C-17, the Advanced Medium-Range Air-to-
Air Missile, and the F-18E/F ghter. In all those cases, we persevered and
achieved good results. In other cases, we have stopped programs that, in
retrospect, we probably should have continued. In still other cases, we kept
going for far too long on programs that should have been canceled earlier.
29
Chapter One: Getting Acquisition Policy Right
In general, my sense is that, for most programs, we can get to a product
that meets our requirements if we have the patience and persistence to con-
tinue. ere are exceptions, however.
ere is an important dierence between the persistence applied to com-
mercial innovation and that applied to innovative products in DoD. For
commercial products, both in start-ups and large corporations, the deci-
sion to continue product development when problems are encountered is
driven by the judgment of the management (inuenced by persistence and
risk tolerance) and by the resources available to the rm. In DoD’s case,
these decisions have a high political content—both internally and exter-
nally. My observation is that the politicization of these decisions does not
generally lead to better results. We also have frequent leadership chang-
es—which makes persistence in the face of diculties more problematic. I
have no solution to oer for all this other than to continue the work of the
last several years to ensure we don’t start unaordable programs, and to
manage risk professionally and proactively in our development programs.
e DoD spends taxpayer-provided money; we will always be under close
public scrutiny, and we will always have internal competition for resources.
Collaboration
Innovation, in the commercial and the DoD context, tends to be based on col-
laboration. Multiple technical disciplines oen have to come together, and
the synergy between multiple disciplines may be the central feature of the
innovative idea. In the DoD, technical ideas only reach the market when the
using military Service decides to embrace the new concept or new product.
is is not quite the same as the commercial market where “early adopters”
from a large customer base may help a technology establish a foothold and
gain credence. Commercial entrepreneurs build the better mouse trap rst
and expect customers to come. In DoD the customers, the military Depart-
ments, ask for fairly specic products and then budget the resources to pay
for the development of those products.
e DoD also uses a formalized requirements process that is based on the
perception of “gaps” in capability. Requirements are generated to ll these
perceived gaps. is approach tends to be self-limiting and to discourage
new concepts and innovative approaches that deviate from existing para-
digms. Henry Ford’s famous quip that if he had asked his customers what
they wanted it would have been a better horse has some relevance here.
e fact is, however, that despite our formal process, requirements are of-
ten based on the priorities of senior Service leadership. For this reason, I
welcome the initiative from the U.S. Senate to increase Service leadership
involvement in acquisition.
30
Getting Defense Acquisition Right
A strong collaboration between Service leadership and the technical acqui-
sition community, starting as early in the product life cycle as possible, is
essential to eective innovation in the DoD, and it is a component of Better
Buying Power. I would also add that close collaboration with the intelli-
gence community is critical as well: Potential adversaries are moving very
quickly to develop products clearly designed to defeat U.S. capabilities. e
DoD must be both innovative and quick to market in responding to these
emerging threats. Achieving these objectives requires strong and continu-
ous collaboration between operators, the intelligence community and the
technical acquisition community.
Funding Is Fundamental
ere is one more necessary ingredient that I have not discussed yet. at
ingredient is capital. Small start-ups and large businesses alike depend
on capital to survive and to bring new products to market. So it is for the
DoD, and this is my greatest concern today. Our capital comes from the
budgets we receive from Congress. As long as we remain trapped in the
grip of sequestration and as long we continue to prepare budgets that are
far out of alignment with the funds we may receive, we will not be able to
innovate eectively.
Innovation isn’t just about thinking outside the box, or about demonstrat-
ing new technologies and operational concepts. It is about developing, pro-
ducing, elding and training with those new capabilities. Today I believe
our pipeline of new products in development is inadequate to deal with
emerging threats. We are facing a major recapitalization bill for the strate-
gic deterrent that is about to come due. ere is nothing that I or the DoD
can do to improve our productivity and eciency that will fully compen-
sate for inadequate capital. All the eciencies I can even imagine will not
make up this shortfall. By conducting well-chosen demonstrations, we can
reduce the lead time to acquiring real operational capability, we can keep
an essential fraction of our industrial base gainfully employed, and we can
position ourselves for changes in threat perceptions and the availability of
additional funds. But, without relief from the specter of sequestration, we
cannot increase the relative combat power of the United States against our
most capable potential adversaries.
I can point to numerous places in DoD where we are taking steps to im-
prove our access to and use of each of these ingredients: knowledge, free-
dom, risk tolerance, persistence, collaboration and capital. For the last few
years, we have worked hard to emphasize and increase the professionalism
of the government acquisition workforce. Secretary Carter’s “Force of the
Future” initiative is specically intended to bring high knowledge people
into our workforce. With help from the Congress through the Defense
31
Chapter One: Getting Acquisition Policy Right
Acquisition Workforce Development Fund and a number of internal ac-
tions, we have continued to build on our strong foundation in this area
despite budget constraints.
We are protecting and emphasizing the freedom of our managers to nd
creative solutions to technical and managerial problems. Last year, I tasked
each of our program managers to communicate directly with me about
problems, issues and recommended solutions. e result was a huge testa-
ment to the creativity, dedication and professionalism of our workforce.
e demonstrations that I mentioned, if they can be funded, show our
willingness to take risk on new and nontraditional approaches to opera-
tional problems. Deputy Secretary Work’s “ird Oset” strategy, by its
very nature, will require the DoD to accept the risk associated with new
operational concepts and the technologies that enable them. Our ability
to persist in bringing all of these initiatives to fruition remains to be seen,
but the closely aligned leadership in the DoD—including the Secretary and
Deputy Secretary of Defense, myself, and the new Joint and Service uni-
formed chiefs—makes me optimistic that we can collaborate to do so.
From their inception, the Better Buying Power initiatives, in every edition,
have been about getting the most value possible from our available capital.
With that possible exception—which is in the hands of the Congress—we
possess or can obtain all the ingredients we need to bring innovative solu-
tions to our warghters.
32
Getting Defense Acquisition Right
Real Acquisition Reform
(or Improvement) Must
Come From Within
Reprinted from Defense AT&L: May-June 2016
Since I returned to government 6 years ago, I have been working with the
acquisition workforce and defense industry to improve defense acquisition
performance. ere is a lot of evidence that we are moving in the right
direction. We have also eectively partnered with Congress on some initia-
tives, and we are in the midst of a new cycle of congressionally led eorts to
improve defense acquisition—as in other cases with the label of “acquisi-
tion reform.”
I would like to share some thoughts with you about the limitations of legis-
lative tools, and also explain why I believe that lasting improvements must
come from within the Department of Defense (DoD)—from our own eorts.
Legislation can make our job easier or harder, but it can’t do this job for us. I
recently was asked by Chairman Mac ornberry to attend a roundtable on
acquisition reform with the House Armed Services Committee. is article
is based in part on the thoughts I communicated to the committee.
First of all, what it takes to be successful at defense acquisition isn’t all that
complicated—to rst order at least. It consists of just these four items: (1) set
reasonable requirements, (2) put professionals in charge, (3) give them the
resources they need, and (4) provide strong incentives for success. Unfor-
tunately, there is a world of nuance and complexity in each of these phrases
and words. ey also apply to both government and industry organiza-
tions, but not always in the same way. e fact is that none of this is easy.
Reasonable requirements are not all that simple to create, professionals
don’t exist by chance, resources are subject to budget vagaries and other
constraints—including a predisposition toward optimism—and incentives
are complicated and oen have unintended consequences. e work of
making each of these four imperatives real for a given program is not easily
accomplished, even with strong hands-on leadership. It is even harder to
inuence through legislation. I have some sympathy—and even empathy—
for the diculty that the Congress and our oversight committees face when
they try to “reform” defense acquisition. Congress has two major challeng-
es as it tries to improve acquisition results. e rst is the structure of the
33
Chapter One: Getting Acquisition Policy Right
defense acquisition enterprise itself. e second is the inherent limitation
on the set of tools they have to work with to eect change.
One way to imagine the defense acquisition enterprise is as a layered con-
struct. At the base of this tiered structure are the organizations and people
that do the actual work of delivering products and services. ese people
and organization are almost all defense contractors. (I’m oversimplifying a
little here—some services and products are provided within government, but
this is an exception.) e next layer consists of the government people who
actually supervise the defense contractors. is second layer is also the layer
at which requirements—a critical input to the acquisition structure I’m de-
scribing—directly impact the work. ere is a huge variety of contracted ser-
vices and product acquisitions, and the government people who plan, issue
and administer contracts cover a broad spectrum of roles and professional
expertise. ese two layers are where the action occurs in terms of delivering
products and services. Everything else in the acquisition structure is about
making these two layers function as eectively as possible.
Above these layers there are chains of command and direct stakeholders
of many types, most but not all of whom are located in the organization
(military department or component) acquiring the service or product.
Next there is a layer of what we like to call “oversight” within the DoD,
some of it in the Oce of the Secretary of Defense but also a great deal of it
distributed in the military departments and agencies. My own position as
Under Secretary is a mix of acquisition chain of command responsibilities
and policy or oversight.
Finally, at the top of the whole structure, and furthest from where the work is
done, there is the Congress, which has statutory authority over the DoD and
the entire Executive Branch and conducts its constitutional oversight role.
In order to achieve its objective of improving acquisition, Congress has
to penetrate through all the other layers to get to those where the work is
done. is isn’t an easy task. e DoD’s relationship with our contractors
is dened primarily by contracts, so one route available to the Congress
to improve acquisition is to write laws governing defense contracts. ese
laws then are turned into regulations in our Defense Federal Acquisition
Regulation Supplement (DFARS) by people in the oversight and policy
layer and implemented by the management layers that are in more direct
contact with defense contractors.
As a practical matter, Congress tends to react to events as they occur by
passing additional statutory provisions. Congress also tends to make
changes or additions whenever committee leadership, members and sta
change. Of course, lobbyists for industry and other interests play a role
34
Getting Defense Acquisition Right
in this process. e result over time is a frequently changing, but usually
increasingly complex compendium of almost 2,000 pages of DFARS regu-
lations governing how the DoD contracts for work. A serious eort at ac-
quisition reform would include a complete review of everything in both
the Federal Acquisition Regulations (FAR) and DFARS with the rst-order
goal of simplication and rationalization and the second-order goal of
eliminating as much content as possible.
is task would take a good-sized, knowledgeable team up to a year to
complete and it would take at least a year more for review and modication
to the resulting product. e DFARS is based on the FAR, of course, so this
would need to be a federal government, not just a defense, endeavor. I be-
lieve this task is worth undertaking, but no one should expect it to achieve
miracles; almost everything in the FAR and DFARS is there for a reason—
usually as an expression of policy goals that are considered worthwhile.
e tough questions have to do with whether the costs of all these pro-
visions in terms of ineciency, higher barriers to entry for industry, and
taxpayer expense are outweighed by the benets achieved. We may only be
able to eliminate a subset of existing provisions, but what we could do for
certain is have a more consistent, coherent and easily applicable body of
regulations. Over time, I have no doubt that Congress would continue to
add legislation that would take us down the same path of increasing com-
plexity; a “reset” every decade or so would be necessary, but I still believe
the eort would be of value.
In addition to inuencing how the DoD contracts with industry, Congress
also attempts to improve acquisition by legislating rules that aect the gov-
ernment oversight layers and the people in them. is indirect approach
is based on the premise that oversight and supervisory bodies can have a
positive or negative impact on acquisition performance and that laws can
in turn improve the performance of those layers. e Weapons Systems
Acquisition Reform Act (WSARA) was of this nature. It addressed the
systems engineering and developmental test and evaluation oces and it
created the Performance Assessment and Root Cause Analysis organiza-
tion (all within the Oce of Acquisition, Technology, and Logistics), for
example. Congress also has taken some steps to improve professionalism
of the government management team by mandating tenure for program
managers and selection rates for acquisition corps ocers. Many of the
steps Congress has taken, like these, have in fact been helpful.
e more indirect approach to improving acquisition by redesigning over-
sight structures and processes also suers from the problem that it only im-
pacts what happens in the top layers of the structure—not the layers where
the work is done. Many outside observers seem to confuse the eciency of
35
Chapter One: Getting Acquisition Policy Right
the defense acquisition system, (i.e., the process by which program plans
are approved and program oversight is executed), with the fact of cost and
schedule overruns on particular programs. I sometimes make the point
that the DoD only has two kinds of acquisition problems—planning and
execution. e burden on the military department or component of pre-
paring a plan and getting it approved is an overhead cost we should seek
to reduce, but that burden shouldn’t be confused with the failure to deliver
a product or service on time and within cost. Where the DoD’s oversight
structure falls short is when it approves an unrealistic plan and thereby
fails to prevent overruns and schedule slips. e oversight mechanisms
succeed when they produce a more aordable and executable plan. I think
we are fairly successful in this regard. Execution itself is where we most
oen have problems—and that is squarely the responsibility of contractors
we hire and the government people who supervise them—in the bottom
two layers I described. Changing the oversight layer’s structure and pro-
cesses can improve our planning, but it doesn’t lead to better execution.
In my experience, some of Congress’ eorts to improve acquisition have
been problematic in three ways. In order of signicance they are: (1) impos-
ing too much rigidity, (2) adding unnecessary complexity and bureaucracy,
(3) failing to learn from experience.
A lot of the work we have done over the past several years has been to
identify and promulgate best practices, but a point I have made repeat-
edly is that the DoD conducts such a huge array of contracted work that
it is counterproductive to impose a one-size-ts-all solution or way of do-
ing business on everything that we do. Imposing rigid rules and universal
practices is counterproductive. Overly proscribing behaviors also has the
unintended impact of relieving our professionals of the core responsibil-
ity to think critically and creatively about the best solution to the specic
problems they face.
One thing the DoD is very good at is creating bureaucracy. New procure-
ment laws lead to the creation of more bureaucracy. Last year we provided
Congress with a number of recommendations to remove reporting re-
quirements and bureaucracy in the acquisition milestone decision mak-
ing process that our program managers go through. Many of these recom-
mendations were included in the Fiscal Year (FY) 2016 National Defense
Authorization Act (NDAA). Unfortunately, while some requirements were
removed more were added. As indicated above, the overhead we impose
on our managers does not directly impact the cost or schedule to com-
plete a program or deliver a service, but it does have the secondary impact
of distracting our managers from their job of getting the most out of our
36
Getting Defense Acquisition Right
resources, and it does increase overhead costs. Frankly, I think we have
enough rules; we need fewer rules—not more.
I’ve also been in this business long enough to have seen multiple cycles of
acquisition reform. I tell a story sometimes about the rst congressional
hearing I ever attended. It was in 1980. I vividly remember someone on
the committee holding up a program schedule and ranting about the pres-
ence or absence of concurrency between development and production. He
was very passionate, but I don’t recall if he was for or against having more
concurrency. We’ve been both for and against high degrees of concur-
rency several times over the years. Concurrency is one of the many judg-
ments best le to professionals who understand the risks in a particular
new product design and the urgency of the need. I also spent several years
cleaning up the messes le behind in the late 1980s by an early round of
self-imposed xed price development contracting, which at one time was a
presumed panacea to overruns in development. It was a disastrous policy
that we swore we would never try again.
e sign outside my door, “In God we trust, all others bring data,” isn’t
there as a joke. We need to learn from our experience, and the data tell us
very clearly that xed price development is usually, but like everything in
acquisition, not always, a bad idea. We should not be making arbitrary ac-
quisition policy changes under the guise of reform just because we are not
fully happy with the results we’ve seen recently. Doing something dierent
ought to reect a factual basis for thinking that change will make things
better. At the very least, novel ideas should be tried on a small scale in pilot
programs before they are mandated more broadly. We need to learn from
our experience, and, in general, passing laws that force us to repeat unsuc-
cessful experiments is not wise.
Let me come back to where I started, with a description of what it takes
to succeed in acquisition. Requirements drive what we acquire and they
are set by our customers—the warghters and the organizations that use
the services or products we procure. Setting reasonable requirements that
meet user needs operationally but are still achievable within a specied
timeframe, consistent with the need at an aordable cost is a matter of
good professional judgment. ese judgments can’t be legislated. ey
occur when operators, intelligence experts, acquisition professionals and
technologists work together.
Creating complex new defense products that provide technological superi-
ority is a job for true professionals, in industry and government. It is very
hard to write a law that makes someone a better engineer or program man-
ager. We have to develop these professionals over their careers in industry
or government. Adequate resources are a concern of Congress, but they are
37
Chapter One: Getting Acquisition Policy Right
authorized and appropriated in the context of the budgets the DoD sub-
mits. Historically, our greatest failing in building those budgets has been to
be too optimistic about the resources we needed to deliver a product or ser-
vice successfully, or about what we expected we could aord in the future.
Sound cost estimating, rational aordability constraints and leadership
that insists on the use of realistic costs also are hard to legislate. Incen-
tives for acquisition success in government come from the dedication of
our workforce members and how they are encouraged and rewarded by the
chain of command and their institutions. Again, this is about leadership,
not legislative rules. For industry, it is a matter of aligning nancial incen-
tives with the government’s objectives in a way that successfully improves
contractor behaviors. And this requires professional judgment that must be
tailored to the individual situation—not something that can be directed in
legislation with broad applicability.
e bottom line of all this is that there won’t be meaningful acquisition
improvement except by our eorts. Congress can make things easier or
harder, but this is still our job. We should be encouraged by the fact that
we have made a great deal of progress over the last several years. e data
support both that we are making progress and that there is still room to im-
prove. As an example, we recently calculated the net Major Defense Acqui-
sition Program overrun penalty for the Services that the FY 2016 NDAA
directed. As of today, because of the savings we have achieved, we have
built up a “credit” of more than $25 billion in underruns across the DoD.
We also have some programs that have come in above their predicted costs,
but the number of programs in which we are beating our original projec-
tions for Program Acquisition Unit Cost outnumbers the programs where
we are seeing overruns by about 2 to 1. We need to stay on course; keep up
the good work.
38
39
Chapter Two
Building Professionalism in
the Acquisition Workforce
“I happen to think we’ve set our ideal on the wrong objects;
I happen to think that the greatest ideal man can set
before himself is self-perfection.”
—W. Somerset Maugham, “e Razor’s Edge”
In the second version of Better Buying Power, I added a category of initia-
tives associated with building professionalism. I was not implying that our
workforce lacked professionalism—quite the contrary. What I wanted to
communicate was the importance of constantly improving our capability;
all of us can always improve our capabilities as professionals. Doing so is
one of our jobs. Even more important, we need to help the people who work
for us to grow in their own professional capacities. I rmly believe that the
most important legacy any government acquisition professional can leave
behind is a more professional workforce then he or she inherited. I also
wanted to communicate to outside pundits, critics, and stakeholders, and
even other defense communities, that all aspects of acquisition, including
program management, engineering, contracting, testing, manufacturing,
and logistics require qualied professionals to achieve success.
e rst piece in this chapter addresses professionalism itself. What makes
the people who work in each of the dozen or so elds associated with the
acquisition workforce professional? My answer includes specialized knowl-
edge, standards of performance, the ability to deal with complexity, a dis-
tinct culture of continuous improvement, and high ethical standards. In
the following article in this chapter, I discuss in more detail some of the
ethical standards that apply particularly to acquisition professionals.
e next article provides some real life examples of acquisition profession-
als at work. Each year I ask each of the Program Managers for our larger
programs to write a short assessment of their programs. e total number
of assessments is around 150. I read each one and reply to each Program
Manager. Many are sources of ideas that can be applied more broadly.
40
Getting Defense Acquisition Right
Sometimes they illuminate problems that can be solved with more senior
intervention. In nearly every case, they reect the range of problems, the
complexity of those problems, and the dedicated and eective way these
acquisition professionals are performing their duties. is article sum-
marizes specic Program Manager experiences in the areas of high-risk
development, incremental acquisition of specialized soware, the unique
problems associated with a space system, and the sustainment, 20 years
aer it was acquired, of a commerical-o-the-shelf product adapted for
military training purposes.
From the Program Managers’ assessments, we move up the chain of com-
mand to Program Executive Ocers (PEOs) who are responsible for a port-
folio of programs, usually with similar characteristics. All of our roughly
50 PEOs were asked to provide assessments of their portfolios and recom-
mendations for improvement. If the reader is interested in real acquisi-
tion reform (improvement), this is the one section that I would consider
mandatory reading. e PEOs have more experience as professionals and a
broader portfolio, so they are more inclined to see and focus on problems
with wider impact than a single program. Arranged alphabetically by topic
and largely as reported by the PEO, this section covers a broad range of
areas where the PEOs see opportunity for improvement. is is the work
of a very professional group of people. eir suggestions were acted upon.
I close this chapter with a tribute to some exemplary acquisition profes-
sionals who have le government service. e individuals whose careers
and contributions I describe include two civil servants and two ocers. All
had exceptional careers. ey are representative of the ne professionals
in the nation’s acquisition workforce. It is a privilege to work with people
like this. e United States is fortunate to have such a remarkable cadre of
government acquisition professionals and many equally dedicated indus-
try partners.
41
Chapter Two: Building Professionalism
in the Acquisition Workforce
What Does It Mean To Be “a Defense
Acquisition Professional”?
Reprinted from Defense AT&L: March-April 2014
One of the seven goals of Better Buying Power 2.0 is to improve the profes-
sionalism of the total acquisition workforce. I thought it might be useful to
provide some specicity about what I have in mind when I talk about pro-
fessionalism. e following is based on various experiences over my career,
including some formal education on the nature of professionalism in the
military, including at venues like West Point and the Army War College, in
my on-the-job training in program management and systems engineering
by various Air Force colonels in the Ballistic Missile Oce, and by mentors
in the Army’s Ballistic Missile Defense Systems Command. I don’t intend
this to be an academic discussion, however, but a hands-on practical ap-
plication of the term “professional” in the context of defense acquisition.
Defense acquisition professionals have a special body of knowledge and
experience that is not easily acquired. Other professions such as attorneys,
physicians, and military ocers also have this characteristic. e situa-
tion for defense acquisition professionals is analogous. is characteris-
tic applies equally to professionals in program management, engineering,
contracting, test and evaluation, and product support, to name our most
obvious examples. One should no more expect a lay person to make good
judgments about something in these acquisition elds—be it a program
structure, a risk mitigation approach, or the incentive structure of a con-
tract—than one would expect an amateur to tell a lawyer how to argue a
case, or a brain surgeon how to do an operation, or a brigade commander
how to organize an attack. No one should expect an amateur without ac-
quisition experience to be able to exercise professional judgments in ac-
quisition without the years of training and experience it takes to learn the
eld. Like these other highly skilled professions, our expertise sets us apart.
Defense acquisition professionals set the standards for members of the pro-
fession. One of the reasons we are establishing “qualication boards” for our
various key senior leader elds is to infuse a greater element of this charac-
teristic into our workforce. Our senior professionals should know better than
anyone else what it takes to be successful as a key acquisition leader. A pro-
fessional career-eld board will make the determination, in a “peer review”
context, whether an individual has the experience, education, training, and
demonstrated talent to accept responsibility for the success of all, or a major
aspect of, a multibillion dollar program. is is not a minor responsibility.
42
Getting Defense Acquisition Right
ese new boards are an experiment at this stage, but I am hopeful that they
will take on a large share of the responsibility for enhancing and sustaining
the expected level of preparation and performance of our key leaders. e
boards will be joint, so that our professional standards are high and uni-
form across the defense Services and agencies. Setting standards for other
members of the profession also encompasses the development and mentor-
ing responsibilities that leaders at all levels, including AEs, PEOs, and other
acquisition leaders, take on to strengthen and maintain the profession. ey
know that their most important legacy is a stronger—and more profession-
al—workforce than the one they inherited.
Defense acquisition professionals know how to deal with complexity. e
problems we have to solve are not simple—we are developing and eld-
ing some of the most complicated and technically advanced systems and
technologies in military history. It is therefore an illusion to believe that
defense acquisition success is just a matter of applying the right, easily
learned “cookbook” or “checklist” approach to doing our jobs. ere are
no xed rules that apply to all situations, and as professionals we know
that a deeper level of comprehension is needed to understand how to make
good decisions about such issues as technical risk mitigation, what incen-
tives will best improve industry’s performance, what it will take to ensure
that a product is mature enough to enter production, or how much testing
is needed to verify compliance with a requirement. It is not enough to know
acquisition best practices; acquisition professionals must understand the
“why” behind the best practices—that is, the underlying principles at play.
Many of our products consist of thousands of parts and millions of lines
of code. ey must satisfy hundreds of requirements, and it takes several
years to bring them into production. Understanding and managing com-
plexity is central to our work.
Defense acquisition professionals embrace a culture of continuous im-
provement. e concept of continuous improvement should apply to our
own capabilities as individuals, to the teams we lead, to the processes we
create and manage, and to the acquisition outcomes we seek. Better Buying
Power is built on the idea of continuous improvement, of measuring per-
formance, of setting targets for improving that performance, and striving
to reach them (“should cost” for example). We are willing to examine our
own results and think critically about where we can achieve more, and we
have the courage and character to learn from our mistakes and to imple-
ment constantly ideas for better performance. As leaders we encourage
these behaviors in the people who work for us and who collaborate with us.
Defense acquisition professionals practice and require ethical standards
of behavior and conduct. Our ethical values guide how we interact with
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one another, with our supervisors, with industry, and with stakeholders
including the public, media, and Congress. An Under Secretary whom I
worked for decades ago told me once that when you lose your credibility
you have nothing le—and you won’t get it back. We must speak truth to
power about problems within our programs and about ill-advised guid-
ance that will lead to poor results. Successful acquisition requires a culture
of “telling bad news fast,” and that values accountability without a “shoot
the messenger” mentality. Finally, it is particularly important that we treat
industry fairly and with complete transparency.
I hope that this doesn’t all come across as either preachy or aspirational. I
believe that these are realistic expectations for defense acquisition profes-
sionals. I believe that they go a long way to dening what being a profes-
sional really means. My West Point class (1971) motto is “Professionally
Done.” I have always thought that this is a pretty good motto, and a pretty
good way to look back on a successful career or a completed project, includ-
ing in defense acquisition.
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Getting Defense Acquisition Right
Ethics and Acquisition
Professionalism—
It Is All About Trust
Reprinted from Defense AT&L: September-October 2014
One of my predecessors as Under Secretary for Acquisition, Technology,
and Logistics, and my former boss, John Betti, once commented to me,
“e most valuable thing any one of us has is our credibility; once cred-
ibility is gone, it can never be recovered.”
Credibility, or our capacity to have other people trust what we say, is essential
to any successful acquisition professional. Trust in our credibility matters
when we interact with our supervisors, subordinates, customers (military
operators), the media, Congress and industry—in other words with every-
one we encounter. Once we lose credibility with any one of these groups, we
aren’t far from losing it—and our eectiveness—with all of them.
ere are a lot of ethics-related topics I could write about. I’ve chosen this
one partly because of its importance, but also because of the frequency
with which I’ve seen problems in this area and nally because it takes us
into an area where there are a lot of shades of gray. I won’t say much about
the basic rules we are required to follow as a matter of integrity and public
condence, but I will mention them briey. If you are a dishonest person
who would violate fundamental ethical requirements, say by accepting
a bribe in some form, then there probably isn’t anything I can write that
would change that fact. If you are likely to yield to that sort of temptation,
we will do all that we can to catch you and put you in jail. If that doesn’t
deter you, I don’t think an article will have much eect.
Sustaining trust in our integrity as public servants also demands that we
be very careful about avoiding any appearance of unethical conduct. We
are reminded of these requirements frequently and all of us should follow
them. e ethical problems I’d like to address instead involve times when
one of us might be tempted to do something wrong in our professional lives
because of a goal we believe has real merit; in other words, to rationalize
that good ends justify unethical means. In my experience, those unethical
means oen involve misleading a decision maker, authority or stakeholder
in some manner. People generally don’t go to jail for this type of behav-
ior and we aren’t talking about appearances only. e people who commit
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these ethical lapses do, however, sacrice their credibility—and sometimes
their careers.
I’m sometimes asked about why the government or, more specically,
the Oce of the Secretary of Defense, doesn’t trust one party or another
more—or even why I personally do not do so. When I’m asked this, it is
usually in the context of someone asking for a decision such as a business
commitment, or reducing the oversight used, or a milestone delegation,
or agreement to limit risk mitigation activities and expenses. e party
asking can be someone from industry or a military department program
manager or another senior leader. e answer, I’m afraid, is simple enough:
experience.
My life in the military, government and industry taught me that it isn’t wise
to give trust away for free; it should be earned. We are all involved in situa-
tions where we are trying to persuade someone to accept our point of view.
It can be for approval of a milestone or authorization of funding or con-
tinuation of a program. ere can be strong temptations in these cases to
be something less than fully honest. is is the gray area I want to discuss.
I’ll start with what I consider unethical attempts to inuence decision mak-
ers or stakeholders. e extreme form of this is simply lying. I have very
rarely, as far as I know, been directly lied to by a government acquisition
professional. I did have one well-reported occasion when direct lying was
practiced. It originated in a program executive oce associated with the
infamous Navy A-12 program. at individual was relieved and forced to
retire when it was revealed that he had directed his subordinates to report
lies about the program.
It shouldn’t be necessary for me to exhort anyone in defense acquisition
not to cover up problems in a program by actively lying about them. If you
are doing that, my advice to you is to get out of our profession. e rest of
us do not want to work with you. e form of ethical lapse I have seen too
oen consists of more subtle attempts to mislead decision makers in order
to obtain a desired result. ere are two forms of conduct that in my expe-
rience are much more common. e rst is simply omitting information
that would support a conclusion that is dierent from the desired one. e
second one I’ll refer to as “marketing,” which falls short of direct lying but
not by a wide margin.
I think I’m a realist, and I know that when a Military Department asks me
for a decision when it has already decided what that decision should be.
As the Defense Acquisition Executive (DAE), I’m not being asked by the
Service to gure out the right decision; I’m being asked to ratify the one the
Service believes it has already eectively made.
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Getting Defense Acquisition Right
Going back to John Betti for a moment, John came into the Department
of Defense (DoD) from a nondefense company where he was a senior ex-
ecutive. Originally, John approached his job as DAE as being similar to a
corporate chief executive ocer being asked to make a decision about an
investment for a company. I explained to John that DoD worked a little dif-
ferently. I told him he should think of it more as if he were a banker being
asked to approve a loan.
e applicant (Service) already knows it should get the loan; its only in-
terest is in getting the loan approved. ere is no incentive for a loan ap-
plicant to explain in detail all the reasons his credit rating is overstated or
to emphasize risks that the business plan might not be successful. Despite
this disincentive, we do have an ethical obligation to provide senior deci-
sion makers with all the relevant information they should have before they
can make an informed decision, whether or not it supports the decision we
would prefer. In this regard, the best way to ensure credibility is to tell the
whole story. It’s ne to make recommendations, and even to advocate for a
decision you support, but it is not ne to omit important facts of which the
decision maker should be aware before he or she makes the decision.
Another of my bosses was Dr. John Deutch, also a former Under Secretary
for Acquisition. John is one of the smartest people I’ve ever met. When I
worked for him, John had a habit, however, of leaping ahead on a subject
and reaching a conclusion before I could give him all the information he
needed. On more than one occasion, I had to physically grab him and insist
that he have the patience to wait for some more information from me be-
fore making a decision. Even if I thought he was right and making the de-
cision I supported, I still wanted him to have all the relevant information.
is was partly out of self-interest as well as a sense of the duty I owed to
my boss. If I didn’t give him the full story and his decision was later proven
wrong by events, I didn’t want to be in the position of not having given him
all the relevant data—my future credibility with him was at stake.
e second type of behavior I see fairly oen can be described as “mar-
keting.” A friend of mine in business was once appalled at the lies her as-
sociate was telling a prospective client. When challenged, the sales person
responded, “at wasn’t lying; it was marketing.” In this case, what I’m
referring to is a little more of a gray area; it consists of claims about judg-
ments, such as risk levels, or future implications of decisions that stretch
the truth instead of breaking it.
More extreme versions of “marketing,” as opposed to objective presentation,
are easy to spot. It doesn’t take too many questions to nd out whether there
is real substance behind an assertion or, to use a phrase from the legal world,
to discover that the claim being made is “mere puery.” I’ve found it to be an
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important practice to try to nd out if a program manager (PM) is trying to
“sell” me, or if he or she is really on top of the program and has a real basis for
the assertions made. (As a style comment, a “just the facts ma’am” delivery
works a lot better with me than that of a used car salesman.)
Most PMs are very professional about this; some are not. Once a PM told me
his optimistic schedule projection was made because he planned to do things
“dierently.” Unfortunately, when I probed a little more deeply, he had no
specics whatsoever about what he was going to do “dierently.” In short, we
shouldn’t make claims we can’t back up just to get someone’s approval.
In another instance, a PM told me the new design turbine engine for his
UAV [unmanned aerial vehicle] program was low-risk because it had over
100 hours of testing on a prototype. I asked him based on past experience
how many hours of testing a new engine should have before it is ready to
enter serial production. He had no idea. (Hint: It’s a lot more than 100.)
It doesn’t take too many questions to nd out if a PM, or anyone else, knows
his business and has done his or her homework. If you haven’t done your
homework and get caught trying to fake it, you can forget about trust or
credibility as an asset.
I’ll also mention similar behaviors that don’t occur as oen, but which I
have seen, including relatively recently. One that particularly galls me is
the “let’s hope he doesn’t read it” approach to getting something approved.
Occasionally people will insert an action that they know I’m likely to dis-
agree with into a document in the apparent hope I will miss it and grant ap-
proval. Even if I discover what I’ve done later, I would be in the unfortunate
position of having to reverse myself. is doesn’t happen oen, but when it
does the major impact is that I will read all the documents from the same
organization very carefully in the future.
A variation on this approach is to insert elements into a program option
the Service or the PM doesn’t support largely to make that option look less
attractive from a cost or schedule perspective. I’ve seen this done to try to
prevent congressional action that was opposed by the Service, and I’ve seen
it done to try to dissuade me from a course of action I as the DAE thought
was worth considering. When I see such actions, the organization does not
earn my trust, nor do the responsible individuals.
One other behavior I see on occasion is what lawyers call “the parade of
horribles.” (Although I’m about 80 percent engineer, legal training pro-
vides some useful insights.) e phrase “parade of horribles” refers to the
use in legal argument of a long list of all the really bad things that will
happen if the judge makes a ruling the party opposes. ese lists tend
to be very speculative and inated but not entirely fanciful. I do nd it
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Getting Defense Acquisition Right
amusing when I’m told that any decision to change a requested program,
in any direction other than precisely the requested one, will have equally
negative consequences for cost or risk. In short, adding a lot of weak or
speculative arguments to a recommendation can have the opposite of the
desired eect.
While I’ve focused on some gray areas within my own interactions in the De-
partment, the points I’m trying to make about earning and sustaining cred-
ibility apply equally well when we deal with outside stakeholders, especially
Congress, industry and the media. For supervisors especially, please note
that when we do any of the things I have described we are eectively training
our workforce that these practices are “OK.” One reaps what one sows.
e bottom line is that we should not let advocacy for a position, no matter
how sure we are that it is correct, push us outside of ethical constraints. We
don’t just need to tell the people we are responsible to the truth, we need
to tell them the whole truth. We need to be clear about what we know and
what we don’t know. We need to clearly distinguish between things we know
and things we have informed opinions about. We must be able to back up
our assertions with facts and sound logic or we shouldn’t make them. We
certainly should not try to sneak anything by the people or institutions that
make decisions we are bound by. Building our credibility as defense acquisi-
tion professionals is a career-long eort. Destroying it only takes a moment.
John Betti was right; our credibility is our most valuable possession.
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Program Manager Assessments—
Professionalism Personied
Reprinted from Defense AT&L: July-August 2015
A few months ago, I decided to ask all of our Acquisition Category I and
Major Automated Information System (MAIS) program managers (PMs)
to provide me with a one- to three-page assessment of the state of their
programs. At the time, this was an experiment. From the feedback I re-
ceived, most PMs were delighted to have this opportunity. I have incor-
porated these assessments into Better Buying Power (BBP) 3.0 as an activ-
ity that will continue on an annual basis. e assessments are intended to
strengthen the role of the acquisition chain of command. e assessments
are simultaneously sent to me, the Service or Component acquisition ex-
ecutive, and the program executive ocer. It was, however, an experiment
that seemed to make a lot of people nervous.
Some of the nervousness stemmed from concerns that I was putting the
PMs in an awkward position, where they might fear that being too honest
with me could jeopardize their program or get them into trouble with a
senior stakeholder in the Service or on the Oce of the Secretary of De-
fense (OSD) sta. I could understand this concern, and I hesitated briey.
However, one of the management principles I’ve picked up over the years
(like the sign outside my door reading “In God We Trust, All Others Must
Bring Data,” this comes from W. Edwards Deming) is that one must drive
fear out of an organization to achieve success. No fear is more crippling
or dysfunctional to an organization than fear of negative consequences of
telling the truth. Close behind that is fear that a new idea will be dismissed
or ridiculed. I decided that any institutional fear of the consequences of an
honest assessment should not be appeased; it should be confronted.
ere was also a concern, which I took more seriously, that the PM would
have to obtain approval and go through multiple dras and reviews before
being allowed to send me an assessment. To overcome this concern, I re-
quired each PM to certify to me that no one had reviewed the PM’s assess-
ment in dra or nal form. at seems to have been successful, although I
expect I have caused some people to worry.
e results, from my perspective at least, have been terric. I’m still work-
ing my way through roughly 150 assessments, but I’ve already learned a
great deal about Department of Defense (DoD) programs and the people
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who are managing them. It was no surprise to me that the assessments have
reected the high degree of professionalism and dedication in our key lead-
ers. I expected that. What I hadn’t expected, but probably should have, was
the window these documents provide into the many complex challenges
our PMs face, and the creative and innovative ways they are dealing with
those challenges. In this article, I would like to summarize some of the
inputs I received. ey say a great deal about the work we are doing—and
how well we are doing it. I hope, with the permission of the writers, to pub-
lish a subset of these assessments soon, but here is a sampling without the
names of the programs or PMs.
e cutting-edge weapon system; high-risk development: is assess-
ment was probably the most impressive of the ones I have read to date.
It was the smallest font the PM thought he could get away with—narrow
margins, lled all three pages, and was packed with detail about the design,
the technical issues and risks and what the PM was doing about them. It
le me with no doubt that this PM was doing what Air Force Assistant
Secretary Acquisition Bill LaPlante calls “owning the technical baseline.”
Aer a short overview of the program, the PM dug into the precise risks
he is managing and mitigating. It wasn’t quite a textbook or professional
journal article on electrical engineering and systems engineering, but it
was pretty close. One feature of this PM’s approach that is noteworthy, and
a program management or systems engineering best practice, was the use
of knowledge points associated with each technical risk area. e use of
actual test results at sub-scale, component testing, modeling, simulation,
and eld testing were all described in fair detail. Key near-term tests were
highlighted. is is not a low-risk program, and there are numerous ways
for this design to encounter problems before it matures, but the PM le me
with the strong impression that he is on top of the risks and well positioned
to deliver this critical product.
e legacy Command and Control (C2) system; incremental acquisition:
is program is a large, complex C2 system that was built up over time from
literally dozens of legacy systems. A few years ago, the idea of modernizing
this collection in a “big bang” approach was rejected in favor of a lower-risk
and lower-cost incremental approach (Model 2 of the new DoD Instruction
5000.02). e PM has the challenge of coordinating and managing numer-
ous interfaces with systems that cannot go oine, while rebuilding part
of this conglomeration of applications and supporting infrastructure with
the government in the role of lead system integrator. A Service-Oriented
Architecture is being implemented in sections as infrastructure and legacy
programs are replaced. is PM is dealing with several builds of soware
in various stages of maturity, testing, and elding. He also is dealing with
the transition of DoD traditional information assurance approaches to the
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recently implemented Risk Management Framework. What this means on
the ground is that the compliance measures have grown from about 100
to more than 400. At the same time, the PM is reacting to the “cyber shi
le” and other recently published Operational Test and Evaluation cyber
procedures. In attempting to implement Agile soware development prac-
tices this PM has run into constraints from MAIS and DoD acquisition
processes that have stymied modern soware development best practices.
is PM is trying to do the right thing, but we’re getting in his way. He
needs some help, and, because of his assessment, I plan to see that he gets it.
e space; achieving stability: Our space systems generally have struggled
to get through development and make the transition to production. is is
oen a challenging step in a product’s life cycle, but space programs have
a particularly troubled history. Over the last few years, several DoD satel-
lite systems have made this transition with great diculty and are now at
relatively stable phases of their life cycles. is PM’s program is no excep-
tion. Soware and hardware issues caused major delays and overruns. ese
problems have been largely overcome and the program is in serial produc-
tion for the space segment, but the PM has no shortage of challenges. e
ground segment, an incremental soware-intensive program, has lagged sig-
nicantly and only now seems to be stabilizing. An aggressive team eort by
government and industry has been required to deliver capability. e PM’s
assessment reects the successful use of Earned Value and Soware produc-
tivity metrics to identify problem areas early and focus eort on corrective
actions. While the PM generously (as I see fairly oen) gives earlier versions
of BBP some credit for his corrective actions, I would prefer less drama in our
programs and less need for corrective action in the rst place.
Like many of our PMs, this one is managing several programs at once. In
this case, they are various separable components of an integrated system.
Each has its own prime contractor, its own business arrangements, its own
technical challenges and its own place in the product life cycle.
e Commercial O-the-Shelf (COTS) product; sustainment 20 years
on: Most of the attention in the acquisition system falls on programs in
development, where delays and overruns are most likely, but where the
contributions to life-cycle cost are lowest. is PM is dealing with a plat-
form that has been in the inventory for almost 20 years. It is nearing the
end of production and was based on a COTS product. e program has
myriad supply chain, aging, and obsolescence issues. Originally a Contrac-
tor Logistic Support for life of the program (acquisition reform circa late
1990s), the program has bounced back and forth between Federal Acqui-
sition Regulation (FAR) Part 12 and FAR Part 15—ending up in Part 15.
e program has moved to introduce competition for sustainment, but the
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PM continues to deal with high costs of spare parts and issues associated
with the commercial design that has not stood up well to military use. Bad
assumptions (commercial product, life-cycle support by the producer) that
may have reduced cost up front are being paid for now. e PM is dealing
with a supply chain that sources nearly 500,000 parts and sees more than
10,000 issues per month across the elded systems. Moving to competi-
tion and standing up a new support contractor has been painful: Protests,
claims, uncooperative suppliers, and intellectual property issues have all
been problems. e PM has worked hard to understand the lessons learned
from this experience and is preparing for the next round of competition.
e bottom line: Sustainment is every bit as challenging as development. It
demands attention to detail, strong leadership, tenacity, solid business acu-
men and innovation in dealing with support contractors.
What I nd fascinating about all of these assessments is the complexity and
scale of the problems described and the candor and depth of understand-
ing demonstrated by the writers. ey personify the professionalism we all
have to continue building throughout our workforce. BBP 3.0 focuses on
innovation, technical excellence and the importance of U.S. technological
superiority, while continuing to build on our earlier eorts to control cost
and to extract as much value as possible from the dollars the taxpayers pro-
vide us. None of these initiatives in any edition of BBP is more important
than continuing to build the human capital that is responsible for the suc-
cessful delivery of every product or service the DoD acquires.
I asked a number of senior people to provide articles for this edition of
Defense AT&L magazine, but for my submission I wanted to highlight the
contributions that our very talented and dedicated PMs, together with
their stas and supporting organizations, are providing to the department
and the nation. Well done.
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Improving Acquisition From
Within—Suggestions From Our PEOs
Reprinted from Defense AT&L: July-August 2016
is year I asked all of our Program Executive Ocers (PEOs) to provide
short assessments and recommendations to me directly. e result, as it
was for the Program Manager Assessments I’ve received for the last 2 years,
has been a treasure trove of observations and recommendations covering
a wide range of topics. I thought it would be useful and insightful for the
entire workforce to see some of these professional, and very frank, com-
ments. I’ve removed most inputs that were about specic programs and
edited lightly to make some of the inputs less Service specic. Arranged
alphabetically by topic, and presented without comment, here is a sampling
of the topics on our senior line managers’ minds as they confront the many
challenges we face.
Acquisition Education: Cybersecurity requirements continue to grow
impacting virtually everything we do in acquisition from daily workplace
activities, to Enterprise Resource Planning (ERP) system development, to
weapon system development. Additionally, the Department of Defense
(DoD) is required to certify audit readiness in Fiscal Year (FY) 2017. Audit
readiness aects every career eld in acquisition, not just nancial man-
agement professionals. Ensure that the Defense Acquisition University
curriculum is updated to reect audit readiness and cybersecurity consid-
erations and requirements for all of the career elds.
Also, an executive level Acquisition seminar for our senior General/Flag
Ocers, especially those assigned in the Pentagon, would advance acqui-
sition reform. We consistently nd ourselves answering questions to our
Service Chiefs and members of Congress that are far outside of acquisition
responsibilities. is is a team sport, and DoD would be better served if all
of our most senior leaders had a basic understanding of the Defense Acqui-
sition process and their respective roles in it.
Business Cases and AoAs (Analysis of Alternatives): Why would we do
both? ere is too much complexity and lack of clarity between the Deputy
Chief Management Ocer and the role of the Oce of Acquisition, Tech-
nology, and Logistics.
Clinger-Cohen Act (CCA) Compliance: CCA mandates the completion
and approval of numerous other programmatic documents as supporting
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Getting Defense Acquisition Right
documentation before a program’s CCA can be certied. e Army Chief
Information Ocer (CIO)/G6 estimates the stang and approval for a pro-
gram CCA compliance determination to take up to 120 days to complete.
Two supporting documents required for submission for a CCA compliance
determination are (1) Test and Evaluation Master Plan (TEMP) and (2)
Acquisition Program Baseline (APB). Because of the potential lead time
required to support a CCA determination (120 days), we recommend that
dra versions of the TEMP and APB be authorized for submission for CCA
compliance purposes. We also recommend that signicant programmatic
changes identied during documentation stang that would alter the CCA
compliance determination be presented during an abbreviated and acceler-
ated update to allow programs to simultaneously sta critical documents
without delaying program schedules.
Conguration Steering Boards (CSBs) and Testing: CSBs have been es-
pecially helpful in adjusting requirements (both to provide a forum for
the deliberate addition of some requirements as well as removing some re-
quirements where they don’t make sense). is process should be extended
to include using the CSB process to adjust test plans and requirements as
well rather than allowing independent members of the test community
virtually unlimited authority to commit programs to cost and schedule
of tests that the operational leaders of the Service do not believe are war-
ranted. Similarly, it would provide a forum for those same uniformed lead-
ers to insist on testing that might otherwise be overlooked.
COTS and NDI Acquisition: Financial Management Regulation must be
claried to provide consistent guidance on the use of procurement funds
in lieu of research, development, test and evaluation (RDT&E) funds to test
Commercial O the Shelf (COTS) and NonDevelopmental Items (NDI).
is has tremendous impacts across my portfolio, which is heavily reli-
ant on COTS/NDI and could mitigate additional funding stability risks
if properly claried where both the budget analysts and the lawyers agree
on the exibility to use either procurement or RDT&E to test COTS/NDI.
Cyber Security Testing: Cyber testing and the ability to achieve a “Sur-
vivable” rating in an ocial operational test environment continues to be
nearly impossible for a Program of Record (POR) to achieve. Test criteria
are not well dened and, even if requirements are met, the standards and
scope is “independently” determined by the OTA or DOT&E for success.
e threat portrayal oen exceeds the capabilities of a Blue Force Team
(i.e., nation-state threat going against a brigade-level formation), focuses
more on “insider” threat of unreasonable proportions, and minimizes the
importance of “defense in depth” approach. Recommend better denition
for standard cyber rules of engagement at operational test, the allowance
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for external cyber protection teams, and that test reports focus on the pro-
gram under test (not the overall “network”).
Fiscal Law Constraints: It is likely pie in the sky, but to operate with a sin-
gle color of money would greatly improve our eciency and eectiveness.
We spend far too much time trying to discern the gray areas that exist be-
tween the appropriations. Functioning with Operation and Maintenance
dollars during periods of continuing resolutions and severe cash distri-
bution challenges, makes continuity of support a challenge and results in
all sorts of bizarre contract actions. If we operated primarily in an Other
Procurement world with narrow denition on true RDT&E (introduction
of truly new functional envelopes), we would be much more ecient and
eective stewards.
Funding Concerns (10 USC Section 2282): I continue to bring this up to
anyone who will listen to me. is pseudo-Foreign Military Sales (FMS)
funding is an excellent tool in that it allows us to deliver capability and build
Combat Command (COCOM) military partnerships, particularly in coun-
tries that can’t aord to invest in our weapon systems. at said, the funding
is restrictive in that we need to gure out what we’re going to buy, put to-
gether an acquisition strategy, and get it on contract in the year appropriated
(which drives some bad acquisition behaviors). e biggest challenge is that
we can only use Section 2282 funding to sustain the system for 2 years. Aer
that, the receiving country must create/fund an FMS case or the COCOM
must provide funding. Bottom line is that there is a high risk that these great
capabilities will be le to rot and quickly become useless.
Funding Stability and Flexibility: For the last several years, we have start-
ed each scal year under Continuing Resolution Authority (CRA) for 3 to 4
months before the budget is enacted and funding begins to ow. e CRA
creates instability in the year of execution because we can’t have any new
start programs and the amount of funding available under CRA typically
is some percentage of our prior year funding. is instability is exacerbated
by the fact that our funding execution is measured against the Oce of the
Secretary of Defense (OSD) obligation and expenditure goals that do not
take into consideration the delay in receipt of funding caused by operating
under a CRA. As a result of missing OSD execution goals, funding oen is
rephased in the outyears, which perpetuates the situation as the cycle has
consistently repeated itself and is likely to do so in the future. It would be
helpful if the OSD Comptroller could adjust the OSD obligation and ex-
penditure goals to “start the 12-month clock” when the Defense budget is
actually passed and not on Oct. 1, as they do now.
Hiring Authority: e agility of a PEO to support its portfolio with ap-
propriate personnel is not adequate with the formal billeting and stang
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Getting Defense Acquisition Right
process and needs to move to a management to budget construct that al-
lows the hiring of additional government personnel.
Human Capital: As the military service begins to reduce force structure,
similar reductions are taking place across the civilian workforce. Addi-
tionally, there is pressure from Congress to reduce the number of support
contractors across DoD. My workforce is comprised of military members
(4 percent), core DoD civilians (15 percent), matrixed DoD civilians—
combining the traditional and product organization structure—(46 per-
cent) and support contractors (35 percent). With all of these components
being driven to reduce numbers and no relief from the mission require-
ments and expectations, my PEO organization will be challenged severely,
even aer realizing process eciencies, to eectively perform the mission
unless some portion of the workforce can be stabilized.
Innovation: In intelligence, surveillance and reconnaissance and in work-
ing with Special Operations Forces, we are working hard at giving people
the tools to bring out their innovative side and give them the condence
to be creative. It is probably the most enjoyable part of my job. I have nu-
merous examples of recent initiatives, but will mention just two of them.
First, the Rapid Development and Integration Facility (RDIF) continues
to grow as a place where government program managers (PMs) and engi-
neers (sometimes in partnership with small business) are rapidly modify-
ing everything from gunships to B2s to helicopters. ey are taking back
the technical base line, learning how to innovate and growing condence
in our government teams. Second, is the Revolutionary Acquisition Tech-
niques Procedures and Collaboration (RATPAC) forum run jointly be-
tween the Air Force and Special Operations Command. Twice a year we
select about 50 junior acquisition professionals to attend an intense week
of engagement with our most innovative acquisition, warghter and con-
gressional thinkers. ey leave RATPAC red up to be acquisition combat
enablers, and it is really special to see.
Obsolescence: We face an ever-growing challenge dealing with obsolete
parts when we build on a COTS-based infrastructure. Components over
the life cycle of our programs become obsolete when supply chain provid-
ers move on to next eorts or divest in the business area. We have seen
cases where we are replacing obsolete components on a system prior to
elding the initial capability. Many vendors are updating their products at
an increasing rate and do not maintain or support older versions of their
equipment. is is true for both soware and hardware. Programs need
to ensure they adequately budget for these activities and have the correct
personnel to address these issues throughout the life cycle of programs. We
also need to engage with vendors early to ensure we have long term sus-
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tainment strategies that may include extended lifetime buys for key com-
ponents early in a program to ensure long-term supportability as well, and
address the ability to upgrade at the component level to meet any poten-
tial obsolescence issues. Help is needed in supporting continuous low-level
modication lines to deal with obsolescence issues.
Protests: I recommend that there be a penalty for protesting to discourage
weak protests. Example: paying the DoD’s legal costs, or paying some pen-
alty for the program disruption.
Quality and Clarity of High Level Taskers: I would like to address the
quality of taskers or assignments received at my level. Oen a broad-based
tasker is issued and, as it ows down the chain of command, it is inter-
preted in various ways by a number of dierent people to the point where
nobody really understands what information is required. ese taskers
should be clear and concise from the beginning and follow established
stang chains to ensure that we are not wasting precious resources (time,
money and people) providing data and information that does not properly
respond to the issue.
Quick Reaction Capabilities: is year alone, I had 42 Quick Reaction Ca-
pabilities (QRCs) that I managed and reviewed as separate programs and
resolved that 5 be closed, had 10 pending closure once 100 percent account-
ability of assets is resolved, 7 transitions to existing Programs of Records
(PORs), and 20 that will continue to be managed as stand alone QRCs.
Note that no QRC comes with organic personnel resources and must be
managed with allocated POR resources and the heavy use of matrix and
contractor support. is is not a sustainable model. e military Service is
working the requirements process that supports these transitions. Howev-
er, the alignment with the Program Objectives Memorandum (POM) pro-
cess inherently results in a 2-year gap that we have only been able to solve
because of the availability of supplemental appropriations. If supplemental
dollars did not exist, we would have been unable to transition and/or retain
QRC capabilities to the degree we have successfully done to date. e delay
in obtaining updated requirements documents hinders the ability to com-
pete in the POM process and exacerbates the gap. A second issue with QRC
transitions is balancing the adequacy of testing to support POR transition
and milestone decisions. In many cases, these capabilities have been oper-
ated eectively for thousands of hours in combat—meeting requirements
as specied for military utility, which ought to be the goal of an Opera-
tional Test event. Testing a QRC now for integration into a POR, should
only verify any changes caused by modifying/integrating on platforms or
needed changes to address usability/human factors of the system when we
transition from contractor to green suit sustainment/operations. In many
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Getting Defense Acquisition Right
cases, we are spending extensive resources (time, money, test ranges, per-
sonnel expertise) to retest basic sensor performance on capabilities which
have been operating in combat for more than 10 years as a QRC. e Ser-
vice Test and Evaluation Organization, the OSD Oces of Developmental
Test and Evaluation and of Operational Test and Evaluation need to adjust
to a more continuous evaluation process and away from the big bang, all-
inclusive testing. Finally, overall, the DoD Instruction (DoDI) 5000 series
guidance does not address the process of the transition of QRCs to PORs.
For example, personnel Concept Plans to support program oce manning
take forever, material release tailoring is all but nonexistent to deal with
COTS, and timely requirements documentation and integration of fund-
ing into the appropriate Program Evaluation Groups/base are challenging
tasks. e aforementioned conditions cause PMs to focus on near-term re-
sourcing and not eective/ecient program management. Help is needed
from an institutional perspective to take lessons learned and update poli-
cies and provide tailoring procedures for improved transitions.
Reprogramming Authority: Another way to provide additional exibil-
ity would be to allow greater reprogramming thresholds (this requires ap-
proval from Congress). Higher Below reshold Reprogramming limits go
hand in hand with giving PEOs/PMs greater authority to move cost savings
realized from successful Better Buying Power (BBP) initiatives within our
funding lines. is would also act as a strong incentive for the Defense Ac-
quisition Workforce to inculcate BBP principles into our programs.
Requirements Process: I suggest that both the operational and acquisi-
tion communities focus serious attention at the most senior levels on im-
plementing a simplied requirements process which better facilitates the
rapid technology/threat cycles within the cyber domain.
Risk Management Framework (RMF): e construct has added time to
the process with, in my opinion, no added benet to date. is process
needs quick eciency reviews and updating. Help is needed in making the
RMF more ecient and shorter.
e new RMF process (which replaced the DoD Information Assurance
Certication and Accreditation Process), providing for certication and
accreditation of weapon systems, has been too unwieldy for the speed and
agility needed in approving cybersystem solutions. Specically, we have
identied the following issues with the RMF process as applied to cyber
weapon systems:
• RMF levies heavy requirements for monitoring, soware updates and
policy controls that are less bound by operational concerns than previ-
ous systems.
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• RMF causes a large resource burden of time and manpower. With the
volume of work entailed in RMF, it is dicult to make consistent prog-
ress or to develop reliable schedules to inform our operational user.
Additionally, the unplanned burden on program oces to apply RMF
is taking resources from xing user issues and addressing moderniza-
tion needs.
• ere was little structure put into phasing the RMF requirement into
weapon systems. e full requirement was mandated with less than 2
years to prepare, with limited waiver opportunities provided.
• While new systems in development can accommodate RMF during
the design process, legacy systems were not designed with RMF secu-
rity controls in place, so there are signicant programmatic and op-
erational impacts to meeting the RMF controls. us, applying RMF
to currently elded operational systems puts undue burden on the op-
erational user.
• Control of and accountability for system cybersecurity is spread over
numerous organizations and is poorly integrated, resulting in dimin-
ished accountability and unity of command and control for cyberse-
curity. ese overlapping roles create ambiguity regarding whether the
commander or the authorizing ocial can make the nal decisions re-
garding risk to a mission.
• e coordination process for RMF approval packages continues to
evolve. Changes in expectation, standards and formats are not com-
municated well, and this oen creates much rework, further delaying
approval and impacting program cost and schedule.
• e vast majority of our systems currently are accredited under the old
structure and the RMF process does not allow previous accreditations
to be easily absorbed into the new structure.
• ere has been a shi in focus from simply managing risk to now ensur-
ing all facets of system vulnerabilities are addressed. While this will im-
prove cybersecurity, there is simply not enough manpower to adequately
perform all of the required processes, specically within the Approving
Ocial and the Security Compliance Assessor communities.
• Approving Ocials have not been issuing Plans of Actions and Mile-
stones during this transition process, which has led to an expiration of
Authority To Operate during the lengthy process.
In considering improvement opportunities since RMF has been in use
and lessons learned have become available, I suggest that the application
of RMF to currently elded cyber weapon systems be reexamined and
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Getting Defense Acquisition Right
tailored to reduce heavy RMF resource demands and impact to the opera-
tional user. In addition, as stated earlier, it is imperative that the acquisition
and lifecycle management tools and processes for both new and elded cy-
ber weapons systems be streamlined to maximize speed and agility within
reasonable levels cybersecurity risk.
Sustainment in DoDI 5000.02: I see a dierence between a system in the
sustainment phase and a sustainment program. Because DoDI 5000.2 is si-
lent on sustainment programs, we sometimes treat sustainment programs
the same as eorts to modernize a program in the sustainment phase, in
terms of systems engineering, milestones and documentation. Moderniz-
ing a program in the sustainment phase usually ts pretty clearly into one
of the “Defense Acquisition Program Models.” But a sustainment program
such as a Service Life Extension Program, Diminishing Manufacturing
Sources Program or a Contractor Logistics Sustainment Program doesn’t
t well within those models. Yet there are some nuances, best practices and
common tailoring that could apply to these types of programs. I thought
the “model” concept was a great addition to the DoDI 5000 series, so I
think adding a model for sustainment type programs would be helpful. I
have also recommended this at the military Service level to address in our
documents. I see a lot of teams struggle in this area.
Tailoring: However, although you and other senior leaders continue to
reinforce the importance of tailoring the acquisition process to the spe-
cic and unique characteristics of the product being acquired, the rules
and policy are frequently interpreted as inexible and prescriptive. As ad-
ditional acquisition reform provisions are considered, we should look for
ways to better institutionalize the expectation for tailoring, particularly as
it applies to the acquisition of nondevelopmental or minimally modied
COTS systems.
Workforce Development Ideas
Acquisition “Whiteboard” Sessions: I found that oen when I received
milestone packages through the stang process, the acquisition strategies
weren’t tailored to the most eective approach to develop or acquire the
system. In order to prevent frustration of the workforce and get the top
level concepts right from the beginning, I began hosting “Whiteboard”
sessions to ensure everyone had a common understanding of the strate-
gy. I run these much like the military Service runs Aer Action Reviews
by serving as a facilitator—asking shaping level questions of the program
stakeholders (from the PM, legal, contracting, etc.) and allowing them to
shape the strategy through their answers. e level of innovation and qual-
ity of the milestone packages has dramatically improved. I’ve received very
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positive feedback on the learning value of these sessions and encouraged
my subordinates to replicate the process at lower levels.
Acquisition Categories II and III Conguration Steering Boards (CSBs):
Much of the equipment we acquire is commercial or commercially based.
On several occasions, we received approved requirements documents that
specied requirements substantially outside commercially available fea-
tures. Our engineers conduct industry Requests for Information, coor-
dinate with commercial testing facilities, and employ analytical tools to
identify requirements that are driving cost and risk. We then organize a
CSB with the appropriate one-star level operational community propo-
nent, along with virtual representation from the Service sta to review the
data analysis. In each case, we’ve been able to temper the requirements to
only the critical capabilities, thereby reducing programs’ costs and techni-
cal risks while allowing them to move forward without risking lost funding
or schedule delays.
Junior Employee Shadowing Program: Each PM within the PEO nomi-
nates high potential GS12/13 employees to shadow me for 2 weeks. ese
employees can attend all meetings that the PEO participates in and get a
good sense of how to think critically about the unique facets of each pro-
gram and how these considerations shape acquisition strategy, contract
type, contract incentives, and source selection approaches. To date, I have
had 24 shadow participants, and I have already seen evidence of grassroots
movement inside their home organizations in taking more innovative ap-
proaches to acquisition strategies.
Topical Town Hall Meetings: I have held town hall meetings quarterly,
and I always highlight a number of innovative accomplishments in acqui-
sition from several of our individual PMs. As an overarching theme, I’ve
suggested that our acquisition professionals should treat every decision
they make as if it was their own money. I’ve continued to encourage them
to challenge requirements and approaches that don’t make sense based on
their personal experiences both in acquisition and in their daily lives.
Conclusion
As with the Program Manager Assessments, I have responded to each of
the PEOs individually. In addition, I have asked some of the writers to work
on follow-up actions to explore solutions to the problems they raised, or to
implement their specic suggestions. My last article and email to the work-
force talked about how real acquisition reform has to come from within
and it has to take the form of continuous improvement on many fronts.
is is one more example of what that looks like in practice.
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Getting Defense Acquisition Right
What Really Matters
In Defense Acquisition
Reprinted from Defense AT&L: January-February 2014
My rst inclination for this issue’s article was to discuss the newly released
DoDI [Department of Defense Instruction] 5000.02. We recently imple-
mented this new acquisition policy document as interim guidance. I pro-
vided a cover letter explaining why I had done a new version and outlined
some of the features of this edition. I do recommend that you look at both
the cover letter and the new document, but on reection I decided to write
about something else for this issue. An enormous amount of time and en-
ergy goes into designing our processes and implementing them, but at the
end of the day it isn’t those processes or policy documents like 5000.02
that really drive our results. What really matters in defense acquisition is
our people and their professionalism and leadership—so I thought I would
start the new year by writing about that.
is past year we’ve gone through a lot, and all of our acquisition profes-
sionals have been asked to put up with more than any workforce should
have to endure. We’ve had continuing budget turmoil and uncertainty,
furloughs, continuing resolutions, late-breaking sequestration, and most
recently a government shutdown. We’re also living under pay freezes and
the prospect of further budget reductions and sta reductions. I want to
thank the whole workforce for the way you have all coped with these chal-
lenges. While other senior leaders and I have been asking you to improve
our productivity and achieve ever greater results for our warghters and
the taxpayer, you’ve also had to work in very challenging circumstances.
You’ve come through, and it has inspired me and your other senior leaders
to see the way you’ve dealt with all these challenges in stride. ank you.
ank you personally, but also on behalf of the Secretary and all the senior
leaders in the Department. ank you also for our soldiers, sailors, airmen
and marines who benet from your great work as they put themselves at
risk for our country.
Recently, I joined Dr. Carter in one of his last ocial acts as Deputy Secre-
tary in presenting the Packard Awards to this year’s recipients. As I write
this, I’m looking forward to going out to the Defense Acquisition Univer-
sity to present the USD(AT&L) [Under Secretary of Defense] awards for
professionalism and developing the workforce to some of our outstand-
ing performers. I’m sorry that we can’t recognize more of our exceptional
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Chapter Two: Building Professionalism
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performers—there are so many of you, and you all deserve to be recognized
for what you do. During the last few weeks, I also have had occasion to note
the departure of some of our most capable people who are retiring or will
soon retire from government service. We lose a lot of terric people every
year of course, and these individuals are just examples of the many ne
professionals working in defense acquisition, technology and logistics. I
decided that for this article I would note the contributions of some of these
people with whom over the last few years I’ve had the chance to work. ey
are just examples, but they are especially powerful examples of what one
can accomplish during a career in defense acquisition.
I’ll start with Charlie Williams, the recently retired Director of the Defense
Contract Management Agency (DCMA). Charlie led DCMA for the past
several years. He started federal service in 1982 in Air Logistics Command
in a Mid-Level Management Training Program. Charlie then rose through
a series of contracting, program analysis and contract management posi-
tions with the Air Force both in the eld and at Air Force Headquarters.
He became Air Force Deputy Assistant Secretary for Contracting before
taking the reins at DCMA. At DCMA, Charlie led the rebuilding of the or-
ganization aer severe reductions in the 1990s. He kept his team together
during the Base Realignment and Closure move from D.C. to Richmond,
and he led the eort to ensure that our contracts in support of operations
in Afghanistan and Iraq were executed properly.
Next I’ll mention Maj Gen Tim Crosby, the soon-to-retire Army Program
Executive Ocer (PEO) for Aviation. Tim has led Army aviation programs
since 2008. He was commissioned aer graduating from the Citadel and
started out as a eld artillery ocer. He moved quickly into aviation as a
pilot before following his interest in research and development and ight
testing. In acquisition, he worked in logistics, training and simulation, and
test and evaluation before becoming a Product Manager, rst for the CH-
47 F and later Program Manager for the Army’s Armed Scout. His long
tenure at PEO Aviation is marked by strong leadership in support of our
deployed forces and in building the capability of the Afghan Air Force. Tim
embraced the Better Buying Power principles and was implementing them
well before Dr. Carter and I gave them a name.
Rear Admiral Jim Murdoch retired recently aer serving as the Navy’s
rst PEO for Littoral Combat Ships (LCS). Jim entered the Navy with an
ROTC commission aer graduating from Rensselaer Polytechnic Institute
in mechanical engineering. He moved between surface combatant assign-
ments and acquisition positions. His acquisition assignments included pro-
gram management for surface weapons and launchers and responsibility
for integrated warfare systems as well as program manager for the Littoral
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Getting Defense Acquisition Right
Combat Ships. In 2011, Jim was handpicked by Sean Stackley to lead the
new Program Executive Oce for LCS sea-frames and mission modules.
He stabilized and fully integrated one of the Navy’s most complex acquisi-
tion endeavors.
Finally, Scott Correll, our retiring Air Force PEO for Space Launch, also
started his career as an intern. From the Pacer Intern Contracting Program
at Robbins Air Force Base, where he began as a cost analyst and contract
negotiator on the F-4 and F-15, Scott rose through the contracting, sup-
ply chain management and program management elds. Scott’s diverse
positions include leadership positions at Military Seali Command and
TRANSCOM. I was able to take Scott in to meet Secretary Hagel recently
so the Secretary could thank him personally for saving the Department
billions of dollars in space launch costs—quite an achievement for our tax-
payers and warghters.
e people I mention above have accomplished a great deal for their country
during their careers. ey’ve also had the opportunity to do exciting and
fullling work. People who achieve this sort of success over their careers are
what give us the best equipped military in the world. All of these people have
a lot to be proud of. All of you have a lot to be proud of. I’m looking forward
to 2014 with the hope that things will improve—and there are some signs
that they will. But mostly I’m just looking forward to another year of working
with this terric team. ank you again for all that you do.
65
Chapter Three
Managing Technical
Complexity
“I don’t mind a reasonable amount of trouble.”
—Dashiell Hammett
Right aer he became Secretary of Defense, Leon Panetta asked me a sim-
ple question. He asked me why we couldn’t build other defense products
as quickly as we had acquired Mine Resistant Ambush Protection vehicles
or MRAPs, the armored trucks we bought on a very aggressive schedule in
the tens of thousands to protect our troops in Iraq and Afghanistan from
Improvised Explosive Devices. My answer was one word, “complexity.”
MRAPs basically are trucks assembled from pre-existing automotive com-
ponents (transmissions, engines, drive trains, etc.) with a lot of armor and
hull shapes designed to deect blast and to protect the occupants. MRAPs
provide eective protection and they have saved countless lives, but they
were designed to deal with an improvised threat used in a counterinsur-
gency or counterterrorism campaign, not for high-end peer competitors.
ey are not representative of the weapons we usually acquire. is chapter
takes up the problem of managing complexity, specically the technical
complexity that characterizes many of the products that the DoD acquires.
Most of our weapons systems are designed to give us a competitive ad-
vantage over the most capable systems any potential adversary has or will
have in the foreseeable future. Some of our potential adversaries, China
and Russia, are aggressively acquiring systems that are being designed
specically to defeat the most advanced U.S. systems. In pursuit of the
dominant capability our warghters expect and deserve, and that our
nation needs, we oen embed new cutting-edge advanced technology
into our systems. For most weapons systems, complex and specialized
soware, oen with millions of lines of code, is essential to achieving
the required functionality. Our weapons also need to be cyber secure,
highly reliable, and maintainable on any battleeld, sustainable at rea-
sonable cost, and eective in a full range of climates and operational
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Getting Defense Acquisition Right
environments. All of this adds complexity, cost and risk to new designs.
Our acquisition professionals’ most challenging task is to manage that
complexity and that risk eectively.
e rst article in this section discusses “e Optimal Program Struc-
ture.” is was one of the rst articles I wrote for the workforce and it was
intended to make a critical point: Our programs should be structured
around the product that we are acquiring and the circumstances associ-
ated with that product. ere is no one optimal program structure, so
the title is a little misleading, but for every product there is an optimal
structure for that product. I always start all discussions about program
decisions by reviewing the design of the product the DoD is acquiring.
Once the product and a few other driving factors like operational urgen-
cy are understood, we can then turn to the subject of how the program
to design and produce that product should be structured. Building that
structure is called “tailoring” and it is the antithesis of the idea that all
product development programs should be structured in the same way or
have identical content.
e range of products that the DoD acquires is vast, and the idea that
a “one size ts all” approach should be mandated or expected is sim-
ply wrong. When I rewrote DoDI 5000.02, our fundamental acquisition
policy document, I included multiple possible starting point models for
program structures, and I inserted the word “tailoring” dozens of times
in the text just to make this point. Because of the complexity we deal
with, the second release of Better Buying Power focused on the need for
critical thinking over a checklist or cookbook approach to acquisition
planning and management. is article also makes the point that risk
and mitigating actions taken to reduce risk, are fundamental drivers on
program structure.
Risk means uncertainty, and the real prospect of things not going as we
would desire. Risk is an integral part of new product development. Design-
ing a new weapon system is a creative process. It is building something
that has never been built before, and it is achieving levels of capability nev-
er reached before—by as wide a margin as possible. Our political system
seems to demand perfection in program execution so that there is never a
cost overrun or a schedule slip and all requirements are met. is is simply
unrealistic if the United States intends to remain the dominant military
power on the planet. We do know how to remove the risk from our pro-
grams: All it takes is to buy existing systems from other nations. ere are
times when that is a reasonable approach, but not for the systems we need
so that our warghters can dominate future battleelds against our most
capable potential adversaries.
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Chapter Three: Managing Technical Complexity
While risk is inherent in the creation of new weapons systems, it must still
be managed. Managing risk is not a passive activity. A PEO once sent me an
e-mail indicating that he was waiting to see what happened with regard to
some known risks on one of his programs. For background, the DoD uses
a somewhat formal standard process to identify specic risks, to catego-
rize them, and to track program events and risk mitigation plans that are
designed to reduce the risk over time. e DoD is good (maybe too good)
at creating standard processes, and our framework for addressing risk is
ne as far as it goes, but having a tracking system in place and waiting to
see what happens isn’t what we should expect from our Program Managers
and their stas. I sent the following reply to the PEO:
From: Kendall, Frank III HON OSD OUSD ATL (US)
Sent: Wednesday, April 13, 2016 3:38 PM
To:
Subject: RE: 2016 Program Executive Officer (PEO) Assessment
Thanks, Generally I agree with your assessment. I’ve gotten to know
many elements of your portfolio pretty well.
One comment just so you are aware of what is becoming a pet peeve
of mine. There are a couple of formulations of this that I’ve seen fairly
often over the last few years. When a program goes in the ditch, what I
hear from the PM or PEO is “schedule is being adjusted to reduce risk”
or “because risks that were accepted were realized the program is being
restructured.”
Frankly I find this a little irritating. It seems like an attempt to say that
we all agreed to roll the dice, and gee look what happened, guess we’ll
have to make some adjustments. I feel that this is basically a way to
duck responsibility. The fact is that a program plan which was submit-
ted for approval and justified as being executable wasn’t executed. End
of story. The reasons can be anything from poor planning to poor per-
formance, to acts of God, but the formulation that “risk was realized”
strikes me as a way to “spin” failure as something else. Of course there
are some things we can’t control, but our job is to manage risk, to take
action to mitigate it, and to adjust immediately when we see problems
emerging. We are not, or should not be, spectators to our programs
waiting to see what happens. I wrote a whole article about this. Our job
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Getting Defense Acquisition Right
is to be on top of events and steer them to get where we need to go as
efficiently as possible. Program management is not a spectator sport.
Frank
Frank Kendall
USD(AT&L)
RM 3E1010 Pentagon
703 697 7021
* * * *
Risk management is addressed in the second article in this chapter. It
amplies the point I made in the e-mail above and discusses some of the
proactive steps a Program Manager can take, ahead of time, to reduce the
potential consequences of a risk.
One of our tools for addressing and understanding risk is something called
a “Technology Readiness Level,” or TRL. TRLs provide a shorthand nu-
merical scale to assess a technology’s maturity. e next article in this
chapter is titled (with a nod to the TV program “Star Trek”), “e Trouble
with TRLs.” I have a strong dislike for TRLs, or perhaps more accurately
I have no respect for them. TRLs originated with NASA and were intro-
duced to the DoD about two decades ago. ey do provide a useful short-
hand or benchmark for the state of maturity of a technology—as examples,
is it theoretical or has it been tested in a laboratory, or in an operational
setting, or is it in a elded system? As such they are useful benchmarks to
begin a discussion of the risk associated with a technology.
What has happened over time, however, is that TRL ratings alone have
been viewed as dispositive and used as a substitute for that deeper discus-
sion. e problem with a TRL rating is that it conveys no real information
about the degree of diculty associated with completing maturation and
putting the technology into a design for production. Understanding that
degree of diculty tells us how much risk remains to be addressed before
we can presume the technology is ready to be used in a product. As Bill
LaPlante, former Air Force Assistant Secretary for Acquisition, once told
me, “TRLs are what we tell nontechnical management to make them feel
good. Engineers know enough to ask about the actual work that remains
to be done.” is in a nutshell is the reason that, as part of Better Buy-
ing Power 3.0, I have encouraged the military Services to place technically
qualied people in charge of development programs. It’s hard to manage
something you don’t understand, and development of new defense systems
is the management of engineering and technical risk.
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e next article in this chapter, written for a developmental test profes-
sional association publication, discusses the role of test and evaluation,
particularly developmental test and evaluation, in a defense acquisition
program. During the last several years, the DoD has rebuilt its develop-
mental test organization within the Oce of the Secretary of Defense. We
have also worked hard to more eectively integrate all testing, both devel-
opmental and operational, to achieve maximum eciency for programs as
a whole. Developmental test spans all the testing activities from program
inception up until elding. e separately conducted Operational Test
events support nal independent determinations about whether a program
is eective, suitable, and survivable or not prior to proceeding to full rate
production. Developmental testing provides the information that guides
program decisions, determines if risks are being addressed successfully,
conrms performance or identies problems that must be corrected. With-
in a program, the developmental test events must be fully integrated into
the program plan and structured to support the Program Manager and
Chief Engineer as they address the complexity and risk associated with the
program. Developmental testers are and should be an integral part of the
Program Manager’s program team.
e nal article in this chapter discusses a sometime neglected area, but a
crucial one—manufacturing. It makes the point that we cannot neglect man-
ufacturing technology as a critical enabler in elding advanced technology
weapon systems. Recognizing the importance of manufacturing technology,
the Obama administration undertook a major initiative to open approxi-
mately 15 national Manufacturing Innovation Institutes (MIIs). e DoD
was the government’s leader in establishing the vast majority of the several
MIIs. My oce led this eort, and a number of others, to further the state of
the art and to improve our manufacturing capability and capacity.
roughout the Obama administration, we tracked the manufacturing in-
dustrial base, particularly as it was impacted by budget cuts. In some in-
stances, we stepped in to preserve or create a needed capability. e ability
to produce a design, and to do it economically, is a critical consideration
in program management and new product development. Years ago when
I was working on my MBA, I was exposed to a case study in which the
brilliant artist who was designing beautiful and novel consumer products
failed to understand the limitations that existing manufacturing processes
imposed on his ideas. We made exactly the same mistake with the disas-
trous A-12 combat reconnaissance aircra program in the 1980s and ’90s.
If there is one “takeaway” from this section, it should be that, in the creation
of a complex weapon system, perfection should not be expected; setbacks
and unforeseen problems will always be the norm—if we are to remain the
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Getting Defense Acquisition Right
world’s dominant military power. Managing any complex weapons system
development includes trade-os between cost, schedule, and performance.
Sometimes urgent need overcomes all other considerations, as it did with
the acquisition of MRAPs, but more oen the customer, our military oper-
ator, wants to acquire a system that meets the Service’s full set of needs, or,
in DoD parlance, its requirements. ose requirements bring complexity
also, but as discussed in another chapter, they are oen demanded by the
operational user, who understandably desires a high quality product that
can be kept in the inventory for 30 or 40 years. It’s useful in that regard to
contrast the MRAP program with another Army protected wheeled vehicle
program, the Joint Lightweight Tactical Vehicle or JLTV.
e original MRAP vehicles were built for use in Iraq’s relatively at ter-
rain. ey were large vehicles with simple suspension systems. A few years
later, it became clear that these vehicles were not suited for use in Afghani-
stan’s rougher and more constrained terrain. A separate program—the
MRAP-All Terrain Vehicle (MRAP-ATV or MATV)—was initiated, and
several thousand smaller vehicles, with more dynamic suspensions and
other features, were acquired. As ground operations wound down, the
DoD eliminated from its inventory the vast majority of the roughly 30,000
MRAPs of all types. However, the DoD is acquiring a large number of new
design JLTV vehicles that have come through the more standard acquisi-
tion process. JLTVs were designed from the start to meet the full range
of Army and Marine Corps requirements, including the ability to operate
with high reliability in a wide variety of terrain and climates.
Which approach to acquisition is the best? e answer is “it depends.”
When lives were at stake and time was of the essence, it was right to initi-
ate a rapid acquisition program focused only on critical needs that used
only o-the-shelf components. Without this pressing need, the Army and
Marine Corps are now acquiring a much more capable and versatile vehicle
in JLTV that will remain in our inventory for decades. Both approaches,
and many others, have a place in our suite of acquisition program options.
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Chapter Three: Managing Technical Complexity
e Optimal Program Structure
Reprinted from Defense AT&L: July-August 2012
Not too long ago, I was asked during a Q&A session with one of the courses
at the Defense Acquisition University what I thought was the optimal pro-
gram structure. e question itself suggests a misunderstanding of how
programs should be structured, and more importantly, it may be an ex-
ample of a type of behavior that I’ve seen too much of in the past 2 years
since I came back to government service.
e answer to the question is either: (A) ere is none, or (B) ere are an
innite number. ere is no one best way to structure a program. Every
program has its own best structure, and that structure is dependent on all
the many variables that contribute to program success or failure. To para-
phrase and invert Tolstoy, happy programs are each happy in their own
way, and unhappy programs tend to be unhappy in the same ways.
As I went around the country a year ago to discuss the Better Buying Power
initiatives with the workforce, one thing I tried to emphasize repeatedly
was that the BBP policies were not set in stone. All were subject to waiver.
e rst responsibility of the key leaders in the acquisition workforce is to
think. One of the many reasons that our key leaders have to be true pro-
fessionals who are fully prepared to do their jobs by virtue of education,
training, and experience is that creative, informed thought is necessary to
optimize the structure of a program. e behavior I’m afraid I’ve seen too
much of is the tendency to default to a “school solution” standard program
structure. I’ve seen programs twisted into knots just to include all the mile-
stones in the standard program template. I’m guessing that there are two
reasons our leaders would do this: rst, because they don’t know any better,
and second, because they believe it’s the only way to get their program ap-
proved and through the “system.” Neither of these leads to good outcomes,
and neither is what I expect from our acquisition professionals.
So how does one determine how to best structure a program? Whether you
are a PM, or a chief engineer, or a contracting ocer, or a life cycle support
manager, you have to start in the same place. You begin with a deep under-
standing of the nature of the product you intend to acquire. e form of the
program has to follow the function the program will perform: developing
and acquiring a specic product. e nature of the product should be the
most signicant determiner of program structure. How mature is the tech-
nology that will be included in the product? What will have to be done to
mature that technology, and how much risk is involved? In addition to the
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Getting Defense Acquisition Right
technology that is included, how complicated will the design be? Is it like oth-
er designs that we have experience with, or is it novel? How dicult are the
integration aspects of building the product? Is the manufacturing technol-
ogy also mature, or will work have to be done to advance it prior to produc-
tion? ese questions on a large scale will begin the process of determining
if a technology development phase is needed prior to the start of engineering
and manufacturing development. ey will also aect the duration of these
phases, if used, and the number of test articles and types of testing that will
have to be performed to verify the performance of the design.
Beyond a deep understanding of the product itself and the risk inherent
in developing and producing it, one must consider a range of other factors
that will inuence program structure. How urgently is the product needed?
How prepared is industry to design and produce the product? How much
uncertainty is there about the proper balance of cost and capability? What
are the customer’s priorities for performance? What resource constraints
will aect program risk (not just nancial resources, but also availability
of competitors, time, and expertise in and out of government)? Is cost or
schedule most important and what are the best ways to control them on
this program? What is the right balance of risk and incentives to provide to
the contractors to get the results the government wants?
We are not in an easy business. is is in fact rocket science in many cases.
As I look at programs coming through the acquisition process, my fun-
damental concern is that each program be structured in a way that opti-
mizes that program’s chances of success. ere is no one solution. What I’m
looking for fundamentally is the evidence that the program’s leaders have
thought carefully about all of the factors that I’ve mentioned—and many
others. I look for that evidence in the nature of the product the program
is acquiring and in the structure the program’s leaders have chosen to use.
e thinking (and the supporting data) that went into determining that
specic and oen unique structure is what I expect to see in an acquisition
strategy, and it is what I expect our leaders to be able to explain when they
present their program plans.
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Chapter Three: Managing Technical Complexity
Risk and Risk Mitigation—
Don’t Be a Spectator
Reprinted from Defense AT&L: January-February 2015
As I have watched programs come through for Milestone Decisions and
other reviews, I have gained the impression that our processes for risk man-
agement may have focused too much on the process and not enough on the
substance of identifying and controlling risk. I think I may be seeing risk
identication—categorization in the “risk matrix” showing likelihood and
consequence and with risk burn-down schedules tied to program events.
From my perspective, this by itself isn’t risk management; it is risk watching.
We need to do what we can to manage and control risk, not just observe it.
All programs, but particularly all development programs, involve risk. ere
is risk in doing anything for the rst time, and all new product developments
involve doing something for the rst time. e Department of Defense (DoD)
has a good tool that lays out in detail the process of identifying, evaluating,
categorizing and planning for risk in programs. Recently updated to version
7.0 by our Chief Systems Engineer, Dr. Steve Welby, it is called the Depart-
ment of Defense Risk Management Guide for Defense Acquisition Programs
and is available online at https://acc.dau.mil/rm-guidebook. I don’t want to
duplicate that material here, but I would like to make some comments on
the substance of risk identication and risk mitigation and how it drives—or
should drive—program structure and content.
I think of every development program primarily as a problem of risk man-
agement. Each program has what I call a risk prole that changes over time.
ink of the risk prole as a graph of the amount of uncertainty about a
program’s outcomes. As we progress through the phases of a program—
dening requirements, conducting trade studies, dening concepts and
preliminary designs, completing detailed designs, building prototypes
and conducting tests—what we really are doing is removing uncertainty
from the program. at uncertainty encompasses the performance of the
product, its cost and how much time is needed to develop and produce the
product. We can be surprised at any point in this process. Some surprises
can be handled in stride, and some may lead to major setbacks and a re-
structuring or even cancellation of the program. It is our job to anticipate
those surprises, assess their likelihood and their impacts and, most of all,
do something either to prevent them or, if they do occur, to limit their im-
pacts. All this eort is risk management.
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Getting Defense Acquisition Right
As managers, we can take a number of proactive measures to mitigate risk.
ese measures all tend to have one thing in common: ey are not free. In
our resource-constrained world, we can’t do everything possible to miti-
gate risk. e things we can do cover a wide spectrum: We can carry com-
petitors through risk reduction or even development for production, we
can pursue multiple technical approaches to the same goal, we can provide
alternative lower-performance solutions that also carry lower risks, we can
stretch schedule by slowing or delaying some program activities until risk
is reduced and we can provide strong incentives to industry to achieve our
most dicult program challenges.
Our task as managers involves optimization—what are the highest-payo
risk-mitigation investments we can make with the resources available? I
expect our managers to demonstrate that they have analyzed this problem
and made good judgments about how best to use the resources they have
to mitigate the program’s risk. is activity starts when the program plan
is just beginning.
e most important decisions to control risk are made in the earliest stages
of program planning. Very early in our planning, we determine the basic
program structure, whether we will have a dedicated risk reduction phase,
what basic contract types we will use, our criteria for entering design for
production and for entering production itself, and how much time and
money we will need to execute the program. Once these decisions are in
place, the rest is details—important but much less consequential. As I’ve
written before, these decisions should be guided not by an arbitrary pro-
cess or best practice but by the nature of the specic product we intend to
design and build.
What we call “requirements” determines a great deal—almost every-
thing—about the risks we need to manage. Do the requirements call for a
product like a Mine-Resistant Ambush Protected vehicle, which is basically
a heavy truck built from existing o-the-shelf components? Or do they call
for a Joint Strike Fighter built from all new design subsystems and much
greater capability and complexity than anything we have ever built? In the
rst case, we probably can go directly into detailed design for production.
In the second case, we need to spend years maturing the highest risk ele-
ments of the design, and it would be wise to build prototypes to reduce in-
tegration and performance risk before our performance requirements are
made nal and we start designing for production.
e contracting approach, xed price or cost plus, is driven by risk consid-
erations. We need to be careful about the illusion that all risk can be trans-
ferred to industry. is is never the case, even in a rm xed-price contract.
e risk that the contractor will not deliver the product is always borne by
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Chapter Three: Managing Technical Complexity
the government. We are the ones who need the product. Industry’s risk is
always limited to the costs a rm can absorb—a very nite parameter. ere
certainly are cases where we should use xed-price contracts for product
development (the Air Force’s new KC-46 refueling and transport tanker is
an example), but we should limit such contracts to situations where we have
good reason to believe industry can perform as expected and where the risk
is not more than the contractor can reasonably bear.
As a risk-mitigation measure, cost-plus development has a very attractive
feature from the risk-management perspective—its exibility. In a xed-
price environment, the government should have dened the deliverables
clearly and should not make changes or direct the contractor about how to
do the work. In a xed-price world, we have chosen to transfer that respon-
sibility to the contractor. In a cost-plus environment, the government can
be (and should be) involved in cost-eectiveness trades that aect require-
ments and in decisions about investments in risk-mitigation measures.
ese decisions aect cost and schedule, and in a cost-plus environment
the government has the exibility to make those trade-os without being
required to renegotiate or modify the contract.
At certain points in programs, we make decisions to commit both time
and funding to achieving certain goals. Sometimes the commitments
include several years of work and require spending billions of dollars.
ese are the milestones and decision points we are all familiar with in
the acquisition process. ese milestones and decision points are criti-
cal risk-management events. At each of these points, we need a thorough
understanding of the risks we face and a clear plan to manage those risks.
Understanding these risks is rooted in a deep understanding of the na-
ture of the product we are building.
e nature of the product should determine whether a dedicated technol-
ogy maturation and risk-reduction phase is needed and what will have to
be accomplished in that phase. Although they can be useful indicators,
we can’t rely solely on metrics like Technology Readiness Levels (TRLs)
to make these decisions for us. A bureaucrat can determine if something
meets the denition of TRL 6 or not. It takes a competent engineer (in the
right discipline) to determine if a technology is too immature and risky to
be incorporated into a design for production. e nature of the product
also should determine whether system-level prototypes are necessary to
reduce integration risk prior to making the commitment to design for pro-
duction. We did not need those prototypes on the new Marine 1 helicopter.
We did need them on the F-22 and the F-35 ghter aircra.
One risk-mitigation rule of thumb for program planning is to do the hard
things rst. In the Comanche helicopter program during the 1990s, the Army
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Getting Defense Acquisition Right
didn’t have enough funding to mature both the mission equipment package
and the airframe. e choice was made to build prototype airframes—the
lower-risk and less ambitious part of the program. is was done (over my
objections at the time), because it was believed that, without ying proto-
types, the program risked cancellation for political reasons. In other words,
political risk trumped development risk. It didn’t work, and the program
ultimately was canceled anyway. I do not advocate this approach; there are
other ways to deal with political risk. In general, we should do the hardest
things as early as we can in acquisition program planning. Eat your spinach
rst; it makes the rest of the meal taste much better.
Preferably, we should do the hardest (most risky) things in a Technology
Maturation Risk Reduction (TMRR) phase where the risk can be reduced
with a lower nancial commitment and with less severe consequences.
Once Engineering and Manufacturing Development (EMD) begins, a pro-
gram quickly has a marching army moving forward in a broad synchro-
nized plan of work. When something goes wrong, that marching army
oen will mark time while it waits for the problem to be solved—an expen-
sive proposition. We recently had a problem with the F-35 engine that led
rst to grounding the eet and then to a restricted ight envelope. All this
delayed the test program, and the eects rippled through much of the EMD
eort. It would have been much better to have found this problem before it
could disrupt the entire ight test program.
Within either a TMRR or EMD phase, we should structure workow to
reduce or realize as early as possible the likelier and more consequential
risks. Risk should inuence program planning details. We can use internal
“knowledge points” to inform commitments within phases. Our chief de-
velopmental tester, Dave Brown, emphasizes “shiing le” in test planning.
e benets of this are that technical performance uncertainty is reduced
as early as possible and that the consequences of realized risks are less se-
vere in terms of lost work, rework or program disruption.
e major commitment to enter production should be driven primarily
by achieving condence in the stability of the product’s design, at least as
regards any major changes. e key risk to manage here is that of discover-
ing major design changes are required aer the production line is up and
running. is always is a trade-o; time to market does matter and our
warghters need the product we are developing. How much overlap is ac-
ceptable in development and production (concurrency) is a judgment call,
but it is driven by an assessment of the risks of a major design problem that
will require correction—and the consequences of such a discovery.
We recently had a fatigue failure in an F-35 bulkhead, a major structural
member. We are in our eighth year of production. Fortunately, in this case,
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Chapter Three: Managing Technical Complexity
a reasonable cost x seems viable, and we should be able to modify at mod-
est cost the aircra we already have built. I say “should be” because the x
will take time to verify through testing, and there remains some risk that
the x will be ineective.
For all our major commitments, but particularly for exiting TMRR and for
entering production, I demand specic accomplishments as criteria and I
put them in Acquisition Decision Memoranda. e pressures are very high
in our system to move forward, to spend the money appropriated and to
preserve the appearance of progress. I recommend that this practice of set-
ting specic criteria for work package initiation (or other resource, work-
scope expansion or contractual commitments) be used internally through-
out our programs. By setting these criteria objectively and in the absence
of the pressure of the moment, I believe we can make better decisions about
program commitments and better control the risks we face.
Delaying a commitment has impacts now; gambling that things will work
out has impacts in the future. It oen is tempting for managers under cost
and schedule pressures to accept risk and continue as planned. We are paid
to get these judgments right—and to have the courage to make the harder
decision when we believe it is the right decision.
A source of risk nearly all programs face is uncertainty about external de-
pendencies, oen in the form of interfaces with other programs that may
not themselves be dened or stable. In other cases, a companion program
(user equipment for the satellite Global Positioning System, for example)
may be needed to make the system itself viable or useful, but that program
experiences its own risks that aect schedule and performance.
We oen expect program managers to coordinate with each other, but in
many cases this isn’t enough. Controlling potential cyber vulnerabilities
across program interfaces is a good example of an area in which we have
problems. No aected program manager may be willing to change or have
any incentive to adjust his or her program to bring it into synchronization
with the other programs. If there is a negative cost or schedule impact, the
question always is, “Who will change and who will bear the cost of any
needed adjustments?” I’m of the view that the DoD could do a better job
at managing this type of risk. We can do so by establishing an appropri-
ate technical authority with directive control over interfaces and program
synchronization.
e sources of some of our greatest risks can go unnoticed and unchal-
lenged. Gary Bliss, director of my Program Assessment and Root Cause
Analysis Oce, has introduced the concept of “framing assumptions” into
our lexicon. One example of a framing assumption, again on the F-35, was
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Getting Defense Acquisition Right
that modeling and simulation were so good that actual physical testing
wasn’t necessary to verify performance prior to the start of production. In
the case of the Littoral Combat Ship, the assumption was that commercial
construction standards were adequate to guide the design. Gary’s point,
and it’s a good one, is that programs oen get into trouble when framing
assumptions prove invalid. However, these assumptions are so ingrained
and established in our thinking that they are not challenged or fully appre-
ciated as risks until reality rears its ugly head in a very visible way. is type
of risk can be mitigated by acknowledging that the assumptions exist and
by providing avenues for us to become aware of sources of evidence that the
assumptions may not be valid. Our human tendency is to reject evidence
that doesn’t agree with our preconceptions.
Gary found several cases where program management failed to recognize
as early as it should have that core framing assumptions were false. e best
way to manage this source of uncertainty is to take the time and eort dur-
ing early program planning to identify a program’s framing assumptions,
to understand that they are a source of risk and then to actively reexamine
them for validity as more information becomes available. Again, “knowledge
points” can be helpful, but we shouldn’t merely be passive about this. In our
planning, we should create knowledge points as early as possible. If we do so,
we can respond to any problems that emerge sooner rather than later.
I’ll conclude by reiterating two key points: Risk management is not a passive
activity, and proactive risk-management investments are not free. ose
investments, however, can be the most important resource allocations we
make in our programs. As managers, we need to attack risk the way we’ve
been attacking cost. Understand risk thoroughly, and then go aer the
risk items with the highest combined likelihoods and consequences and
bring them under control. Allocate your scarce resources so you achieve
the highest possible return for your investments in risk reduction. Do this
most of all at the very start of program planning. e course set then will
determine the direction of the balance of the program and whether it suc-
ceeds or fails.
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Chapter Three: Managing Technical Complexity
e Trouble With TRLs
(With anks to Gene Roddenberry
and David Gerrold)
Reprinted from Defense AT&L: September-October 2013
For a long time now, the Defense Department has been using Technology
Readiness Levels (TRLs) as a tool to assess the risk of including a new or
advanced technology in one of our products. ere is nothing wrong with
TRLs except that they are only one input for a risk assessment and provide
at best a crude indicator of the risk of using a technology in a product. In
many cases, TRLs tell us virtually nothing about whether we need to take
additional action to reduce risk and what it will take to reduce a specic
risk to an acceptable level. Let me give you three real-life examples I’ve seen
over the last few years:
Example No. 1: An oeror on a missile program wants to incorporate a
new infrared imaging array in a missile seeker. e technology will pro-
vide a signicant performance enhancement. It employs a new material or
perhaps just a larger array with a proven material. e oeror has produced
several test arrays and incorporated them in laboratory test articles and
in a prototype seeker that has been own in a test article against a repre-
sentative target. We would seem to have a technology that has reached the
benchmark TRL 6; it has been tested in a prototype in a relevant end-to-
end environment. What could be wrong? For a seeker material of this type,
a critical question is its aordability as well as producibility, which usually
is a function of the manufacturing processes’ yield percentage. Demon-
strating that we can build a few test articles simply does not tell us enough
about the viability of the technology for large-scale production and there-
fore about the wisdom of its inclusion in the design for an Engineering and
Manufacturing Development (EMD) program.
Example No. 2: To support amphibious operations, a new ramp design is
needed for a staging vessel that will be used to transfer ground combat ve-
hicles from an amphibious ship to the staging vessel before they are loaded
onto landing cra and deployed to shore. e intended ramp design is nov-
el, but it does not include any new materials or design features that would
expand the state of the art in any fundamental way. It is similar to other
commercial and military designs but will be required to work in higher sea
states than other similar structures. Subscale models have been built and
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Getting Defense Acquisition Right
tested in tank tests, and extensive modeling and simulation work has been
done to verify the design. is “technology” (or design) doesn’t meet the
TRL 6 benchmark because it has not been tested in a relevant end-to-end
environment. Should the program oce be required to build a full-scale
test article prior to entering EMD for the staging vessel? ere is no way to
know from the facts I have provided. Resolving this issue requires expert
judgment about the degree to which the new design departs from proven
capability, the risk of relying on model testing and simulation, as well as
about the cost of designing, building and testing a pre-EMD prototype.
Example No. 3: New mathematical algorithms have been devised to fuse
data from multiple onboard and ooard Intelligence, Surveillance and
Reconnaissance (ISR) sources in a networked Command and Control (C2)
system to be used on a new tactical strike platform. e success of these
algorithms in substantially reducing the data processing loads on the C2
system will determine the viability of the design concept because of limita-
tions on available power, cooling and volume on the aircra. What must
be accomplished prior to EMD to mitigate the risks of relying on these
algorithms in the EMD design? If someone told you this technology was
TRL 6, would that be enough to convince you that the risk was mitigated
adequately? I hope not.
One of the hardest and most important aspects of our jobs in developing
and delivering new capabilities to the warghter is risk management. A
problem I’ve seen repeatedly is defaulting to a TRL assessment as a substi-
tute for informed professional risk assessment and well thought-out miti-
gation plans, including specic knowledge points and decision criteria or
exit/ entrance criteria for the next phase of development. TRLs do not end
the conversation about risk. TRLs may start the risk conversation, and they
may provide a convenient shorthand benchmark, but they do not answer
the question of whether the total risk of proceeding is acceptable, or dene
what work needs to be done to make the risk acceptable.
Some time ago I revised the technology assessment process that we re-
quire prior to major acquisition decisions, particularly the commitment
to enter EMD, to place more responsibility on our Program Managers. I
expect Program Managers to have a thorough and deep understanding of
the technical risks associated with their programs and of the mitigation
steps and resources required to reduce that risk. Technical risk consider-
ations drive any number of program decisions, including: (1) the feasibil-
ity of requirements, (2) the need to conduct a Technology Demonstration
(TD) phase, (3) the need for and value of competitive prototypes, (4) the
specic accomplishments needed before entering EMD or initial produc-
tion, and (5) the appropriate contract type. All this is Program Manager’s
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business, requiring judgment that goes well beyond any formulaic assess-
ment of TRLs.
We also can’t assume that industry will take the needed steps to identify
and reduce risk. A recent study of TD prototyping programs that I com-
missioned revealed that industry isn’t necessarily trying to reduce risk as
its highest priority. When there is a competition, we can expect industry’s
rst priority is to win the competition. We have to make sure that winning
the competition is synonymous with doing what the government needs
done to identify risk and drive it down. e study showed that in many,
in fact the majority, of the cases, industry was achieving an asserted TRL
6 benchmark for the government but not reducing the risk in the product
that the vendor intended to build in EMD. is isn’t something we should
blame industry for; we write the rules and we enforce them.
We will never have, and should not expect to have, risk-free programs. Our
warghters have the best equipment in the world because we take the risks
inherent in doing things that have never been done before. Our technologi-
cal superiority rests on this foundation. As acquisition professionals, we
have to manage risk so we strike the right balance between stretching for
new and better capabilities and limiting our goals to ones that are attain-
able and will be reached eciently at acceptable cost. TRLs are just one of
the tools we use to accomplish this task, and we should not rely on them for
more than they can provide or think of them as a substitute for the profes-
sional judgments we have to make.
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Getting Defense Acquisition Right
Perspectives on Developmental
Test and Evaluation
Reprinted from ITEA Journal: March 2013
During my rst tour in the Pentagon in Acquisition, Technology, and Lo-
gistics (AT&L) from 1986 to 1994, I was responsible initially for strategic
defense systems and then for tactical warfare programs. During this time,
I had the opportunity to work with a Developmental Test and Evaluation
(DT&E) organization that was very professional and led by an outstanding
civil servant, Pete Adolph. Somewhere along the way, as priorities and per-
sonalities changed in the Oce of the Secretary of Defense (OSD), the DT&E
organization atrophied and all but disappeared. For the last few years, under
the auspices of the Weapons System Acquisition Reform Act, we have been
strengthening the DT&E organization within OSD. Ed Greer, who retired
from public service recently, has rebuilt the DT&E organization to the point
that it is now performing a role much closer to the one I remember from the
80s and 90s. As Defense Acquisition Executive, I rely heavily on the DT&E
oce and sta for sound advice on the adequacy of the test programs being
proposed for major programs and on the implications of developmental test
results for investment decisions, particularly for entry into low rate produc-
tion. Developmental testing is a core activity in our acquisition programs,
however, not just an OSD oversight function. In this article I discuss the role
DT&E plays in our programs, some important principles I believe should be
applied to developmental testing, and some common problems I have en-
countered that relate to the eectiveness of DT&E.
Role of developmental testing
e purpose of developmental testing is simple: to provide data to pro-
gram leadership so that good decisions can be made as early as possible. I
have a sign outside my oce displaying a quote from W. Edwards Deming:
‘‘In God we trust, all others must bring data.’’ It is our developmental tes-
ters who ‘‘bring the data’’ needed to make sound decisions during product
development. Programs are organized in various ways, but whatever the
specic organizational model, testing is the source of the crucial informa-
tion that provides feedback to program management, chief engineers, lead
system engineers, integrated product teams, and military users on whether
their designs meet requirements or not. e spectrum of testing types and
venues that is captured in compliance matrices for system specications
runs the gamut of laboratory testing and eld testing. All of these sources
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of information can be valuable, but integrating them into a test program
and an overall program plan and schedule that meet the needs of develop-
mental testers’ customers requires a high degree of professionalism and a
deep understanding of how test results can inuence design and program
decisions. In my experience, a well-structured test plan makes all the dif-
ference in whether a program is eciently executed or not. ere are two
layers of DT&E organizational roles and relationships; both are important
in determining DT&E’s contributions to program success.
e rst layer of DT&E organization exists within the program oce. I
have seen several organizational models for DT&E oces within Depart-
ment of Defense (DoD) programs, and any of them can work given profes-
sional leadership, well-dened lines of authority, and responsibility, and
commitment to working together as a team. e DT&E oce or organi-
zation within a program usually reports to the program manager, to the
chief engineer, or to the lead systems engineer. In some cases, the DT&E
sta can be matrix sta allocated from centralized functional test organi-
zations, and in other cases, the testing sta can be organic sta members
of the program oce. Whatever the model, the role of the test organization
is to support the program’s leadership by providing timely, accurate, and
relevant information to enable ecient and eective program decisions.
e second layer of DT&E organization exists within the Service or Mili-
tary Department at a higher level than the program oce. Here too there
are various models, and any of them can be successful. Some Services have
centralized DT&E support within test organizations that include opera-
tional test as well as DT&E. Others have created DT&E organizations at the
system command level. ese organizations tend to be focused on ensuring
the acquisition and evaluation of the specic data needed to support major
decisions, such as initiating production or proceeding to Operational Test
and Evaluation (OT&E). is layer of DT&E organization, with some de-
gree of independence from the standard acquisition chain of command of
program executive ocer and program manager, and even in some cases
the acquisition executive, can be eective, but it also runs the risk of dilut-
ing the authority and accountability of the acquisition chain of command.
In my own OSD AT&L organization, I consider the DT&E organization,
which we have rebuilt over the last few years, to have a sta function that
supports my acquisition decisions and also provides expertise and other
support to the Services. When there are dierences of opinion between the
OSD DT&E organization and the Service acquisition chain of command, I
expect them to be brought to my attention for resolution.
Precepts of effective DT&E
e following ‘‘precepts’’ are based on my own experience and are gener-
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Getting Defense Acquisition Right
ated largely from a program or engineering management perspective. ey
are in no particular order and are intended merely as food for thought by
anyone involved in DT&E or any customers or stakeholders in the DT&E
functional area.
1. Contribute to program eciency and eective execution: DT&E is a
support function that enables sound design and program decisions, and
DT&E leadership should be an integral part of the program planning
team. DT&E should be part of program planning from the outset. Much of
product development can be thought of as risk management, where design
and technical risks are addressed and resolved in an iterative process over
time. e way DT&E is structured to contribute to this process can make
all the dierence in the eciency (think waste avoidance) with which a
product is developed. DT&E leadership should be fully integrated into the
program management and system engineering functions. Formal ‘‘design
of experiments’’ techniques are being used widely now to ensure that tests
are structured to extract meaningful information as eciently as possible,
and I applaud this development. Testing isn’t free, however, and we need
to balance the desire for thorough testing against the resources in time
and money required to conduct the testing. is can only be accomplished
through a cooperative eort that fully involves DT&E professionals in the
program planning process.
2. Provide relevant information as early as possible: Once a program enters
Engineering and Manufacturing Development (EMD), the commitment to
design for production unleashes a marching army of interdependent engi-
neers that needs to keep moving in a tight formation through the develop-
ment process. Any serious design problems that surface late in the devel-
opment process can stop this marching army in its tracks at great expense
while the problem is addressed and resolved. e later a problem is identi-
ed and the solution determined, the greater the redesign burden and cost.
To avoid this problem, information on the performance of the design in key
areas needs to be made available as early as it can be provided and from the
most reliable source of information available. As good as our design tools
have become, there is still no substitute for physical testing, particularly
for our more complex and novel designs. For key program technical risks,
the early use of prototypes (full or subsystem level) and developmental
testing during technology demonstration risk reduction activities prior to
the commitment to EMD can make all the dierence between a successful
EMD and one that experiences massive overruns. Again, DT&E isn’t free,
and like any program, it needs to be conducted as eciently as possible, but
the real benet of an eectively structured test program is in the cost avoid-
ance it can provide by discovering problems as early as possible.
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Chapter Three: Managing Technical Complexity
3. Integrate DT&E planning across the product life cycle: DT&E is not just
about production representative prototype testing in a controlled environ-
ment prior to the decision to proceed to OT&E. It encompasses the total
program of testing, including, for example, hardware in the loop testing in
system integration laboratories, environmental stress screening at the sub-
system level, and soware testing in emulators. Whenever data are needed
to support risk reduction, design validation, and requirements verication,
there is a role for DT&E in collecting those data and evaluating them on a
continuum over a program’s life. is spans all phases of a program’s life
cycle. Increasingly, the Department is keeping systems longer and upgrad-
ing them in lieu of pursuing new designs. Eective DT&E is as central to
these eorts as it is to new product development programs. Well-struc-
tured developmental testing should be integral to all phases of a product’s
life cycle.
4. Focus on support to internal program decisions and verication of com-
pliance with requirements: DT&E does not exist in a vacuum and is not
a separate function; its purpose is to support program management and
technical leadership as it works to develop and eld a product that meets
user requirements. Programs move through a series of development activi-
ties that must be successfully completed and veried through testing, oen
as a condition of proceeding to the next phase of the program. Sometimes
this is the next soware build; sometimes it is a higher level of integration,
and sometimes it is a decision to commit to initial production. DT&E also
provides an indication of the readiness of a program to proceed to OT&E.
For any of these decision points, DT&E provides crucial information to
support the decisions, and the adequacy of that information is central to
controlling program risk and ensuring contractual compliance. Careful
planning and well-dened decision criteria are necessary prerequisites, but
the discipline to enforce those criteria is what oen sets successful pro-
grams apart.
5. Use DT&E to improve the eciency and validity of OT&E: OT&E is con-
ducted with more independence from the program oce and the acquisition
chain of command than DT&E and with less involvement by the contrac-
tor supplying the product, but the two test regimes should work together to
complement each other and avoid unnecessary expenses as much as possible.
Under Mike Gilmore’s and Ed Greer’s professional leadership, there has been
a very cooperative relationship between the DT&E and OT&E organizations
at the Department level. is relationship should continue and be mirrored
at all levels. While the OT&E community works hard to preserve and ensure
its independence, I am encouraged by the willingness of that community
to use the data that DT&E can provide to augment and complement data
provided by OT&E. We will never have the resources to do as much testing
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Getting Defense Acquisition Right
as we would like, and achieving statistically meaningful testing is sometimes
prohibitively expensive. By working together, the DT&E and OT&E commu-
nities in OSD and the Services can achieve more valid results, anchor each
other’s eorts, and do so at less cost.
How we get into trouble in DT&E—
Some of the ways at least
ere are times when DT&E doesn’t fulll its purpose, and a program ends
up with one type or another of acquisition problem. is can take the form
of cost overruns and schedule slips, or worse, a product that simply isn’t
viable, despite having been approved for development and even initial pro-
duction and aer years of eort and expense. e following paragraphs
provide some of the types of problems I have encountered most frequently
over the last 40 years.
In the technology demonstration or risk reduction phase, we permit the
use of test articles that may not be adequately representative of the actual
product design. In these cases, the testing that is conducted may be more
intended to sell a product than to reduce that product’s risks. Motivated
by a specic example I encountered (a program that was up for a Mile-
stone B decision), I recently asked a former deputy director of the Defense
Advanced Research Projects Agency (DARPA) to review a number of pro-
grams that had been through technology demonstration programs, which
included DT&E of competitive prototypes. e results were troubling. In
the majority of the cases, the design that was demonstrated had little or
no correlation to the design that was going to be developed in EMD. e
DT&E that was done in the risk reduction phase was not providing data to
reduce the risk of the target design. It was providing data intended to sell
the government on the prospective bidder. e lesson I derived from this
was that the combined government management team (program manage-
ment, engineering leadership, and developmental testers) was not insisting
on the relevance and validity of the test program. We can’t blame industry
for trying to win the EMD contract; we have to blame ourselves for not
understanding industry’s motivation and insisting on meaningful testing
that actually addresses the risks in the intended design.
We use ill-dened user requirements that have not been translated into
testable technical specications. As a result, we cannot plan the time and
resources for appropriate testing in the early stages of a development pro-
gram, and we cannot hold the contractor responsible for not meeting our
expectations. e government generally has to dene its requirements and
ensure that they are converted into testable requirements that our contrac-
tors can demonstrate they have satised in DT&E. If we fail in this respon-
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Chapter Three: Managing Technical Complexity
sibility and provide vaguely dened requirements to industry, we have no
one but ourselves to blame when our expectations are not met. e largest
program I ever worked on had extensive user requirements that were never
properly dened to the prime contractor or converted by that contractor
or the government into quantiable and testable technical requirements.
When the program eventually died of its own weight, years aer it had
started and aer billions of dollars of cost, the prime contractor and the
customer were still debating over how to interpret the requirements and
how to test for compliance.
We have to resist the tendency to assume DT&E eciencies that exceed
previous experience in response to nancial pressure. Most programs
come under nancial pressure at some point; oen before the program
even enters EMD. It is far too easy to assume away the need for an adequate
number of test articles, or an adequate amount of test time in order to meet
a budget number or a schedule that has been dictated for some reason. Usu-
ally in my experience, program leadership, including the DT&E leadership,
accepts the constraints that have been provided and gambles on unprece-
dented test performance and eciencies. e usual result is increased inef-
ciency, not the opposite. We don’t want to over schedule or buy unneeded
test assets, but my experience is that the far more common errors are un-
warranted optimism and acceptance of excessive risk rather than excessive
conservatism or risk aversion. If we have solid reasons to conclude that we
can improve the eciency of DT&E (and we should always be looking for
sources of eciencies), then we should take those eciencies into account
in our planning, but hope is still not a method.
We sometimes fail to conduct adequate DT&E prior to the decision to
start production. About a year ago, I called a particular decision to en-
ter production on an aircra program without ight testing ‘‘acquisition
malpractice.’’ If a product enters production before the design is stable, the
resulting waste in cost increases and schedule slips can be dramatic, and
the program is much more likely to be canceled. I stress solid, well-dened
DT&E results as an important prerequisite for this decision because the
pressure to enter production can be overwhelming, and doing so prema-
turely has major consequences. e Service oen feels that it will ‘‘lose the
money’’ that has been requested a year or more earlier from the Congress
if the production contract is not awarded. Industry wants to make the sale,
and the user is anxious to get the new product. e decision to enter pro-
duction is all but irreversible, and to make this commitment for a new de-
sign without the knowledge obtained from adequate DT&E entails high
risk. at said, there is a balance to be struck. A well-structured DT&E
program will provide condence in the stability of the design as early as
possible. Some degree of concurrency between development (including
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Getting Defense Acquisition Right
DT&E) and production is usually appropriate. e degree of concurrency
that is acceptable depends on several factors, but in every case there should
be a well-dened basis rooted in data provided by DT&E to support this
critical decision.
We assume untested design xes to problems discovered in DT&E will be
successful, in order to preserve schedule. It is always a judgment call, but in
general, design changes have to be veried through DT&E just as much as
the original design needs to be veried. Where I have seen this most oen
is when we are about to initiate or have already initiated low rate produc-
tion. I recently slowed the rate of production of DoD’s biggest program
so that we could test design xes adequately prior to increasing the rate
of production. I seriously considered stopping production completely, but
made the judgment call to continue at a low rate while the test program
veried the design xes. e cost of stopping and restarting would have
been very high, so I limited our exposure but didn’t take it to zero. We don’t
want to be in this position if we can avoid it.
We sometimes over-focus on DT&E as preparation for OT&E. No one
wants to fail operational testing, and one of the things we can learn from
the last stages of DT&E is whether or not a program has a high probabil-
ity of a successful OT. is doesn’t mean, however, that we should do two
rounds of OT&E with the rst being called DT&E. In general OT&E is not
intended to be a place to discover unanticipated problems, but we shouldn’t
be so risk averse that we add what amounts to an extra phase of testing out
of concern for failing operational test. DT&E should be focused on verify-
ing that the contractor has met the requirements. We should do an eective
job of linking those requirements and the DT&E that veries compliance
to the operational performance that we intend to demonstrate in OT&E. If
we have done this eectively, the last stage of DT&E shouldn’t have to be a
full dress rehearsal for OT&E.
The bottom line
Developmental testers are critical professionals who make a major contri-
bution to DoD’s programs. ey bring a unique body of knowledge to the
table that is essential to eective program planning and execution. Again,
it is largely the DT&E community that ‘‘brings [the] data’’ the sign outside
my door emphasizes. Working with program and engineering leadership
as key members of the management team, developmental testers provide
the information that makes program success possible and much more
probable.
Editor’s Note: e ITEA Journal article above is reprinted here with the per-
mission of the International Test and Evaluation Association.
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Chapter Three: Managing Technical Complexity
Manufacturing Innovation
and Technological Superiority
Reprinted from Defense AT&L: September-October 2016
At the end of the Cold War, I was serving as the Deputy Director of Defense
Research and Engineering for Tactical Warfare Programs in the Oce of
the Secretary of Defense (OSD). For years I had studied the intelligence
reports on Soviet weapon systems and worked on ways the United States
could achieve or maintain a military advantage over those systems. We
knew the Russians had some of the best scientists and engineers in the
world working on their designs. ey also had aggressive modernization
cycles in areas they considered important; their multiple competing design
bureaus turned out new designs for armored vehicles, missiles and tactical
aircra on a predictable schedule at intervals of about 5 years.
Aer the Cold War ended, I was anxious to get a close look at the Soviet
weapons systems we had been working to defeat. I soon had two opportu-
nities to examine the newest Soviet equipment up close. One was a display
at Andrews Air Force Base in Maryland of all the equipment that we ac-
quired to test once the wall came down and the Russians were desperate
for any source of cash. e other was at the Farnborough International
Airshow in England, where the Russians were oering to sell their most
modern systems to anyone who would buy them. What struck me most
when I examined the former Soviet equipment was how primitive their
production technology was compared to U.S. manufacturing technology.
ose brilliant scientists and engineers had lacked the modern materials
and manufacturing technology to keep pace with the West. It was clear that
the performance and reliability of their weapons systems had been severely
limited by their limitations in areas like precision machining; the ability to
fabricate multilayer printed circuit boards; and their inability to produce
integrated circuits.
I recall in particular the presence of Bakelite, a distinct early plastic ther-
mosetting insulating material, which the United States hadn’t used since
the 1950s, being everywhere in Soviet 1980s-era aircra. One of the great-
est constraints on the Soviet designers, and on the performance and cost of
their weapons systems had been manufacturing technology.
Manufacturing technology doesn’t just aect weapons systems and tech-
nological superiority—it also drives national economic performance. e
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Getting Defense Acquisition Right
rst and second industrial revolutions were largely about manufacturing
technology. e English advantages in mechanized textile manufacturing
in the early 1800s drove the performance of the British economy, just as
Carnegie’s steel production in the late 19th century and Ford’s mass pro-
duction technology early in the 20th drove the growth of the U.S. econo-
my. More recently, ever smaller and more ecient silicon-based integrated
circuits that can be economically manufactured in massive quantities are
driving economic growth around the world.
Recognizing the importance of manufacturing technology to both nation-
al security and our economy, the President initiated a program to establish
Manufacturing Innovation Institutes (MIIs) that would create incubators
for advanced manufacturing technology in key technological areas. e
Department of Defense (DoD) has been a national leader in establishing
these institutions. With the Acting Secretary of Commerce and the Nation-
al Economic Advisor, I opened the rst one—which is dedicated to advanc-
ing additive manufacturing (3D printing) technology—in Youngstown,
Ohio, in 2012. Since then, several more MIIs have been opened, two by
the Department of Energy and six by the DoD. Several more are on the
way. e technologies of interest are determined by an expert interagency
body with industry input. Focus areas include lightweight alloys, digitiza-
tion of design to manufacturing processes and exible electronics. All of
these new institutions depend on collaboration between federal and local
government, industry and academia. Government funding is combined
with other sources of funds to get these institutions up and running, but
they will have to be self-sucient in a few years when government fund-
ing will cease. We don’t know if every MII will ourish; we will let time
and the requirement to be self-sucient sort that out. Four years in we do
know that some of the MIIs we have established are o to a good start, with
continuing interest from industry, signicant advances in manufacturing
technology and successful products to their credit.
I would like to recognize some key DoD leaders who have organized and led
the competitive process to set up the MIIs. First Brett Lambert, then Elana
Broitman, and now Andre Gudger, as leaders of the DoD’s Manufacturing
and Industrial Base Policy organization, have been the senior leaders respon-
sible for the DoD’s MIIs. A remarkable team, led by Adele Ratcli (whose
article in this edition of Defense AT&L magazine provides much more detail
on the MIIs), has done the heavy liing required to make each of the MIIs a
reality. Each of the Military Departments also has played a strong role—con-
ducting the actual competitions and working with the selected consortium
to get the MIIs up and running. All of these dedicated professionals deserve
our appreciation for creating these new national assets.
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Chapter Three: Managing Technical Complexity
While the MIIs are important, they are only one source of the technologies
that will make building our future generations of weapons possible and
aordable. Industry investments are focused on staying competitive in an
ever-more-competitive world, and help to keep the United States competi-
tive against potential adversaries.
I have been encouraging defense companies to invest more in research and
development, and one of the areas of greatest promise is on technologies that
will lower the production costs and improve the performance of our weap-
ons systems. Industry is responding. One example is the “blueprint for af-
fordability” initiative in which Lockheed Martin and major F-35 suppliers
have agreed to undertake to reduce F-35 production costs. rough a cre-
ative “win-win” agreement, Lockheed Martin and the major suppliers for
the F-35—Northrop Grumman and BAE—are all making investments that
will reduce government cost and achieve a higher return for the industry
participants. Pratt & Whitney has a similar program for the F-135 engine. In
another example, Boeing has invested signicantly in its ground-breaking
proprietary manufacturing processes that are expected to pay strong divi-
dends in both military and commercial aircra manufacturing. Industry
understands that manufacturing technology is the key to competitiveness.
For more than 50 years, the DoD Manufacturing Technology Program, or
ManTech, has been used by the DoD to sustain our lead in defense-essen-
tial manufacturing capability. e ManTech Program, executed through
dedicated teams in the Services, agencies, and within the OSD, develops
technologies and processes that impact all phases of acquisition and reduce
both acquisition and total ownership costs by developing, maturing, and
transitioning key manufacturing technologies. ManTech not only provides
the crucial link between technology invention and development and indus-
trial applications, but also matures and validates emerging manufacturing
technologies to support feasible implementation in industry and DoD fa-
cilities like depots and shipyards.
Direct investments by the government have oen been the genesis of new
manufacturing technology and a catalyst to spur more investment by in-
dustry. When I was vice president of engineering at Raytheon in the 1990s,
I was able, with the CEO’s strong support, to protect our corporate invest-
ment in the technology needed to produce gallium arsenide radio frequen-
cy components, a key enabler for a range of important national security
projects and a major competitive advantage for the company. More recent-
ly, government support, together with industry investments, for Gallium
Nitride components is giving the United States the opportunity to produce
systems like the Next Generation Jammer, the Advanced Missile Defense
Radar and others.
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Getting Defense Acquisition Right
For the acquisition professionals managing our new product development
programs, manufacturing technology and the risk associated with bring-
ing new technology on line, should be major parts of program planning.
Our policy encourages the use of Manufacturing Readiness Levels as one
way to assess the maturity and risk associated with producing specic de-
signs. As I hope you know by now, I’m not a fan of readiness levels—they
convey no real information about the actual risk or the diculty of matur-
ing a technology to where it can be used in a product or in manufacturing
a product—but they do provide a place to start a conversation about that
risk. Managing the risk associated with manufacturing is as important as
managing the technological risk associated with performance. is isn’t a
new problem. When I was working on my MBA in the 1970s, we did a case
study on how to manage creative designers who failed to appreciate the dif-
culty associated with actually producing their ingenious designs. While
a new idea might work in theory, if it can’t be built at an aordable cost it
doesn’t have much value. As we build risk reduction plans and proactively
manage the risks associated with new capabilities we cannot aord to ne-
glect the importance of having mature manufacturing processes.
Given the importance of manufacturing technology, we must protect that
technology just as we protect the actual designs and performance charac-
teristics of our weapon systems. As I work with our international partners,
one thing is almost a constant—the desire to acquire advanced manufac-
turing expertise in order to build more competitive manufacturing ca-
pacity and create jobs. Our competitors as well as our friends understand
the importance of manufacturing technology, and they have no reticence
about using every available means to acquire that technology—especially
cyber the. As we build Program Protection Plans, we must include the
steps we will take to protect critical manufacturing technology—through-
out the supply chain.
is issue of Defense AT&L magazine is focused on manufacturing, the
various MIIs and on our programs, such as ManTech, established to in-
vest in critical manufacturing technology. As we plan and execute our re-
search eorts and our development programs, we all should be conscious
of the importance of advancing the state of the art in manufacturing, of
managing the risks associated with manufacturing, and of protecting the
manufacturing technologies that we need to maintain our technological
superiority over our most capable potential opponents. You can be certain
that potential adversaries are working very hard to avoid the disadvantage
embedded in the Soviet weapon systems I was so anxious to investigate at
the end of the Cold War.
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Chapter Four
Working With Industry
“We’re all in this game together.”
—William Styron
is chapter addresses the most important relationship in defense acquisi-
tion—that between the DoD and the for-prot rms that provide almost all
of the products and services that the DoD acquires. e DoD does business
with a wide spectrum of companies, but a mere handful are the source of
most of our major weapons systems. We oen refer to these rms and the
specialized supply chain that contributes parts and subsystems to them,
as the Defense Industrial Base, or DIB. Most of this chapter addresses that
specialized industrial base. A much larger group of businesses provides a
range of products and services that are less unique, specialized, or complex
than the major systems we acquire. ese rms are commercial and oen
have a broad set of customers. Information technology rms are a good
example. For these companies, the DoD oen is a small fraction of their
business base. Still another type of rm, small business, also is important,
as small rms provide a disproportionate share of the innovation in our
economy and are a source of much of our economic growth.
e rst article in this chapter discusses our relationship with industry
in general and the balance the government has to strike as it simultane-
ously tries to protect the taxpayer’s investment in defense, treat industry
fairly, and obtain the high quality products our warghters need and de-
serve. e government relationship with industry is dened largely by
our contracts, but it is also dened by the attitude toward industry that
we bring to the table, and the expectations we communicate by every-
thing that we do. We need to recognize that prot isn’t optional for in-
dustry, and that industry can only absorb so much risk, but we also need
to protect the taxpayer. e government isn’t a commercial buyer spend-
ing its own money. It has a special obligation to be good stewards of the
funds we spend in defense of the nation. e relationship should be in
a word “businesslike” and professional—neither too adversarial nor too
familiar. At the end of the day, we need “win-win” business arrangements
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Getting Defense Acquisition Right
that motivate industry to work for the government and that provide high
quality products and services to the DoD.
Over the years, a number of ideas have been suggested to “solve” the prob-
lem of cost overruns in defense weapons programs, usually overruns in the
product development phase where a new design is created and tested. One
particular idea resurfaces periodically, probably because its simplicity has
some seductive appeal. at idea is the notion that xed-price contracts
will, rst, motivate industry to bid more realistically and, second, provide a
stronger motivation to control costs. In the extremes, xed-price contracts
bind industry to deliver the contracted product without the government
having to pay for any cost increases, and cost-plus contracts have the oppo-
site structure with the government paying for any cost increase but retain-
ing the freedom to modify the product as the knowledge increases during
development. We are not limited to these extremes, however. We have a
broad range of contract structures we can use that balance the risk that has
to be absorbed between industry and the government. is range is needed
because of the wide variety of situations the government and industry have
to work through successfully. For new product development programs in-
volving complex weapons systems, the use of xed-price contracts should
be approached with great caution. e second article in this chapter ex-
plains what should be considered prior to making that decision, in order to
treat industry fairly and have a reasonable chance of success.
Another frequently advocated approach to dealing with industry is to use
commercial practices instead of the highly regulatory approach used in
much of defense contracting. Like xed-price contracts, the use of com-
mercial practices denitely has a place in defense acquisition—but it is also
not a panacea. e defense market isn’t a commercial market. As a practical
matter, there is only one customer—and that customer is spending taxpay-
ers’ money, not his own. e products being acquired oen are highly spe-
cialized and complex, with long and very expensive lead times to produc-
tion and sales. e DoD also is not a high-volume buyer, and sales to DoD
are subject to the vagaries of a highly unpredictable political environment.
Nevertheless, commercial practices oen do apply to the products and ser-
vices the DoD buys, and we need to be alert to these opportunities. e
next article discusses commercial sources and commercial practices and
describes some specic instances in which commercial approaches have
been used successfully in defense acquisition.
Prot isn’t optional for businesses. One thing I have always enjoyed about
working in industry is that the metric for success isn’t a mystery; everyone
in a rm knows what success for the rm looks like. at motivator, prot,
provides the DoD with its most powerful tool for eliciting better products
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Chapter Four: Working with Industry
and better performance on contracts with industry. We can be certain that,
when we oer the possibility of earning a prot, industry will try to ob-
tain that prot. We need to make sure this behavior aligns well with what
the government is trying to accomplish. e next piece in this chapter dis-
cusses the use of prot and nancial incentives in the range of activities
that DoD contracts for from industry, including development, production,
and logistic services acquisition. e way we structure the potential prot
drives how industry bids to us and how source selections occur as well as
how industry performs once a contract is awarded. One source selection
criteria, Lowest Priced and Technically Acceptable, or LPTA, has been
criticized by industry as being overused; the situations in which LPTA is
acceptable or preferred are also addressed in this article.
How do we get industry to oer the government better than minimally ac-
ceptable products? For decades, our source selections for weapons systems
have been about oering the lowest cost product that met our “threshold”
requirements. e DoD has provided “objective” levels of performance as
part of our weapon system requirements denitions, but it hasn’t provided
any incentive to industry to achieve those higher performance levels. is
practice has been changed, and with great success. e idea was simple
enough: Tell industry how much more (in dollars) we are willing to pay
for better performance, and then give credit for oering a better product
in source selection. is is done by discounting the bid price by the extra
value being oered for the purpose of source selection—or, in other words,
by using a “value adjusted” price for the purpose of source selection. e
next article in this chapter explains this technique in more detail and pro-
vides examples of its use during the last few years.
Our privately owned, for-prot, defense industrial base is a precious na-
tional asset. Many other nations have used public or government-owned
enterprises to supply military equipment and, for the most part, this has
not worked well. e prot motive is a strong incentive and it does work.
e defense industrial base also is very specialized. It produces high-cost,
complex, specialized, even unique products in low volumes to one princi-
pal customer in a highly regulated business environment.
Over the last several decades, the defense industrial base in the United
States has slowly responded to market pressures to consolidate into fewer
and fewer rms. at trend was arrested in the late 1990s when it had clear-
ly gone too far. Competition, at all levels of the supply chain, depends on
the existence of enough competitors to create a viable market. Recently one
of the largest defense primes succeeded in acquiring a major new market
position in a class of defense products it had not previously produced. at
merger motivated me to release the following statement:
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* * * *
Statement on Consolidation in the Defense Industry
DELIVERED BY USD AT&L ON SEPT 30, 2015
The Department of Defense (DoD) is concerned about the continuing
march toward greater consolidation in the defense industry at the prime
contractor level. While the Lockheed Sikorsky transaction does not trig-
ger anti-trust concerns of having a negative impact on competition and
we understand and agree with the basis upon which the Department of
Justice (DOJ) decided not to issue a request for additional information
about the transaction, we believe that these types of acquisitions still
give rise to significant policy concerns.
Since 2011, DoD’s policy has been that it would not look favorably on
mergers of top tier defense firms. Lockheed’s acquisition of Sikorsky
does not constitute a merger of two top tier defense firms and it does
not violate that policy. However, this acquisition does result in a further
reduction in the number of weapon system prime contractors in the
Defense Industrial Base. Over the past few decades, there has been a
dramatic reduction in the number of weapon system prime contractors
producing major defense programs for the DoD. This transaction is the
most significant change at the weapon system prime level since the large
scale consolidation that followed the end of the cold war. This acquisition
moves a high percentage of the market share for an entire line of prod-
ucts – military helicopters – into the largest defense prime contractor, a
contractor that already holds a dominant position in high performance
aircraft due to the F-35 winner take all approach adopted over a decade
ago. Mergers such as this, combined with significant financial resources
of the largest defense companies, strategically position the acquiring
companies to dominate large parts of the defense industry.
With size comes power, and the Department’s experience with large de-
fense contractors is that they are not hesitant to use this power for cor-
porate advantage. The trend toward fewer and larger prime contractors
has the potential to affect innovation, limit the supply base, pose entry
barriers to small, medium and large businesses, and ultimately reduce
competition—resulting in higher prices to be paid by the American tax-
payer in order to support our warfighters.
The reality is that the defense market at the prime contract level has very
high barriers to entry. Our prime contractors provide very complex and
specialized products in relatively small numbers to one principal custom-
er. The Department will continue to work closely with the Department
of Justice and the Federal Trade Commission to ensure that mergers do
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not reduce competition. In addition, the Department is convinced that
we should work with the Congress to explore additional legal tools and
policy to preserve the diversity and spirit of innovation that have been
central to the health and strength of our unique, strategic defense indus-
trial base, particularly at the prime contractor level.
If the trend to smaller and smaller numbers of weapon system prime con-
tractors continues, one can foresee a future in which the Department
has at most two or three very large suppliers for all the major weapons
systems that we acquire. The Department would not consider this to be a
positive development and the American public should not either.
* * * *
Shortly thereaer, the Department of Justice, aer consulting with DoD,
released the following:
* * * *
JOINT STATEMENT OF THE DEPARTMENT OF JUSTICE AND THE FED-
ERAL TRADE COMMISSION ON PRESERVING COMPETITION IN THE
DEFENSE INDUSTRY
The Department of Justice (DOJ) and the Federal Trade Commission
(FTC) (“the Agencies”) are issuing this joint statement to explain our
standard of review under the antitrust statutes of proposed transac-
tions within the defense industry. The Agencies are responsible for re-
viewing mergers in the defense industry under Section 7 of the Clayton
Act, which prohibits mergers whose effect “may be substantially to
lessen competition, or to tend to create a monopoly.” The Department
of Defense (DoD) is responsible for ensuring our nation’s security and
is in a unique position to assess the impact of potential defense indus-
try consolidation on its ability to fulfill its mission. The Agencies rely on
DoD’s expertise, often as the only purchaser, to evaluate the potential
competitive impact of mergers, teaming agreements, and other joint
business arrangements between firms in the defense industry. When
assessing proposed consolidation in this sector, the overriding goal of
the Agencies in enforcing the antitrust laws is to maintain competition
going forward for the products and services purchased by DoD. Com-
petition ensures that DoD has a variety of sourcing alternatives and the
most innovative technology to protect American soldiers, sailors, ma-
rines, and air crews, all at the lowest cost for the American taxpayer.
The Agencies analyze mergers pursuant to the analytical framework
set forth in the DOJ/FTC 2010 Horizontal Merger Guidelines. The uni-
fying theme of the Guidelines is that mergers should not be permit-
ted to create, enhance, or entrench market power or to facilitate its
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exercise. A merger can produce these harmful outcomes if it is likely to
enhance the ability of one or more firms to raise price, lower output, re-
duce innovation, or otherwise harm customers as a result of diminished
competitive constraints or incentives. The Guidelines “reflect the con-
gressional intent [in Section 7 of the Clayton Act] that merger enforce-
ment should interdict competitive problems in their incipiency and that
certainty about the anticompetitive effect is seldom possible and not
required fora merger to be illegal.” The Guidelines are necessarily gen-
eral, as they apply to all industries. They areal so sufficiently flexible to
address DoD concerns that reductions in current or future competi-
tors can adversely affect competition in the defense industry and thus,
national security. The Agencies also consider particular aspects of the
defense industry, such as high barriers to entry, the importance of in-
vestment in research and development (R&D), and the need for surge
capacity, a skilled workforce, and robust subcontractor base. In light of
our substantial experience applying the Guidelines to defense indus-
try mergers and acquisitions, the Agencies are able to focus on issues
that are central to, and often dispositive in, assessing the competitive
effects of such mergers. In the defense industry, the Agencies are es-
pecially focused on ensuring that defense mergers will not adversely
affect short- and long-term innovation crucial to our national security
and that a sufficient number of competitors, including both prime and
subcontractors, remain to ensure that current, planned, and future pro-
curement competition is robust. Many sectors of the defense indus-
try are already highly concentrated. Others appear to be on a similar
trajectory. In those markets, the Clayton Act’s incipiency standard is a
particularly important aspect of the Agencies’ analysis. As part of an
investigation, the Agencies will consider any procompetitive aspects of
a proposed transaction, including economies of scale, decreased pro-
duction costs, and enhanced R&D capabilities. However, if a transac-
tion threatens to harm innovation, reduce the number of competitive
options needed by DoD, or otherwise lessen competition, and therefore
has the potential to adversely affect our national security, the Agencies
will not hesitate to take appropriate enforcement action, including a
suit to block the transaction. As the 1994 Defense Science Board Task
Force on Antitrust Aspects of Defense Industry Consolidation report
states, “the antitrust agencies should continue to determine the ulti-
mate question of whether a merger of defense contractors should be
challenged on the ground that it violates the antitrust laws.” The Agen-
cies are committed to “giving DoD’s assessment substantial weight in
areas where DoD has special expertise and information, such as na-
tional security issues.” Our mission when reviewing defense industry
mergers is to ensure that our military continues to receive the most
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effective and innovative products at competitive prices over both the
short- and long-term, thereby protecting both our troops and our na-
tion’s taxpayers.
* * * *
Prot is an important motivator for industry. It does work to obtain better
products for our warghters at reasonable cost for our taxpayers, but we
also will have to remember that business rms will pursue their own and
their shareholders’ interests, as they should. It’s up to the government to do
what it can to ensure that the structure of the for-prot industrial base on
which we depend continues to provide the products we need—at a reason-
able cost.
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Getting Defense Acquisition Right
Our Relationship With Industry
Reprinted from Defense AT&L: November-December 2013
As we enter what promises to be a dicult time for both defense acquisi-
tion professionals and the industrial base that we rely upon, I thought it
might be useful to share a few thoughts on our relationship with industry.
I want to provide some basic guidance for working with our industry part-
ners at any time, but especially when those rms we depend on are expe-
riencing a declining market, as they are now. At any time, we need to be
aware of industry’s perspective if we are going to work eectively together.
I le government in 1994 aer a career in uniform and as a civil servant.
One of the reasons I le was that I felt I needed some time in industry to
round out my background. I spent about 15 years in industry, some of it
with major defense corporations, some of it as a private consultant work-
ing with defense rms of various sizes, and some of it as a partner in a
small business working with defense companies ranging from start-ups to
major corporations. Many, probably most, Department of Defense (DoD)
acquisition people have not worked in industry and have not experienced
that perspective rsthand. Industry’s perspective is pretty straightforward.
One of the things I enjoyed about industry was that there was never any
confusion or disagreement about the metric we used to measure our own
performance. In short, we were trying to make money: If certain actions
made us more money, they were considered good; if they made us less mon-
ey, they were not good. at’s an oversimplication, of course. In actuality,
the equation for industry is much more complex than this would suggest,
but in the long run the principle I just articulated governs. If a rm is going
to stay in business, prot is required. It doesn’t stop there; business lead-
ers also have an obligation to their shareholders to maximize the return
the company achieves. Our fundamental obligation, on the other hand, is
to obtain as much value as we can for our warghters and the American
taxpayer. Industry’s goal and ours would appear to be in tension, and to a
degree they are. We are not, however, in a purely adversarial relationship
with industry. Neither are we in one with completely common interests.
As we try to maximize the value we receive from industry, we also have an
obligation to treat industry fairly and reasonably. Here are some thoughts
about how we should behave in this complex relationship:
Give industry the opportunity to make a reasonable prot. How much
is “reasonable” is subject to some disagreement, but generally it should be
commensurate with the risks being accepted by industry and with the rate of
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return a going concern doing similar work would obtain in a free market. As
I indicated above, prot isn’t optional for a business, and rms won’t support
the DoD unless they have the opportunity to make an acceptable return.
Don’t ask companies to take on more risk than they can absorb. De-
fense rms generally will respond to any Request for Proposals (RFPs) the
department puts out for bid that they think they have a shot at winning.
We in government need to understand the risks associated with the per-
formance we are asking for and structure the business deal so risk is al-
located reasonably between the government and industry. is issue tends
to dominate the decision between a xed-price and a cost-plus contract
vehicle. Firms can absorb some risk, but that capacity is limited. Before we
can set the boundaries and terms of a business deal, we need to understand
both the magnitude of the risk involved in providing a product or service
successfully and a company’s capacity to absorb risk.
Tie protability to performance. Prot is not an entitlement; it should
be earned. Our industry partners tend to be smart people. If we give indus-
try a nancial incentive to provide the department with better services, or
a better product, or anything else that we value, and if we structure that
reward so it is attainable with reasonable eort, then we can expect to see
the behavior we have motivated. In some business deals, this incentive is
built in. A xed-price contract always rewards eective cost control by
the supplier, but the government may not share in that reward—unless we
structure the contract so that we do. Incentives can and should cut both
ways; poor performance should lead to poor returns. In general, I believe
we can be more creative and more eective at structuring incentives that
tie prot to performance. By doing so, we can create win-win opportunities
for industry and government that reward the results that provide value for
the warghter and the taxpayer.
Don’t ask industry to make investments without the opportunity for a
reasonable return. On occasion, I have seen government managers solicit
or encourage investments from industry without a realistic prospect of a
return on that investment. is can take several forms: internal research
and development spending, participation in government-sponsored but
unfunded demonstrations, development of proposals or option bids when
there is no serious prospect of future business, or cost sharing in a technol-
ogy project that isn’t going to lead anywhere. is kind of behavior oen
occurs as part of an eort to obtain more support for a program that is on
the margins within a Service’s budget. Putting industry in this position is
not fair to industry, and it wastes resources that could have been used more
productively. It also destroys trust between industry and government when
promised business opportunities do not materialize.
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Communicate as fully with industry as the rules allow. For some rea-
son, we seem to have become “gun shy” about talking to industry. at’s
the wrong approach. e more we communicate our intent and priorities
to industry, and the more we listen to industry concerns, the better. Up
until the time a nal RFP for a specic eort is released to industry, we
should not overly restrict our contacts. We do have an obligation to treat all
rms in the same manner—but that doesn’t mean we can’t have conversa-
tions with individual rms, as long as the same opportunity is available to
others who want to take advantage of it. We can expect that a lot of what
we hear from companies will be self-serving. At the same time, however,
companies may have legitimate concerns about how we are doing business
and superior ideas about how to acquire the product or service we are con-
templating. We need to be as open as we can be, and we need to listen.
Competition works—use it whenever you can. e wonderful thing
about competition is that it is a self-policing mechanism. Companies are
motivated to do whatever they can to reduce cost and provide a better
product or service in order to win business. We also generally can rely on
industry to protect itself and only sign a business deal that delivers an ac-
ceptable prot, or at least does so within the rm’s risk tolerance and con-
sistent with any broader business situation.
Treat industry fairly, and keep your word. It is interesting that the com-
mercial world has no requirement for one rm to treat another fairly. (Try
to imagine a “protest” of a commercial contract award because the buyer’s
source selection process wasn’t equally fair to all possible bidders.) Because
we are an arm of the U.S. government and we expend public funds, we
are held to that standard. It’s also the right thing to do ethically, and it is
necessary if we want to have constructive relationships with industry. My
experience is that industry does not entirely trust government people. Our
source selections are opaque to industry, and no industry capture-team
leader ever told his boss that he lost because he wrote a bad proposal. If
we act just once in a way that is not consistent with our values or betrays a
commitment we have made, then we have sacriced whatever trust we have
built. We can spend our credibility only once and then it is gone.
Protect the government’s interests and insist on value for the taxpayer’s
money. I put this last for a reason. is is the other side of the coin. In-
dustry can be counted on to try to maximize the metric that I mentioned,
protability. Most of the time, but not always, industry will do so within
the “rules of the game.” e “rules of the game” are dened largely by law
and by the terms of the contracts we sign. e business deals codied by
our contracts have to be fair, but they also have to be structured so that
the government obtains what it wants at a reasonable price and industry is
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motivated to improve its productivity. Once we have the business deal in
place, we have to ensure that the product or service we’ve acquired is deliv-
ered as agreed. If not, we have a duty to act to protect the warghter’s and
the taxpayer’s interests.
Nothing I’ve written here should be a surprise. ese are principles we
should all be very familiar with already. As we continue, at least for the
next few months, or maybe years, to experience shrinking budgets and en-
vironments that place great stress on both DoD and industry, I believe we
should make a special eort to keep them in mind. Like everything else we
do, this requires a deep understanding of the products and services we are
acquiring, of the business deals we enter and of the industry partners with
which we do business.
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Getting Defense Acquisition Right
Use of Fixed-Price Incentive Firm
(FPIF) Contracts in Development
and Production
Reprinted from Defense AT&L: March-April 2013
e choice of appropriate contract types is very situationally dependent,
and a number of factors must be taken into account to determine the best
contract type to use. From the perspective of both industry and the govern-
ment, it makes a good deal of dierence whether the Defense Department
asks for Cost type, Fixed-Price Incentive (FPI), or Firm Fixed Price (FFP)
proposals. In the original Better Buying Power (BBP) initiatives, although
Dr. Carter and I encouraged greater use of FPI, we also included the caveat
“where appropriate.” BBP 2.0 modies this guidance to stress using ap-
propriate contract types while continuing to encourage use of FPI for early
production.
I would like to be more explicit about what “appropriate” means and how
I believe we should analyze a given situation. In particular, I will address
both Engineering and Manufacturing Development (EMD) and produc-
tion situations.
During the early 1990s, I had a lot of painful experience with xed-price
development. e A-12 was a notorious case that ended badly. On another
xed-price major program in development during the same time frame,
the program manager was relieved for nding creative but illegal ways to
provide cash to the prime contractor who lacked the resources to complete
development. FFP development tends to create situations where neither the
government nor the contractor has the exibility needed to make adjust-
ments as they learn more about what is feasible and aordable as well as
what needs to be done to achieve a design that meets requirements during
a product’s design and testing phases. Any xed-price contract is basically
a government “hands o” contract. In simplistic terms, the government
sets the requirements and the price and waits for delivery of a specication-
compliant product. While we can get reports and track progress, we have
very little exibility to respond to cases where the contract requirements
may be particularly dicult to achieve.
Most sophisticated weapons systems development programs deal with
maturing designs and challenging integration problems. As a result, the
government oen will and should provide technical guidance and make
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trade-o decisions during development. In EMD, we oen do want to work
closely with the prime contractor to achieve the best outcome for the gov-
ernment. While it certainly is possible to negotiate changes in a xed-price
contract environment, the nature of development is such that informed de-
cisions need to be made quickly and in close cooperation with our industry
partners. e focus in a xed-price environment is squarely on the nan-
cial aspects of the contract structure and not on exibly balancing nancial
and technical outcomes.
Risk is inherent in development, particularly for systems that push the state
of the art. Even with strong risk reduction measures in Technology Dem-
onstration phases and with competitive risk reduction prototypes, there
still is oen a good deal of risk in EMD. By going to EMD contract award
aer Preliminary Design Review, as we routinely do now, we have partially
reduced the risks—but again, only partially. Our average EMD program
for a Major Defense Acquisition Program (MDAP) over the last 20 years
has overrun by a little under 30 percent. Industry can only bear so much
of that risk, and in a government xed-price contract, industry cannot
just stop work and walk away. A commercial rm doing development of a
product on its own nickel has complete freedom to stop work whenever the
business case changes. Firms on government contracts do not, at least not
without some liabilty.
For good reasons, I am conservative about the use of xed-price develop-
ment, but it is appropriate in some cases. Here are the considerations I look
for before I will approve a xed-price or FPI EMD program:
Firm requirements: Cost vs. performance trades are essentially com-
plete. In essence, we have a very clear understanding of what we want the
contractor to build, and we are condent that the conditions exist to permit
the design of an aordable product that the user will be able to aord and is
committed to acquiring.
Low technical risk: Design content is established and the components
are mature technologies. ere are no signicant unresolved design issues,
no major integration risk, the external interfaces are well dened, and no
serious risk exists of unknowns surfacing in developmental testing and
causing major redesign.
Qualied suppliers: Bidders will be rms that have experience with this
kind of product and can be expected to bid rationally and perform to plan.
Financial capacity to absorb overruns: Sometimes overruns will hap-
pen despite everyone’s best eorts. We still want responsible contractors
who have the capacity to continue and deliver the product despite potential
overruns that may not have been foreseeable.
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Getting Defense Acquisition Right
Motivation to continue: A business case must be provided via a pro-
spective reasonable return from production that will motivate suppliers to
continue performance in the event of an unanticipated overrun. It is unre-
alistic to believe contractors will simply accept large losses. ey will not.
As an example, the Air Force Tanker program met all of these criteria.
Early or low-rate production have similar considerations, but here is where
greater use of FPI contract vehicles makes the most sense as an alternative
to cost-plus vehicles. Over the last 20 years, the average overrun for MDAPs
in early production has been a little less than 10 percent. is is a reason-
able risk level to share with industry in an FPI contract arrangement. I
expect our program managers and contracting ocers to have meaningful,
detailed discussions about the risks in contract performance over target
cost. Determining a ceiling price is all about the fair recognition of risk
in contract performance. Unlike an FFP contract, there needs to be a fair
sharing of the risk—and the rewards—of performance.
To be comfortable with a xed-price vehicle for early production, I would
look for the following:
• Firm requirements (as explained)
• Design proven through developmental testing
• Established manufacturing processes
• Qualied suppliers
• Suppliers with the resources to absorb some degree of overrun
• Adequate business case for suppliers to continue work if they get in
trouble
It should be noted that some of the items on this list reect the “responsibil-
ity determination” that should be part of every contract we sign. However,
the decision I am talking about here is not the decision to award a contract
or accept a proposal for consideration but rather the decision about what
type of contract to employ.
e above apply to FPIF procurements for which proposals are solicited
at or near the end of EMD aer we have been through Critical Design Re-
view, built production representative prototypes, and completed some sig-
nicant fraction of developmental test (DT). is is very dierent from a
case in which we are only at Milestone (MS) B when we ask for low-rate
initial production (LRIP) options. In that case, designs are not usually
rmly established, production representative prototypes have not been
built, and DT has not yet been done. So when we ask for FPIF propos-
als as options at MS B, we have already failed criterion 2 at least. In those
cases, we ought to have a low risk of completing EMD without major de-
sign changes that would aect cost. Again, the Air Force Tanker program
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serves as an example. Another example where this can be done is a Navy
auxiliary, where the shipyards have a great deal of experience with similar
designs and with the design process for that class of ships.
FPIF LRIP can have a number of advantages, including better insight into
contractor costs and an opportunity to share in contractor cost reductions.
While it is attractive to secure FPIF prices at the time we award EMD con-
tracts, as we usually still have competition at that point, we need to balance
the benet with the risk. Optimism tends to prevail early in programs, both
for government and industry, and we need to be realistic about the risks
that remain before EMD has even begun. It also is an illusion to believe we
can routinely transfer all the risk in our programs to industry. Industry has
a nite capacity to absorb that risk and knows how to hire lawyers to help
it avoid large losses.
We can and should increase the use of FPIF contracting, but we need to
approach with some caution FPIF contracting for EMD and for options on
LRIP lots that are still years away from execution. During the transition to
production, aer successful DT has established that the design is stable and
that production processes are under control, FPIF becomes a very attrac-
tive bridge to an FFP contracting regime.
Finally, there also may be times during the mature production phase of a
program when the use of FPI contracts would be preferred. Typically, ma-
ture production programs are well established in terms of requirements,
design content, and production processes at both the prime contractor and
subcontract level. is environment should provide for accurate pricing,
and FFP contracts would seemingly be appropriate. However, if we have
reasons to conclude there may be a poor correlation between negotiated
and actual outcomes, the use of an FPI contract would be more appropriate.
In that case, we would share the degree of uncertainty with the contractor.
ere could be several reasons why the correlation between negotiated
and actual outcomes may be poor—e.g., ineective estimating techniques,
unreliable actual cost predictions at either the prime and/or subcontract
level, incomplete audit ndings, or diminishing manufacturing sources for
some components. In addition, there may be times (e.g., multiyear con-
tracts) where the period of performance is long enough that it places too
much uncertainty and risk on either party. e key is understanding the
pricing environment. If we have well-prepared contractor/subcontractor
proposals, an environment where we have a solid actual cost history, and
we have done the necessary analysis to ensure we have the price right, the
use of FFP contracts is ne. If the environment is uncertain, the use of an
FPI contract may make sense.
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Getting Defense Acquisition Right
Again, BBP 2.0 stresses use of the appropriate contract types. Unfortunate-
ly, sorting this out is not always easy. It is hoped that this discussion will be
helpful as we all wrestle with the problem of getting the best answer to the
question of what type of contract to use in a given situation, whether it is
an MDAP or an Acquisition Category III product, and at any phase of the
product life cycle.
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DoD Use of Commercial
Acquisition Practices
When ey Apply and When ey Do Not
Reprinted from Defense AT&L: September-October 2015
e Department of Defense (DoD) generally buys major weapon systems
through the defense acquisition system, a process that is highly tailorable
but still built around the assumption that the DoD will compensate sup-
pliers for product development, contract through Defense Federal Acquisi-
tion Regulations and be heavily involved in all aspects of the product life
cycle. A number of organizations—including the Defense Business Board,
some think tanks and some in Congress—have encouraged or recom-
mended greater use of commercial practices. ere are indeed times when
using more commercial practices makes sense, and we should be alert to
those opportunities—in any aspect of defense procurement.
ere are three aspects of “going commercial” that I would like to ad-
dress—rst, purchases based on the fact that an item is oered as a com-
mercial product; next, the need to access cutting-edge commercial tech-
nologies; and, nally, those cases where we can take advantage of private
investments to develop products we might traditionally have purchased
through the normal multi-milestone acquisition system.
Our policies and regulations try to strike the right balance between taking
the steps needed to protect the taxpayer from overpaying while simultane-
ously avoiding discouraging commercial rms from doing business with
DoD by asking for more information than they are willing to provide. For
purely commercial items widely and competitively sold on the open mar-
ket, this is easy. For thousands of items, from oce furniture to cleaning
supplies to laptop computers, the DoD pays commercial prices (subject to
negotiated adjustments for quantity-based discounts, etc.) without inquir-
ing as to the costs to produce the products. Other items are more clearly
and purely military products, such as a replacement part for a howitzer or
a low observable ghter component. e gray area between these extremes
represents a problem in rst determining that a product can be consid-
ered commercial, and, then, if there is no competition for setting the price
for that product, obtaining adequate information from the supplier and
other sources to determine that the price charged is fair and reasonable.
We are working to expedite these processes, make them more predictable,
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Getting Defense Acquisition Right
and provide technical support to the procuring ocials who must make
these dicult determinations. I’m afraid that we will never be perfect at
this, given the vast number of items the DoD procures and our limited re-
sources, but we must and will improve our performance while preserving
a reasonable balance.
It is clear that in many areas of technology the commercial market place
is moving faster than the normal acquisition timeline for complex weapon
systems. Examples include information technology, micro-electronics,
some sensor technologies, some radio frequency devices and some so-
ware products. In most cases, these technologies will enter our weapon
systems through one of our more traditional prime contractors. Our prime
contractors and even second- and lower-tier suppliers are looking for a
competitive advantage, and, when commercial technologies can provide
that advantage, they will embed them in their products.
Competition among primes can give us access to current commercial tech-
nologies early in a program, but we oen move to a sole-source situation
when we down-select for Engineering and Manufacturing Development
(EMD), reducing the incentives for inserting state-of-the-art commercial
technologies. We can sustain these incentives by insisting on modular de-
signs and open systems, both emphasized under the Better Buying Power
initiatives. As part of this process, we also must manage intellectual prop-
erty so we don’t experience “vendor lock” in which we cannot compete
upgrades without going through the original contractor.
Assistant Secretary of the Air Force (Acquisition) Bill LaPlante’s initiative
to “own the technical baseline” includes the concept of proactive manage-
ment of conguration control and of interfaces so that the DoD preserves
the option to introduce technology at rates more consistent with the pace
of relevant commercial technology improvements.
e DoD also is taking other steps to improve our access to commercial
technology. ese include opening the Defense Innovation Unit–Experi-
mental (DIU-X), in Silicon Valley, investments through In-Q-Tel and in-
creased emphasis on the productivity of programs like the Small Business
Innovative Research program. e DoD also is evaluating the congressio-
nally sponsored Rapid Innovation Fund (RIF) and will make a decision this
year as to whether to include a request for funds for a Reduction in Force
in the Fiscal Year 2017 President’s Budget. All these steps are designed to
open the DoD to more timely and broad commercial technology insertion.
e last of the three “going commercial” topics I would like to cover in-
volves situations in which the DoD substitutes a more commercial acquisi-
tion model for the ones depicted and described in DoD Instruction (DoDI)
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5000.02. In some cases, industry, traditional defense contractors and others
will invest to bring a product to the DoD market, without DoD shouldering
the direct cost of product development. e critical motivation for these
independent businesses decisions is the prospect of reasonable returns on
the corporate investment.
Cost Sharing
Sometimes, especially when there is a mixed DoD and commercial market
for the product, a cost-sharing arrangement may be appropriate in a pub-
lic-private “partnership” for development. DoD acquisition professionals
need to be alert to these opportunities and prepared to analyze them and
act on them where they benet the government. When we do this, we may
need to be innovative and think “outside the box” about business arrange-
ments and contract structures. In these cases, the structure and processes
in DoDI 5000.02 may be highly tailored or even abandoned. I’ll illustrate
this concept with a few real-life examples.
As we moved down the path of DoD-funded research and development
for tactical radios under the Joint Tactical Radio Systems program, we dis-
covered that in parallel with the DoD-funded programs of record, some
companies had invested their own money to develop and test products that
used more advanced technologies than the Programs of Record. ese es-
sentially commercial product development eorts oered the prospect of
cheaper and higher performance systems, without a DoD-funded develop-
ment program. As a result of this, we changed the acquisition strategy to
allow open competitions and stressed “best value” source selections so we
could take advantage of the most cost-eective radios available.
Our “system” had a little trouble adjusting its planning to this type of ac-
quisition. e Developmental Testing people wanted to perform a standard
series of developmental tests, even though the development was complete.
Operational Test people wanted to test each competitor—before source se-
lection. Program oversight people wanted to do Milestone (MS) A and B
certications, even though there was no reason to have an MS A or B.
What we needed, and where we ended up, was a competitive source-selection
process for production assets that included an assessment of bidder-provided
test data, laboratory qualication testing, and structured comparative eld
testing to verify the oered products met DoD requirements. ere were
minimum requirements that had to be met; once that was established, a bid-
der would be in a “best value” evaluation for source selection for production.
It was a little surprising to me how wedded our workforce, in both the Ser-
vice and the Oce of the Secretary of Defense, was to the standard way of
doing business—even when it didn’t really apply to the situation.
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Getting Defense Acquisition Right
e next example involves space launch. e DoD is working to bring
competition into this market. at opportunity exists because multiple
rms have been investing development funds in space launch capabili-
ties for both commercial and DoD customers. We acquire space launch as
a service; there is no compelling reason for DoD to own launch systems.
What we need is highly reliable assured access to space for national secu-
rity payloads, which can be acquired as a service. For some time, we have
been working to certify a commercial launch company to provide national
security launches. at milestone recently was achieved for the rst “new
entrant” into national security launches in many years. e DoD did not
fund the development of the new entrant’s launch system, but it did provide
support through a Cooperative Research and Development Agreement for
the certication process.
More recently, the need to remove our space launch dependency on im-
ported Russian rocket engines has caused the DoD to evaluate options for
acquiring a new source of reliable competitive launch services. rough
market research, we know there are options for private investment in new
launch capabilities but that industry’s willingness to develop the needed
products may depend on some level of DoD funding. e DoD intends to
ask for industry bids in a very open-ended framework for whatever nan-
cial contribution would be necessary to “close the business case” on the
guaranteed provision of future space launch services. is novel acquisi-
tion approach will work only if the combined commercial, other govern-
ment customer, and military launch demand function can provide enough
anticipated launch opportunities to justify industry investment. is eort
is a work in progress, and we don’t know if it will prove successful. If it
does succeed, it will provide for the continuing viability of two competi-
tive sources of space launch services—without the need for DoD funding
and executing a new standard DoD development program for a launch or
propulsion system.
Another example from the space area is the Mobile Ground User Equip-
ment (MGUE) for GPS III. ese GPS receiver electronics “chips” will be
ubiquitous in DoD equipment and munitions. e technology also will be
relevant to commercial GPS receivers that will be embedded in millions of
commercial devices. Here, also, the DoD has been proceeding with a stan-
dard DoD-funded development program with multiple vendors developing
MGUE risk reduction prototypes leading up to an EMD program phase.
e combined market for this capability is so great that the competitors
proceeded with EMD on their own, without waiting for a DoD MS B or
contract award. ey did this so successfully that the EMD phase of the
program was canceled in favor of a commercial approach that limits the
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DoD’s activities to compliance testing of the MGUE devices and integra-
tion of those devices into pilot platform programs.
e nal example I’ll cite is the Marine Corps decision to defer the program
to acquire a new design amphibious assault vehicle in favor of a near-term
option to acquire a modied nondevelopmental item (NDI). e Marine
Corps concluded, I believe correctly, that the technology was not mature
enough to support the Corps’ desired performance levels and that a new
product would be unaordable. As a result, the Marine Corps opted to rst
evaluate and then pursue a competitively selected near-NDI alternative.
is is more military than commercial o-the-shelf, but the principle re-
mains the same. is program does include some modest DoD-funded de-
velopment to, for example, integrate U.S. communications equipment and
test for compliance with requirements, but it is a highly tailored program
designed to move to production as quickly as possible and with minimal
DoD costs.
The Common Thread
What all these examples have in common is the DoD’s recognition that an
alternative path—outside the normal DoDI 5000.02 route—was available
and made sense from both a business and an operational perspective. Once
such an opportunity is recognized, a more commercial approach can be
adopted, but this requires some novel thinking and open-mindedness on
the part of the DoD acquisition team. We cannot “go commercial” for all of
our acquisitions or even most of our weapons systems. e normal process
works best for the standard low-volume, highly specialized, cutting-edge
and uniquely military products that populate the DoD inventory. e busi-
ness case simply isn’t there for industry to develop and oer these types of
products without DoD development funding. In all standard DoD acquisi-
tions, however, we need to proactively look for ways to embed or insert the
most current commercial technologies. Where commercial approaches are
justied, we need to spot and capitalize on the opportunity.
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Getting Defense Acquisition Right
Tying Prot to Performance—
A Valuable Tool, But Use
With Good Judgment
Reprinted from Defense AT&L: May-June 2015
One thing I enjoyed about working in industry was that everyone in the
private sector understood the denition of success: It was prot. If some-
thing made a prot for a business, it was good. If something did not make
a prot for a business, then it was not good. Prot is the fundamental rea-
son that businesses exist: to make money for their owners or shareholders.
Without prot, businesses die.
From industry’s point of view, more prot is always better. Not being prof-
itable makes a company unsustainable and will lead to bankruptcy. Declin-
ing prots make it harder for businesses to raise capital or to invest for their
futures. ese facts make prot the most powerful tool the Department of
Defense (DoD) has to obtain better performance from industry. It is im-
portant, however, to recognize that this also implies that over-aggressive
use of this tool can seriously damage the institutions we depend upon for
products and services.
Sometimes—through some combination of incompetence, poor manage-
ment, the realization of risk, or external factors—defense companies will
lose money and even go out of business. at is the nature of capitalism. We
do not have an obligation to protect defense companies from themselves,
but we do have an obligation to treat them fairly and to try to balance our
use of prot as a motivator for better performance with an understanding
of the possible implications for those we expect and hope to do business
with over the long term.
As we continue to work through a period of uncertain and declining bud-
gets, we need to be especially careful. A recent study by the Institute for
Defense Analyses shows very clearly that cost increases correlate strongly
with tight budgets. Historically, programs initiated during tight budget pe-
riods had 3 times higher acquisition cost growth for production than those
started during less constrained resource periods. We’re working now to
understand what causes this strong correlation, but one likely factor is that
tight money motivates everyone to take more risk. A shrinking market and
fewer bidding opportunities put pressure on industry to bid more aggres-
sively. Government budgeters and programmers are motivated to take risk
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also, or to buy into optimistic assumptions or speculative management fads
as alternatives to having to kill needed programs. Industry may be incen-
tivized to sign up for a low target—knowing that they might otherwise be
out of that market permanently—and hoping that budget instability and/
or changing requirements will provide a recovery opportunity. We can’t
entirely prevent industry from making high-risk bids in competition, but
we should do what we can to ensure realism in our budgets and execut-
able business arrangements that give industry a fair opportunity to make
a reasonable prot.
e prot margins that DoD pays vary, but in the aggregate they are fairly
stable. Large defense companies, in particular, have very little risk. eir
markets are fairly predictable and stable. e government pays upfront for
most product research and development costs, and provides excellent cash
ow through progress payments, minimizing the cost of capital. Most de-
velopment programs are also cost reimbursable, which signicantly limits
the risk to industry. Substantial barriers for new companies to enter the
defense market also limit competitive risks. While there usually is com-
petition early in product life cycles, many products end up as sole-source
awards by the time they enter production. e primary defense market
customer, DoD, is highly regulated, is not allowed to arbitrarily award con-
tracts, and is subject to independent legal review if a bidder believes it has
not been treated fairly. At the end of the day, it’s not a bad business to be in,
and we don’t want to change these fundamental premises of government
contracting. We do, however, want to get as much for the taxpayer and the
warghter as we can with the available resources. at means we must tie
performance to protability.
As we have tried to incentivize and improve industry’s performance under
the Better Buying Power (BBP) initiatives of the last several years, we have
consistently followed two principles. First, BBP is not a “war on prot”—we
are not trying to reduce prot as a way to reduce costs. We want to con-
tinue to give our industry suppliers a reasonable return. Second, we will
use prot to motivate better performance, both as a carrot and a stick. In
the balance of this article, I want to focus on this second principle.
How do we use prot eectively to obtain better results for the taxpayer
and the warghter? I’m going to address some specic cases I think are im-
portant: product development, early production, lowest price technically
acceptable, commercial and commercial-like items, logistic support, and
support services.
First, I would like to address the use of prot as an incentive in general.
Before we solicit anything from industry, we need to think carefully about
what the government really needs or desires and how we can eectively tie
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Getting Defense Acquisition Right
getting what we need to prot opportunities for industry. In product acqui-
sitions, we need to decide whether higher performance or cost or schedule
or some combination of these parameters matters to us. Oen they are not
independent, and we have to think about how those interdependencies are
related to prot-related incentives. In services acquisitions, we oen want a
certain quality of performance; we may or may not be willing to pay more
for higher quality performance of the service, or we may only be interested
in controlling cost at a set level of performance. As we emphasized in BBP
2.0, we have to start by thinking, in this case thinking carefully about what
matters to us and about the extent to which fee or incentive structures can
add motivation to behavior that achieves those government objectives and
that wouldn’t exist without the incentives.
We can use the full range of contract types to motivate performance. For
products, we sometimes place the highest value on the schedule, sometimes
on the cost, and sometimes on increased performance levels. Our contracts
oen inherently include a high degree of prot motivation without any spe-
cial incentive provisions. For example, a rm-xed-price contract provides
a strong nancial incentive to control costs.
However, we also need to think about how incentives that aect prot will
play out over the life of the contract and the life cycle of the program. It
is not just the immediate contract that we care about. We need to think
through prot incentives not only under the expected scenario but under
any alternative scenarios that may develop, including the realization of
any foreseeable risks. A cost-plus development contract that has reached
a point where nothing is le to be gained or lost in fee by completing the
eort doesn’t include much incentive.
We also need to think carefully about unintended consequences. Industry
may look at the situation very dierently than we do. We can assume in-
dustry will try to maximize its prot—by whatever means we make avail-
able. We also can assume industry will examine all the available scenari-
os—including ones we have not intended. at means we need to anticipate
industry’s behavior and make sure that we align industry objectives with
the performance we intend. In general, we also can expect industry to ar-
gue for incentives that come sooner in the period of performance and are
easier to achieve. Usually that is not what we should be rewarding.
We also must recognize there is no motivational value in incentive fees
or prots that are impossible to earn—or conversely that are very easy to
achieve. e bottom line is that this isn’t simple, and, as in much of what we
do as acquisition professionals, careful thought and sound judgment based
on experience play major roles. One of the items I am most interested in
when I read a program’s Acquisition Strategy or a request for proposal is
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Chapter Four: Working with Industry
the incentive structure and how it ties prot to performance. I particularly
look for why the program manager and the contracting ocer chose the
proposed approach. Now I’d like to discuss some specic cases.
Product development: On our major competitive development contracts,
industry has been receiving nal margins of about 5 percent or 6 per-
cent—about half the levels seen in production. (Note that this isn’t where
we start out; the reality of the risk in development programs leads to this
result. Also note that margins on sole-source development contracts are
signicantly higher.) Industry accepts this lower outcome because of two
things. First, competitive pressures force industry to bid aggressively and
take risks in the development phases. Second, winning subsequent produc-
tion contracts, with their higher margins and decades of follow-on work,
makes it worthwhile to accept lower returns in development. Most oen,
the inherent risk of development makes a cost-plus vehicle appropriate, and
prot then is tied to the incentive fee structure we provide. If the situation
still is competitive aer award, winning the future engineering and manu-
facturing development or production contract provides all the motivation
to perform we are likely to need. However, in a sole-source situation, we
need to structure prot potential to aect desired outcomes.
e data from recent sole-source contracts show that formulaic incentive
structures with share ratios above and below a target price are eective in
controlling costs on the immediate contract. Oen, however, performance
on the current contract is not what concerns us the most. We may want
lower cost in follow-on production or sustainment, or we may want higher
performance in the nal product, or some combination of parameters. is
is where we need to be very thoughtful and creative about how we use prot
to motivate desired behaviors and outcomes.
Early production: Usually when we award these contracts, we have a rela-
tively mature design and a specied performance we intend to achieve, so
cost control tends to dominate our use of the prot incentive. We generally
use formulaic incentive share ratio structures during this phase. In the rst
iteration of BBP, we encouraged consideration of 120 percent ceilings and
50-50 share ratios, as a starting point, adjusting these structures to the situ-
ation at hand. e key to eective incentive contracting is to motivate the
contractor to reduce costs as quickly as possible.
In the past, we have not done as good a job as we should have done in es-
tablishing realistic target costs. When we negotiate challenging but achiev-
able target costs, we create an incentive arrangement that allows industry
to earn a higher share of any underruns in early production. DoD should
reap the benets in future lots through lower prices. In addition, industry
has more at stake here than the government: As we move up or down share
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Getting Defense Acquisition Right
lines, industry gains or loses what it cares most about—prot—at a much
higher rate than the DoD gains or loses what it cares about—cost. For this
reason, we should provide share ratios above and below target prices that
give industry greater incentives (e.g., more favorable share ratios for indus-
try below target and less favorable ones above target) to control cost.
Lowest price technically acceptable (LPTA): Industry has expressed con-
cern for some time about the eect of this source-selection criterion on
selections and protability. I recently provided some policy guidance on
this subject (see the March-April 2015 issue of this magazine). DoD’s policy
is to use LPTA only when there is (1) an objectively measurable standard
of performance, and (2) there is no desire for any performance above some
dened level of acceptability in that standard. In all other cases, we should
use another form of best-value source selection. If LPTA is used properly
in competitive source selections, it will give us the performance we desire
and constrain prot levels to those necessary for businesses to be viable.
at is what competitive markets do. While we aren’t trying to articially
force prot down to reduce cost, we also shouldn’t pay higher margins than
those determined by competitive market forces for this type of work and
standard of performance.
Commercial and commercial-like items: is is a particularly dicult
area in which to achieve the right balance. Our policy is simple: If a suppli-
er sells us a commercial item and the supplier can demonstrate that it sells
that item in substantial quantities to commercial customers, we will pay
what other commercial customers pay for similar quantities. When we buy
truly commercial items, we compare prices, try to get volume discounts,
and let the market set the price (oen using tools like reverse auctions).
When we buy a commercial item, the reasonableness of the price we pay
is important to us—not the prot level a commercial company may make
when selling that item. We must understand that the risk posture of a com-
mercial company selling commercial items in a competitive marketplace is
dramatically dierent than that of the traditional defense contractors with
which we deal.
When we purchase items that may be sold commercially, or which are close
in design to items sold commercially (sometimes referred to as “commer-
cial of a type”), but for which there is really no competitive market to estab-
lish prices and margins, we have an obligation to ensure that we obtain fair
and reasonable prices for the taxpayers whose money we spend. Examples
include aircra parts that are similar in design, but possibly not identical,
to the parts used on commercial aircra. In those cases, we have processes
in place for our buyers to establish whether the item is commercial, and if
it is, the fairness and reasonableness of the price. If an item is commercial,
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we only inquire about costs (and prot margins) when we have exhausted
the other available means of determining price reasonableness.
Logistics support: We started emphasizing Performance Based Logistics
(PBL) in BBP 2.0 as a way to reduce costs and improve outcomes on product
support contracts. As we went through the dicult scal year 2013 seques-
tration scenario, our use of these types of arrangements actually declined.
Today I am tracking the use of PBL through quarterly reviews at the Busi-
ness Senior Integration Group. PBL is an eective tool that ties prot to
performance in a way that has been demonstrated to be a win-win for DoD
and industry. PBL is harder to implement and execute than other business
arrangements, but the payo is well established by the historical results;
PBL prot incentives work to enhance performance and reduce cost.
Support services: In these contracts, we oen buy some form of adminis-
trative or technical support to carry out routine functions that are not in-
herently governmental. ere may be metrics of performance to which we
can tie protability—and, if they are available, we should use them. Oen,
however, services are about the productivity and basic skill sets of indi-
viduals working on location alongside DoD military or civilian employ-
ees. At one point, we routinely used time-and-materials or rm-xed-price
contract vehicles for these types of support services. A preferred approach
is oen the use of cost-plus-xed-fee arrangements to pay actual costs cou-
pled with DoD contract manager oversight with discretion over the accept-
ability of assigned contractors. In these cases, quality can be controlled by
rejecting contractor sta members who are not performing up to contract
standards. Since protability will depend on providing acceptable sta to
bill for, the incentive to do so is high.
Conclusion
Industry can be counted upon to try to maximize protability on behalf
of its shareholders and/or owners—that’s capitalism. Our job is to protect
the interests of the taxpayers and the warghter while treating industry
fairly and in a manner that won’t drive businesses away from working for
DoD. To achieve these complex objectives, we should strive to ensure that
we create business deals that provide industry an opportunity to earn fair
and reasonable fees/prots, while protecting the government’s interests.
Industry will respond to prot incentives if they are achievable with realis-
tic eort. We will benet if prot incentives provide eective motivation to
industry and are tied to the goals we value.
ere is plenty of room for creativity in this area because our business situ-
ations vary widely. It is up to each of us to determine how prot incen-
tives should be structured so that reasonable prot margins can be earned
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Getting Defense Acquisition Right
with reasonable performance levels, superior performance results in higher
margins, and inferior performance has the opposite eect.
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Chapter Four: Working with Industry
Getting “Best Value” for the
Warghter and the Taxpayer
Reprinted from Defense AT&L: March-April 2015
We use the phrase “best value” fairly oen, usually to describe the type of
source-selection process or evaluation criteria we will use in a competitive
acquisition. Under the Better Buying Power initiatives, we have empha-
sized using a more monetized and less subjective denition of best value.
As a way to spur innovation, we also have emphasized communicating the
“value function” to the oerors so they can bid more intelligently.
Some reluctance and understandable concern arose about the unintended
consequences of trying to dene best value in monetary terms. In fact, this
decision can’t be avoided. I would like to explain why it is unavoidable, pro-
vide some examples of using this approach, and discuss how we can avoid
those unintended consequences some of us worry about. I’ll also touch on
the proper use of Lowest Price, Technically Acceptable (LPTA)—which is
a form of monetized best value, but with a very restrictive denition and
range of applicability.
A “traditional” best-value source-selection process combines disparate
metrics in to one overall evaluation. In a recent example that I reviewed,
four separate and unrelated metrics were proposed for the source selec-
tion: risk (high, medium or low), cost ($), performance (a composite scaled
metric) and degree of small business utilization (with its own scale). ink
how this would have played out in the source-selection decision making.
Setting aside the small business metric, assume that there was a slightly
more expensive and higher-risk but much higher-performing oeror and
a slightly less expensive and lower-risk but signicantly lower-performing
oeror. e Source Selection Authority would have to decide whether the
increased price and risk of the higher oeror was worth the dierence in
performance. at acquisition ocial, not our customer (the warghter),
would have needed to make the “best value” determination as a subjective
judgment by weighing cost against the other two metrics. In eect, that
individual in the acquisition chain would make the precise cost versus per-
formance and risk judgment we intend when we recommend monetizing
the value of performance and including it in the evaluated price.
e likely bias for an acquisition ocial making the source selection is to
take the lowest-price oer; it’s much easier to defend than the subjective
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Getting Defense Acquisition Right
judgment that the higher-cost oeror was worth the dierence in price. Is
this the best way for us to do “best value” source selections? To the extent we
can do so, we are better o dening “best value” by a single parameter we
can readily compare. e easiest way to express that parameter is in dollars—
using value-based adjusted price for evaluation purposes (e.g., bid price with
predened dollarized reductions for performance above threshold).
I believe there are some very good reasons to take the approach of monetiz-
ing performance metrics. First of all, it forces our customers—the opera-
tors who set requirements—to consider how much they are willing to pay
for higher performance. Our normal practice in the requirements process
is to dene two levels of performance—threshold and objective. Unless we
provide industry an incentive to do otherwise, we can expect it to bid the
threshold levels of performance and no more. e simple reason is that we
usually don’t give industry any competitive incentive to oer higher per-
formance. e lower threshold levels of performance almost always are the
lowest-cost levels of performance.
Getting the requirements community to consider what it would be willing
to pay for dierent levels of performance also has an important side ben-
et: It forces that user community to recognize that its requirements are not
free and to engage the acquisition community on prioritizing those require-
ments. We must work as a team to be eective. Involving our customers in
decisions about best value before releasing the nal Request for Proposals
(RFPs) builds our mutual understanding of the real-life trade-os needed
in almost any product or service acquisition. Monetizing best value to in-
dustry also provides benets that accrue to the government. By not provid-
ing industry with a business reason to oer higher performance, we create a
disincentive for innovation. We want industry to be in a position to make in-
formed judgments about what level of performance to oer. e easiest way
to accomplish this is to tell industry exactly, in dollars and cents, what higher
levels of performance are worth to us. Industry then can compare its costs of
meeting higher performance levels to our willingness to pay and decide what
performance to oer.
We also should provide this information as early as possible, so industry has
time to react to the information, including, when possible, time to develop
new technologies that are integratable into their oerings. In addition, com-
municating this information to industry allows uncompetitive rms to avoid
wasting company funds (allowable Bid and Proposal costs in overhead that
the government reimburses) on proposals that have no chance of success. We
have to dene best value if we want industry to oer it to us.
ere is a side benet to monetizing best value criteria in that the objective
source-selection criterion are harder to contest successfully. I don’t believe
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we should design our source-selection criteria or acquisition strategies
around minimizing the likelihood of a protest, whether it is a successful or
an unsuccessful protest. But I don’t mind having that feature as a byprod-
uct of our approach. Avoiding successful protests is about setting down
the rules for source selection, following them religiously, documenting the
decisions we make so we can explain them if challenged, and maintain-
ing the process integrity. All our source selections, of any type, should be
conducted in this manner. At the end of the day, however, no one should be
able to argue with the government about the monetary value we place on
a specic feature or level of performance before we conduct a source selec-
tion (as long as we have a reasonable rationale for our choices and aren’t be-
ing arbitrary). is judgment also is easier to defend if it is transparent and
communicated to oerors well before we start the source-selection process.
About 15 years ago, while in industry, I tried for months to get the Air
Force to provide some allowance, some competitive credit, for my com-
pany’s AIM 9X air-to-air missile’s above-threshold performance. We had
a novel design with exceptional o bore-sight capability, well above the
threshold requirement. I didn’t succeed and we lost the competition, but
the Air Force also lost the opportunity to acquire an innovative design with
superior performance. I nd it hard to believe that performance had no
value whatsoever to the Air Force. In any event, we received no credit in
the source selection for oering what we were certain was a better product.
We have been using the technique of monetizing performance dierences
in source selections under Better Buying Power 2.0 and will continue this
emphasis under BBP 3.0, but the practice didn’t start with BBP.
One early use was in the second KC-46 Tanker competition. ere was a
successful protest by the losing oeror in the rst competitive best-value
source selection conducted in 2008. In the second competition in 2009, we
moved to much more objective source-selection criteria, using evaluated
price as the primary metric. In addition to folding fuel costs and opera-
tional eciency into the evaluated price, we allowed for consideration of
a long list of “desired but not required” features, but only if the evaluated
prices were within 1 percent for the two oerors before we considered these
features. Essentially, we bound the value of all these objective features as
being worth no more to us than 1 percent of evaluated price. Notice that
this had nothing to do with the cost of those features.
Value or worth to the buyer has nothing to do with cost; it is only about
what we would be willing to pay for something. e tanker situation is
analogous to buying a car and deciding what options to include. All those
options, the “fully loaded” version of the tanker if you will, were only
worth a 1 percent price dierential to us. Having this information allowed
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industry to be a smarter oeror and propose a product more in line with
our “value function.”
More recently I had an experience with the acquisition strategy for a tacti-
cal radio program where the program manager intended to use a LPTA
approach. He was asking for threshold performance and didn’t plan to pro-
vide any credit to higher performance in the evaluation criteria.
I asked him hypothetically if he would want to buy a radio with twice the
range and twice the message completion rate for 1 percent more. e answer,
of course, was yes. We changed the evaluation criteria. Sometimes LPTA
makes sense but it doesn’t make sense if we are willing, as we usually are,
to pay a little more for a much better product. LPTA may be an easier way
to do a solicitation and a source selection, but that shouldn’t be our metric.
e warghter and the taxpayer deserve better from us. LPTA is appropriate
when we have well-dened standards of performance and we do not place
any value on, and are therefore unwilling to pay for, higher performance.
LPTA is used in many acquisitions for services. As discussed above, it may
be appropriate—if there is no value to the government in performance be-
yond well-dened thresholds.
e arguments against monetizing best value include a concern recently
expressed by an Army program executive ocer: Industry is likely to game
the system to try to win. He was right, of course. We want “best value.”
Industry wants to win. Nevertheless, I don’t nd this to be a strong argu-
ment against monetizing best value. I do nd it to be a strong argument for
getting it right and making sure we align our source-selection criteria with
what we want (what we value). If we have properly dened what is impor-
tant to us and what we are willing to pay for that “best value,” industry will
position itself to meet our best-value proposition.
ere are various possible ways to meet our best-value proposition—and
from industry’s point of view, that’s not gaming us; that‘s doing what it
takes to win. Our concern should be with getting the “best value” crite-
ria right. We need to monetize best value in a way that doesn’t permit an
unintended consequence imposed on us by a cray proposal team. I have
worked on a reasonable number of proposals from the industry side and I
know the concern has some validity. When we set source-selection criteria,
we need to do our own red-teaming process to ensure we don’t produce
unintended and negative consequences. Basically, this is just a matter of
running through the range of possible approaches to bidding to see if we
have neglected an excursion that has an unintended and negative eect.
You can count on industry to do the same.
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I have also heard the concern that industry may inate its pricing to come
just under what we are willing to pay, even if the cost is substantially lower.
In a competitive acquisition, we should be able to count on the fact there
will be other bidders to prevent this behavior. Oerors have to beat the
competition, regardless of the government’s willingness to pay. Inciden-
tally knowing our published budget gures also provides industry with a
strong indication of what we could pay for the product. In any case, we
must use either competition or, in a sole-source environment, discussions
about actual costs to ensure we get a reasonable price for the warghter and
the taxpayer. Monetizing best value doesn’t change those processes.
In development contracts, we oen are concerned about risk, and it’s fair to
ask whether it is possible to monetize risk considerations. We can set sub-
jective risk scales for evaluation purposes and do so routinely, using High,
Medium, and Low—or a more nally grained alternative. Translating these
comparisons into relative monetary value takes some thought, but it can
be done. One has to be careful because risk valuations can be very nonlin-
ear. For example, “low-risk” and “medium-risk” oerors might have fairly
small dierences in “value,” but a high-risk oeror could (and probably
should) have prohibitively high cost adjustments to overcome. We would
expect both low- and medium-risk oers to be obtainable but with cost
and schedule impact dierences. A high-risk oer has a nite probability
of being outside the realm of the possible.
A better way to handle risk factors is to create thresholds or “gates” as op-
posed to comparative assessments. If an oer has acceptable risk, it is con-
sidered responsive and evaluated for cost and performance. If an oer has
high risk, it is eliminated from the competition. is is one of the many
areas in which we have to use professional judgment and a real understand-
ing of the actual risks involved in order to make a good decision.
It is argued that this approach is more dicult and time consuming. A
former senior ocial once told me that “convenience” was the biggest de-
terminer of an acquisition strategy. I certainly hope that is not so. We do
have nite capacity, but we owe our customers our best eorts in every
acquisition. I am not persuaded that monetizing best value is prohibitively
dicult. It is a new approach for many in the requirements community,
and they won’t be comfortable with it until they have more experience.
My rst attempt to use this approach was on the Combat Rescue Helicop-
ter program. It took several attempts to get the user community to stop
bringing me cost estimates for various levels of performance. Ultimately,
the users concluded that the cost premium the Air Force was willing to
pay for objective performance was only about 10 percent. is information
caused one company to drop out of the competition. I’m not troubled by
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Getting Defense Acquisition Right
that result. It would have been a waste of time for that company to prepare
an oer. It does take a little more eort up front to dene best value in
monetary terms. However, the source-selection process is made simpler,
and, more importantly, we can get better results for our customers. at is
the metric that should matter most to us.
As we build our teamwork with both the warghters who set requirements
and with industry which tries to win business by meeting those require-
ments, I believe there will be more acceptance and support for monetizing
best value. It is in everyone’s interest and well worth the eort.
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Chapter Five
Responding to External
Forces and Events
Congressional Direction, Financial Man-
agement Policy, Funding Cuts, Changing
reats, and Military Customers
“So we beat on, boats against the current,
borne back ceaselessly into the past.”
—F. Scott Fitzgerald, “e Great Gatsby”
e list of external forces and actors aecting defense acquisitions is long.
By external, I mean external to the community of defense acquisition prac-
titioners. e list includes the Congress; other executive branch operations,
such as nancial management; potential adversaries; and our customers—
military operators and their leaders. ese and others create constraints
and an environment that exerts forces to which the defense acquisition en-
terprise must react. is chapter deals with some of these forces and their
impacts on defense acquisition.
e Congress almost continuously makes legislative changes that aect
defense acquisition, oen under the rubric of “acquisition reform.” ese
eorts wax and wane, but they recur with higher intensity every few years,
oen as a result of dissatisfaction with the performance of the “acquisi-
tion system.” Some of these eorts have produced very positive results—the
Weapon Systems Acquisition Reform Act of 2009 or the Improve Act of
2011 are good examples. Others have had mixed results or worse.
In my view, the best results are obtained when Congress works closely with
the DoD and there is an informed discussion of any proposed changes
before they are implemented. One example of a process that fosters this
is the initiative of the last few years by the House Armed Services Com-
mittee, led by Chairman Mac ornberry, to le proposed legislation for
the purpose of obtaining feedback before a nal bill is draed. Another
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Getting Defense Acquisition Right
example was the outreach in 2014 by Senators John McCain and Carl Levin
to obtain acquisition reform suggestions from a wide range of involved and
concerned individuals. I was one of those individuals. I submitted the rec-
ommendations included in the following letter:
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Chapter Five: Responding to External Forces and Events
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Getting Defense Acquisition Right
131
Chapter Five: Responding to External Forces and Events
One of the suggestions in this letter was that the Congress refrain from
writing additional rules for the DoD and instead work on reducing the
current number of rules. e fact is that we already have too many rules;
some of them are too rigid and limit our exibility, and almost all of them
require increased bureaucracy for implementation and to ensure compli-
ance. Recently there has been some success in our eorts to work with
the Congress to reduce bureaucratic requirements, as several of the DoD’s
legislative change requests have been implemented. Unfortunately, many
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Getting Defense Acquisition Right
more new requirements have also been added and the appetite to continue
the eort to improve acquisition by statute does not seem to be diminish-
ing. On a positive note, the DoD has a congressionally directed team, a
commission, currently conducting a 2-year review of the publication that
implements all the congressionally directed federal and defense contract-
ing regulations, a document that spans thousands of pages and which has
been continuously added to for decades. e intent is to drastically simplify
the content. It is a noble endeavor and one that I hope will be successful.
at success, however, will ultimately depend on Congress’ willingness to
repeal existing legislation.
Another issue mentioned in my letter to Senators McCain and Levin was
the problem of the perverse incentives to get our budgets out the door—to
spend to an arbitrary schedule. e Congress will rescind funds that are
not obligated in a timely way. is puts pressure on the DoD’s acquisition
managers to put money on contract in order to avoid loss of the funds.
Industry is well aware of this constraint, and it can put our managers in a
dicult negotiating position. We should certainly not ask for money before
we need it, and we should be managing our cash ow eciently, but when
the circumstances call for patience, we should not be punished for failing
to obligate funds. To address this issue, I worked with the DoD’s nancial
management leader, the Under Secretary of Defense (Comptroller) to issue
the letter that appears below to provide guidance to the DoD’s Program
Managers and contracting professionals on how obligation rate require-
ments and sound business practices would be balanced. is practice has
been implemented, in part through joint reviews by the Comptroller and
Acquisition stas, to good eect and it should continue.
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Chapter Five: Responding to External Forces and Events
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Getting Defense Acquisition Right
135
Chapter Five: Responding to External Forces and Events
For the past few years, the DoD—in fact, most of the federal government—
has been operating under the threat that our annual budgets will be de-
termined by a process called sequestration. Sequestration is an external
force that is unprecedented and severe in its consequences. is budget
mechanism was originally implemented in statute as a motivator to a con-
gressional “super-committee” that was tasked to reach a political budget
compromise. Sequestration was intended to be the unacceptable default
that would motivate the super-committee to succeed. It failed, and in 2013
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Getting Defense Acquisition Right
sequestration was implemented, causing the DoD to cut more than $30 bil-
lion from its operating budget halfway through the year. As I write in 2017,
sequestration is still a threat hanging over the DoD. Without statutory re-
lief, it will remain the default budget mechanism through 2021.
In early 2013, on the eve of the implementation of sequestration, I pub-
lished the rst article in this chapter, laying out some of my plans for ac-
quisition improvement, including the second version of the Better Buying
Power initiatives. With the general election over, I believed that the next
few years would be dicult, but I also believed that I would have a few rela-
tively uninterrupted years to provide consistent acquisition policy guid-
ance and management to the DoD. Sequestration was about to make this
much more dicult.
e DoD had not anticipated, and did not adequately prepare for seques-
tration in 2013. In addition to the large reductions we had to absorb, we
also had the problem that the law provided virtually no exibility as to
where the funds would be cut. In addition, the scal year was already ap-
proximately half completed before sequestration was initiated. Because the
cuts were widely distributed, the impact was not dramatic or obvious—but
it was severe. e DoD was forced to furlough most civilian employees to
make up some of the shortfall in operational funds. e workforce mem-
bers felt betrayed by a process and a government that had let them down.
(Later in the year, we also endured a government shutdown as well.) Sec-
retary Panetta and the entire DoD leadership did everything we could to
mitigate the impact. In July 2013, I issued the following guidance to the
acquisition workforce:
* * * *
From: Kendall III, Frank HON OSD OUSD ATL
Sent: Tuesday, July 09, 2013 4:54 PM
Cc: AT&L Personnel
Subject: Guidance During FY13 Sequestration and Furloughs
OUSD AT&L OFFICE OF ADMINISTRATION BROADCAST
AUDIENCE: ALL AT&L PERSONNEL
DATE: July 9, 2013
To the Defense Acquisition Workforce,
As we continue to execute a sequestered FY13 and enter a period of fur-
loughs for most DoD civilian employees, I’d like to give you some basic
guidance as to how we should do our jobs during this period.
Firstly and most importantly, we have an obligation, now and always, to
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Chapter Five: Responding to External Forces and Events
extract as much value as we can for our taxpayers and the warfighters
we support with the resources that are made available to us. Nothing in
the current situation changes that, despite the fact that everything, and
I mean everything, about sequestration, including: idle operators who
should be training, facilities that are being allowed to deteriorate, equip-
ment that isn’t being maintained, research and development that is ex-
tended unnecessarily, disrupted test plans, and production that is at less
economical quantities creates inefficiency and lowers our capabilities. It
does not, however, change our fundamental duty to be as efficient and
productive as we can be under any circumstances. We all know that the
effects of sequestration are real, even if they are not dramatic and highly
visible because of the way the cuts are distributed across the Depart-
ment. We all know that this is no way to conduct business—but these are
the cards we have been dealt and we have to play them to the best of our
ability. Our taxpayers and the warfighters deserve no less.
Next we have to follow the rules—statutory and regulatory—to the best
of our ability. We are in uncharted territory to some degree, so you are
likely to have to consult with your chain of command and appropriate
government legal authorities to determine the exact constraints you have
to operate under. Unfortunately the rules were generally not written with
this situation in mind; it is after all unprecedented. Many of the rules al-
low for exception and waivers. When that is the case and the effect of
following the rules leads to even more inefficiency and waste, you should
seek an exception or a waiver or an interpretation that allow you to do the
right thing and avoid unnecessary waste.
Finally most of our work involves contractors and we have an obliga-
tion to treat contractors fairly and reasonably under all circumstances
including these. We should honor contracts we have in place where
the requirement is still needed. Where the requirement has changed
due to funding cuts, furloughs of government employees or for some
other reason, we should modify the contract to address the change in
requirements provided it will result in savings to the government. In
either circumstance we need to deal with our contractors equitably and
with full transparency.
This is a painful time for all of us. The pain comes in different forms; oper-
ators are losing the chance to train and their equipment is not being kept
ready, many contractors are losing their jobs entirely, and government
employees are experiencing furloughs. As we make our way through this
uncharted territory please keep in mind our core responsibility is to get
as much for the resources we have as possible. We don’t need to make
sequestration look any worse than it is; that will take care of itself. This
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Getting Defense Acquisition Right
isn’t about everyone experiencing the same pain in the same way—that
isn’t possible. It’s about doing our best to perform our duty.
Frank Kendall
Under Secretary of Defense
Acquisition, Technology, and Logistics
* * * *
At about the same time I published the next article in this chapter. It deals
with my expectations for the period lying ahead of the DoD. I noted that
the period we were in was “the most dicult defense planning and man-
agement situation I have ever seen.” e acquisition workforce, indeed the
whole of DoD, responded to the challenge with remarkable professionalism
and dedication. Morale may not have been high, but I will always be proud
of how the Department soldiered on during all the trauma and dysfunction
we experienced in 2013. We need to ensure this does not happen again.
e next two articles in this chapter deal with my concerns about the im-
pact of developments by potential adversaries on America’s military tech-
nological superiority. For years I have been giving speeches about this con-
cern. Aer the Cold War and our astonishingly successful campaign in
the First Gulf War in 1991, we entered a period of unprecedented military
dominance in conventional warfare. e capabilities we demonstrated in
1991—stealth, precision munitions, networked forces, wide-area surveil-
lance systems—have been serving us well for the past quarter-century. Un-
fortunately, all military advantages, including this one, are transient. Our
potential adversaries have had a quarter-century to analyze and respond to
the way America ghts—and they have done so.
e rst of these two articles deals with the need to protect the future, to
invest in the research and development needed to move new weapons sys-
tems through the new product pipeline and into the hands of our military
operators. It lays out the reasons why investment in research and develop-
ment should not be neglected, even in times of tight budgets when there are
many competing demands for resources. In brief, our technological supe-
riority is not assured, research and development is not a variable cost, and
time is not a recoverable asset. We ignore these tenets at our peril.
The second of these articles explains with more specificity why I de-
cided in 2014 to issue and implement a third version of Better Buying
Power. This version retained many of the initiatives from the earlier
versions that had emphasized cost control and professionalism, but
added emphasis on actions that could be taken to increase innovation
and move technically and militarily higher quality products to our
warfighters more effectively.
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Chapter Five: Responding to External Forces and Events
Defense acquisition also must deal with the external impact of political
change, including general elections every 4 years. Political appointees oen
change with even higher frequency. One of my goals has been to remain
in oce long enough to provide consistent policy direction and eect real
change. I have seen other leaders scramble to achieve all their goals during
their last few months in their positions, and I wanted to avoid that.
e theme I chose for the 2016 election year was “sustaining momentum.”
In other words, let’s keep doing what we’ve been doing and let’s focus on
doing it even more eectively. As I will discuss in the next chapter, the DoD
has built up momentum in the right direction and substantially improved
acquisition performance. If external factors, such as congressional reform
eorts, don’t disrupt that progress, the right thing to do is remain focused
and to keep moving in the direction of proven results. e next article in
this chapter provides a summary of the areas in which momentum has
been achieved and needs to be sustained. Most of these areas of progress
have their origin in Better Buying Power initiatives.
e nal “outside force” I will discuss is the most important of all—the
customers for defense acquisition, our military operational communities
and their leadership, including the Service Chiefs. A tight relationship—in
fact, a close partnership—between operational customers and acquisition
professionals is an important element of acquisition success. At one time,
early in my career, operators wrote requirements for weapons systems,
handed them to acquisition personnel, and waited for the desired product
to arrive. We are long past those days, but there remains a strong need for
close and continuous cooperation and teamwork between these communi-
ties. Both have special expertise, and both need to recognize the value of
that special expertise to each other as weapons systems are dened, devel-
oped, produced, and elded. Both communities have crucial roles to play,
throughout the life cycle of our defense products. To be successful, they
have to work together as one team.
Recently, the Congress acted to increase the role of the Service Chiefs in
acquisition. e DoD and I fully supported this provision. e Service
Chiefs are responsible for dening the requirements for weapons sys-
tems, and they have overall responsibility for the Services’ budgets where
programs are funded. ey also oversee and direct the management of
Service personnel systems, which directly aect the health of the acquisi-
tion workforce. Each of these responsibilities is tightly coupled to acqui-
sition success.
ere are, however, aspects of acquisition that Service Chiefs should in-
uence but generally not control. ese include for example: acquisition
strategy decisions including contract type, technical risk mitigation, tech-
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Getting Defense Acquisition Right
nical maturity and concurrency risk, testing adequacy, and development
cycle time. Most chiefs have no expertise in these areas, and history has
demonstrated very clearly that, given the opportunity to do so, they will
tend toward optimism and higher risk program planning. erefore, a
close working partnership between Service military leadership and Service
acquisition leadership is imperative so that decisions in both areas can be
fully informed. Operational urgency may dictate a higher-risk, more con-
current program. Conversely, the need for long product life cycles and low
sustainment costs may dictate a more robust design with more reliability
growth and testing. is chapter includes a letter that I sent to the Service
Chiefs laying out my views on how they could best work with the acquisi-
tion community to improve defense acquisition in their Services.
e nal article in this chapter is really intended for the Service operational
leadership and also for the Service Chiefs. It is based on thinking that was
stimulated by two conversations I had; one with Secretary Panetta and the
other with the Chief of Sta of the Army, General Mark Milley. Both had
raised the subject of why we couldn’t do new weapons systems faster. My
immediate reaction, and an accurate one, when Secretary Panetta asked
me this in our rst one-on-one meeting was “complexity.” at was cor-
rect, but where does the complexity originate? e answer is that it comes
from operational user community requirements.
ere are two kinds of operational user requirements—rst, basic military
performance and, second, all the other desirable attributes or features the
user wants in a weapon system that likely will be in the inventory for de-
cades. e point of this article is that the acquisition community will re-
spond to user requirements, and if you want something quickly (always the
desire) with just basic military performance features, we can do that for
you—but be careful what you ask for. Technologists and engineers, like me,
love to build creative new things that are better than all preceding products
at what they do. We do not particularly enjoy the myriad design details as-
sociated with manufacturability, reliability, maintainability, cyber securi-
ty, full weather and environment compatibility, human interfaces, training
systems, ease of eld support, and many other features that are considered
in a high quality product.
e article was written to clarify that there is a real trade-o be-
tween length and cost of development (time to market) and the qual-
ity of the product that will be delivered. e article includes several ex-
amples of cases in which the desire for speed has had disastrous results,
but it also discusses as I did in an earlier chapter, some successes like
MRAPs. Accelerated or rapid acquisition denitely has its place, but it
isn’t free, and it certainly isn’t “acquisition magic.” User communities
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Chapter Five: Responding to External Forces and Events
need to understand that there is no acquisition “magic” that produces
everything they want on a much shorter timeline, although plenty of peo-
ple and institutions will promise that—in return for large sums of money,
of course. e price of rapid acquisition is higher risk in cost, schedule and
performance, and, as importantly, a reduction in quality. Sometimes that’s
a smart decision, and sometimes it is not.
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Getting Defense Acquisition Right
Moving Forward
Reprinted from Defense AT&L: January-February 2013
I wanted to take this opportunity, with the general election now behind us,
to give Defense AT&L magazine readers a sense of what we can expect dur-
ing the next few years. First of all, we can expect to be challenged. Budgets
are shrinking and threats to our national security are not. e department
has articulated a sound strategy, and, unless there are major budget re-
ductions to come and we are forced to make revisions, we will be charged
with supporting that strategy through eective acquisition of products and
services across the full spectrum of Defense Department needs. We must
do everything we can to execute eectively—to extract full value from the
money with which we are entrusted. Over the next several years, I will do
everything I can to help you perform that challenging duty.
When I replaced Dr. Ashton Carter in an acting capacity over a year ago,
I articulated six priorities: support ongoing operations, achieve aordable
programs, improve eciency, strengthen the industrial base, strengthen
the acquisition workforce, and protect the future. You can expect those
priorities to remain in place.
I recently introduced the “for comment” version of Better Buying Power
(BBP) 2.0. BBP 2.0 is the next step in a process of continuous improvement.
Like BBP 1.0, it is not intended to be a “school solution” or a checklist of
ideas for you to unthinkingly “check o.” BBP 2.0 is consistent with my
goals and priorities, and it is designed in large part to drive critical thought
in the daily execution of our work. BBP 2.0 will help improve our eec-
tiveness in the tradecra of acquisition. ere is no single “schoolbook”
answer in this business, and as we move forward on BBP 2.0 over the next
year or two, we will learn from our joint experiences and make adjustments
as necessary. We will identify and share new best practices, and we will
reject or modify the ideas that turn out to be impractical or ineective. You
can expect future versions of BBP as together we learn about and discover
what works and what doesn’t.
Increasingly, we will measure our own performance and try to learn from
those who are most successful at acquiring products and services for our
warghters. is winter I will publish the rst edition of what I intend to be
an annual AT&L publication on “e Performance of the Defense Acquisi-
tion System.” For the rst time in my experience, we will begin to measure
the trends in our own performance and to understand, through data and
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Chapter Five: Responding to External Forces and Events
analysis, the root causes of superior performance. You can expect that this
report will be updated annually and that it will contain increasingly so-
phisticated assessments of our ability to execute programs of various types,
of the productivity of Department of Defense institutions, and of the rms
in the defense industrial base.
is winter, hopefully before this article goes to press, I will issue the co-
ordination dra of the new DoDI 5000.02. is dra will update 5000.02
to be consistent with current law. It also will provide a range of models for
structuring programs, and it will emphasize the need to tailor our acquisi-
tion approaches to the natural workow and decision points for the prod-
uct being developed and elded. I will expect the principles embodied in
the new 5000.02 to be used immediately while the document goes through
the standard review cycle.
e process of rewriting DoDI 5000.02 has made clear to me that over the
years an increasingly complex web of statutory direction has signicantly
complicated the lives of our key leaders, particularly our program manag-
ers. As a result, I have asked my chief of sta, Andrew Hunter, to form a
team with other stakeholders, working with interested parties from Con-
gress, to prepare a legislative proposal that would provide a single coherent
and simplied body of law to guide the defense acquisition system. e
goal is to have this completed and submitted to Congress within 1 year.
Finally, you can expect my continued support and dedication to giving you
all of the tools you need to be eective. You, the total acquisition work-
force—and I include in this grouping all of you who are involved in tech-
nology development, logistics, and sustainment activities of all types, as
well as those working in the traditional product development and produc-
tion activities—are the key to our success.
e next few years are not going to be easy. I expect that the Department will
be stretched signicantly as we attempt to retain the force structure needed
to execute our national security strategy while simultaneously maintaining
readiness, sustaining infrastructure, recapitalizing or modernizing aging
equipment, introducing innovative technologies, preserving our industrial
base, and ensuring the continuing technological superiority that our forces
have every right to expect. Our success depends on your ability to execute
the overall AT&L mission: supporting the warghter and protecting the
taxpayer. I look forward to meeting this challenge with you.
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Getting Defense Acquisition Right
What Lies Ahead
Reprinted from Defense AT&L: July-August 2013
I usually write about acquisition policy and best practices, but given our
current circumstances I felt I should provide you with some thoughts on
the highly unusual and unfortunate budget situation we face.
I want to begin by thanking everyone who works in defense acquisition,
technology, and logistics for all the hard work, dedication, professionalism,
and, increasingly, the patience and fortitude that you display. is includes
our military personnel and government employees and also our industry
partners. We provide our warghters with the best equipment in the world,
and we sustain and support that equipment so our warghters know they
can count on it when they need it. We all know we aren’t perfect—there
is room to be more ecient, and all of us can learn from our experiences,
education, and training and become more capable. Nonetheless, all of us
work hard every day to provide capability to our warghters and value to
the American taxpayers who provide us with the resources for which we
are stewards.
In the next few months and possibly years, our work ethic, dedication, and
professionalism, and, yes, our patience and fortitude are going to be need-
ed. I started my military career in 1966 as an ROTC cadet. A year later I
entered West Point and, while I didn’t serve in Vietnam, I did serve during
the turmoil of the Vietnam era and in the aermath. Later I served in the
Pentagon during the nal years of the Cold War as the Goldwater-Nichols
Act was being implemented. I was in the Pentagon for the rst few years
of the transition aer the fall of the Berlin Wall. Aer that, I experienced
the defense drawdown of the 1990s from industry’s perspective. In all my
experience, I have never seen a situation like the one we are trying to cope
with today. Aer Vietnam, and again aer the Cold War, the Department
of Defense went through a period of transition that included major chang-
es in defense budgets and force composition. But today we are confronted
with the most dicult defense planning and management situation I ever
have seen.
What makes this environment so dicult in part is the uncertainty and
the lack of stability in our budgets and, therefore, in our planning activi-
ties. Defense is a cyclical business—budgets do not follow a straight line
but generally correlate to perceptions of national security needs. Today we
are looking at sharp reductions in our budgets—not because threats to our
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national security are diminished (in fact, the opposite is true) but because
of concerns about annual decit levels and the size of the national debt, and
the resulting political gridlock about how to address these issues. e se-
questration mechanism was put in place to try to force Congress out of this
gridlock and to obtain a $1.2 trillion reduction in projected decits. Former
Deputy Secretary of Defense Bill Lynn said before he le the department
that “the idea of sequestration was to be so crazy nobody would ever let it
happen, and they did a really good job.” Not good enough, apparently.
Like most people in the national security community, I did not expect se-
questration to be implemented in January 2013. Technically, I was right—it
was deferred a few months. But, in the larger sense, I was wrong. I won’t
belabor this, but aer the tax bill passed in January it was clear that Con-
gress would not reach an agreement to avert sequestration permanently
before it went into eect.
During the long period leading up to sequestration, the administration and
the leadership of the department, military and civilian, argued against se-
questration and its devastating impact on our military. at impact is real,
and everyone working in any aspect of defense acquisition reading this ar-
ticle knows this. Sequestration never was going to arrive with the sound
of trumpets and stacks of contract termination notices and reduction-in-
force announcements; it comes more like a steady rain that doesn’t stop
rather than like a hurricane. But the water keeps rising. Every week we
compile a list of the actions being taken to absorb the cuts. Individually,
they are not dramatic: training not conducted, buildings not furnished or
repaired, maintenance on equipment deferred. e cuts are distributed all
across the department, and there are thousands of them. In FY2013, the se-
questration mechanism gave us no choice about where to absorb the nearly
$40 billion of spending we have to eliminate. I refer to what we are doing
now as “damage limitation.” We don’t have the exibility to do much else.
We are using reprogramming requests to address our greatest readiness
needs and some high-priority investment needs, but serious shortfalls will
remain. Many of the things we are doing amount to a decrease in our pro-
ductivity (stretched-out development programs, reduced economic pro-
duction quantities) and work deferred into future budgets. Probably worst
of all is the impact sequestration will have on the readiness of the force,
now and into the future. As a former Army ocer who lived the readi-
ness crisis of the 1970s in a combat arms unit in West Germany, I under-
stand the fragility of readiness and what it takes to recover once people and
equipment have lost their edge.
As I write, we also are on the path to implementing furloughs that will
make almost $2 billion available for our highest-priority remaining
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shortfalls. I want you to know that Secretary Chuck Hagel worked very
hard to nd a way to avoid taking this step. In the end, he felt he had no
choice, and he made the dicult decision to proceed with as minimal a
level of furloughs as possible. We know how dicult this will be for our
workforce, particularly those in the lower pay scales. Senate-conrmed po-
litical appointees like me are not legally subject to furloughs, but many (if
not all) of us, including me, will be sacricing an equivalent share of our
pay. e department’s leadership will continue to look for ways to reduce
this burden.
What will happen next? Our hope, and the administration’s goal, is a po-
litical compromise that will resolve the impasse in the Congress and de-
trigger sequestration. e next forcing function for such a deal might be
the requirement to raise the debt ceiling that Congress will confront in the
late summer or early fall. Even if an agreement can be reached, that will be
very late to impact FY2013 spending. I’m afraid there is a good chance that
the debt ceiling issue will be resolved without a grand bargain that allows
Congress to remove the remaining 9 years of sequestration ($50 billion a
year). As a result, sequestration may stay in place as the default mechanism
determining the level of our resources.
As I write, the department is nearing the conclusion of the Strategic Choic-
es Management Review that Secretary Hagel directed Deputy Secretary
Ashton Carter and Gen. Martin Dempsey to lead. is review is assessing
the implications of signicantly reduced budgets for the department. e
current budget options on the table include the House of Representatives’
budget resolution that does not cut defense, the Senate Budget Resolution
that removes about $250 billion (mostly outside the Five Year Defense Plan
[FYDP]), and the President’s Budget Submission, which removes about $150
billion(also mostly outside the FYDP). Sequestration of course removes $50
billion per year, starting immediately. Under the circumstances, it is only
prudent to assess the implications of signicant reductions. e FY2014
budget that the president submitted is consistent with the Security Strategy
that we announced in 2012 and provides for the resources the administra-
tion believes are needed for national security.
e frightening scenario that may confront us looks like this: Congress
remains gridlocked and the uncertainty about future budgets continues
at least through FY2014. We start FY2014 under a Continuing Resolution
(CR) that funds the department at the FY2013 level. e funds we now are
executing in FY2013 already include cuts to the levels required by seques-
tration, and that is the level we would receive under a CR. In eect, seques-
ter already would be built into an FY2014 CR. Under a CR, the department
still would be constrained to keep funds in the same budget accounts, but
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not as constrained as we were this year where essentially each budget line
had to take the same reduction. In this scenario, Congress does not have
to determine where the cuts occur; it can leave that politically painful task
to the sequestration mechanism and the department. If past experience is
any guide, Congress also may not allow the department to take some of the
steps (such as Base Realignment and Closure [BRAC] and early ship retire-
ments) it needs to take to eliminate low value added or unneeded expenses.
I think this is the worst-case scenario the acquisition community needs
to be prepared to manage through, until we know more or receive other
guidance. Will furloughs be necessary under this scenario? I don’t know.
I can promise that the department’s leadership will do whatever it can to
avoid them. Under this scenario, we still will not know what the depart-
ment’s ultimate budget levels will be. is uncertainty will make long-term
planning all but impossible. We will have our share of challenges in defense
acquisition.
In normal times, the resources are balanced by the department’s budget
among force structure (the size and composition of the force), readiness
(training and maintenance), and investment (research and production of
equipment to modernize and recapitalize the force structure). Each of these
major spending categories depends on the other; a healthy Department of
Defense keeps them in balance. When that balance is skewed for any length
of time, the result is a “hollow force,” such as the one I experienced in the
1970s when readiness was underfunded for a period of years. In addition
to not knowing what size force to design the department around and re-
source, the precipitous cuts required by sequestration compound the prob-
lem. Force structure cannot be reduced overnight; it takes time to bring the
force down. Because of that fact, immediate cuts fall on other parts of the
budget—readiness or investment. Today we are at war, and the readiness of
our deployed units and those preparing to deploy is of the highest priority.
at leaves investment, which has to absorb a disproportionate part of the
reductions until force structure is reduced. Remember, however, that in
this scenario we lurch into FY2014 under a CR with no resolution of the
long-term budgets we can expect and, therefore, no clear indication of how
far our force structure should be reduced or how quickly. Finally, just to
make matters worse, we also have the problem of the work we deferred in
FY2013 as we were trying to absorb the sequestration cuts in the last half of
the scal year. We will have to adjust our FY2014 plans to take this deferred
work into account.
I have written this piece for two reasons. One reason is to let you know how
I see the situation and what we need to be prepared for. e second is to
again thank you for all that you do, and will do, for our country. I’m afraid
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that more is about to be asked of us. I say “us” because of my background
and because my intention is to be with you through the next several years.
e Defense Department’s total acquisition community, and the industrial
base that is part of that community, provide two of the three pillars of the
department; we are not the warghting force itself, but that force’s techno-
logical superiority and rate of recapitalization, and its material readiness
levels, will depend on how well we do our jobs in the dicult months that
may lie ahead.
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Protecting the Future
Reprinted from Defense AT&L: May-June 2014
If you’ve heard me speak recently or read about any of my recent congres-
sional testimony, you may be aware that I’m fairly vocal about my concerns
regarding our ability to sustain the unchallenged technological superiority
our military has enjoyed for several decades. is isn’t a new concern, but
given the budget cuts we face and the dicult trade-os among competing
needs for force structure, readiness and investment, I decided it was time
to be much more public and vocal about our current and future risks. e
Secretary and the acting Deputy Secretary have been extremely supportive
and are expressing the same concerns.
One of my priorities as USD(AT&L) is “Protect the Future.” In October
2011, I added this item to the list of priorities I had articulated as Princi-
pal Deputy Under Secretary in 2010. “Protect the Future” spans several
areas. It includes keeping alive the capabilities we developed to support
the two-prolonged counterinsurgency campaigns we have waged in Iraq
and Afghanistan—we may need them again. On this list are items like con-
tingency contracting, counters to improvised explosive devices, and rapid
acquisition in general. “Protect the Future” includes the protection of our
science and technology accounts. It would also include protecting the gains
we have made in stang and training the acquisition workforce using the
Defense Acquisition Workforce Fund. Most of all, however, I am concerned
about protecting the adequacy of our research and development invest-
ments in capabilities and systems that will allow us to dominate on future
battleelds and keep engineering design teams that develop advanced de-
fense systems.
e department is dealing with an unprecedented level of uncertainty
about our future budgets. It is normal to have a small gap between the re-
quested budget and the appropriated one, but not on the order with which
we have been forced to cope. e large gap between the budgets we have
been requesting and what we could receive under sequestration is a plan-
ning nightmare. e president’s budget this year acknowledges this discon-
nect. We are asking for an FY 2015 number that complies with the Bipar-
tisan Budget Act, but the president is appropriately requesting additional
funds for defense in the Opportunity, Growth and Security Initiative. In
FY 2016 and beyond, our request narrows the gap between sequestration
and our hopes by about half, but this still leaves us with a signicant band
of uncertainty. Whatever the ultimate result, we live in a world of reduced
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resources and a world in which we may plan based on an assumption of
substantially more resources than may actually be provided.
In this environment there is a tendency to hang on to what we have—name-
ly, force structure and programs that are already in production. ere is
also a strong desire to keep the readiness of our forces at acceptable levels.
Having lived through the readiness crisis of the 1970s as an Army ocer
stationed in West Germany, I can appreciate this desire. Nevertheless I will
continue to argue that we need to properly balance readiness, force struc-
ture and modernization, while preserving our research and development
activities. Here are three reasons why I believe preservation of research and
development is necessary.
First, technological superiority is not assured. Ever since returning to gov-
ernment service in the spring of 2010, I begin my day with an intelligence
update. Because of my role, I tend to focus more than most senior leaders
on technical intelligence. While a conict with any specic power may be
unlikely, it was immediately apparent to me 4 years ago (and nothing has
changed this view except to reinforce it) that China in particular, but also
Russia and other states, are developing cutting-edge military capabilities
that are designed to defeat current and planned U.S. capabilities. We have
had the luxury of living for a long time o technological capital largely
developed during the Cold War. We demonstrated dominant operational
eectiveness in the rst Gulf War, which was won in a very short time with
many fewer casualties than anyone expected. Our advances in stealth, pre-
cision weapons, networking and wide-area surveillance combined to give
us an unprecedented level of military capability. We used these same elded
technologies in Serbia, in Afghanistan and in the invasion of Iraq. Potential
adversaries saw what we had demonstrated so clearly over 20 years ago, and
they took action. In the meantime, I’m afraid we have been complacent and
tended to take our technological advantage for granted. We also have been
focused for more than a decade of intense counterinsurgency campaigns.
What areas concern me the most? e areas we refer to loosely as A2AD
for Anti-Access and Area Denial. Our ability to project power around the
globe depends on an array of assets and actions that include our space-
based global-positioning systems, our communications and sensors, our
long-range strike, our ability to move carrier-based strike forward, our
networks, forward basing (including airelds and command, control and
communication as well as logistics nodes), and our ability to be dominant
in the air. ese are all areas in which we are being challenged with both
current capabilities and capabilities still in development. is bears repeat-
ing. While a conict with any specic power may be unlikely, I do not want
to live in a world in which the United States no longer is the dominant
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military power or in which potential adversaries may possess equipment
(from any source) that would remove the advantage our warghters have
depended on for so long.
My second point is that research and development is not a variable cost.
is is not an obvious point to many people, and in the past there has been
a tendency to reduce research and development more or less proportion-
ately to other budget reductions. is can be dangerous, if done in excess,
because research and development costs are not related to the size of our
force or the size of the inventory we intend to support. e cost of develop-
ing a new weapons system is the same no matter how many of that system
we intend to produce. If we don’t do the research and development for a
new system, then the number of systems of that type we will have is zero.
It is not variable.
ird and nally, time is not a recoverable asset. It takes a certain amount
of time to develop a new system, test it and put it into production. Time lost
is, for the most part, not recoverable. By taking higher risks and accepting
ineciencies and higher costs, we can reduce the “time to market” of a new
weapon system. is approach was used successfully to eld MRAPs for
the conicts in Iraq and Afghanistan; however, MRAPs are not complex
cutting-edge weapon systems. Nominally, it takes about 10 to 15 years from
conception until we have a modern complex system in the eld in opera-
tionally meaningful numbers. Even during the 1940s we had to ght World
War II largely with systems that were in development years before the war
began. We can shorten, but not eliminate, the time required to eld new
cutting-edge weapons systems.
Fortunately the department’s leadership understands and supports these
views. As Secretary Hagel made clear, we must strike a balance between
our ability to meet current global requirements, maintain a trained and
sustained force that can meet near-term needs and at the same time “pro-
tect the future” by continuing our highest-priority research and develop-
ment programs and the science and technology programs that feed them.
e Secretary, senior leadership in the Oce of the Secretary of Defense
and in the Joint Sta and the Services all tried to strike the right balance as
we built the Future Years Defense Program.
at brings me to our role in defense acquisition, technology and logistics.
e eciencies we continue working on under the Better Buying Power
label are some of the tools we have to help sustain technological superiority.
Every dollar of cost savings from a successful “should cost” initiative, every
business deal we negotiate that provides better value to the government
and every successful incentive structure we implement with industry will
allow us to invest more in future technological superiority. We also have
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to become better at working with the operational requirements communi-
ties. By focusing on performance features that really matter militarily, this
relationship helps ensure we provide the users with products that give them
advantages they need at an aordable cost. Our technology base work also
has to be strategically focused on areas that give us a signicant operational
advantage. Our responsibility in these still uncertain times, as always, is to
deliver as much capability to the warghter as we can with the resources
entrusted to us. We will not sustain our technological superiority or “pro-
tect the future” unless we succeed.
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Technological Superiority
and Better Buying Power 3.0
Reprinted from Defense AT&L: November-December 2014
Each morning I start my day with a half hour or more devoted to reading the
latest intelligence. I’ve been doing this for about four-and-a-half years now.
It took me only a few weeks from the time I came back into government in
March 2010 to realize that we had a serious problem. Some of the countries
that might be future adversaries, (or that could at least be counted on to sell
their weapons to countries that are our adversaries) were clearly developing
sophisticated weapons designed to defeat the United States’ power-projec-
tion forces. Even if war with the United States were unlikely or unintended,
it was quite obvious to me that the foreign investments I saw in military
modernization had the objective of enabling the countries concerned to
deter regional intervention by the American military.
How did we get here? is journey began aer the Cold War and in par-
ticular the First Gulf War that followed shortly thereaer. At that time, I
was the Director of Tactical Warfare Programs in the Oce of the Under
Secretary of Defense for Acquisition. For years, since the 1970s, the De-
partment had been working on a suite of capabilities originally designed
to overcome the Soviet numerical advantage in Europe. As a young Army
ocer, I had served in Germany in the 1970s and studied rsthand the
problem that successive echelons of Soviet armor formations posed to
NATO forces. Our answer to this problem was something called Follow-
On-Forces-Attack (FOFA), which had grown out of the Assault Breaker
technology demonstration program at the Defense Advanced Research
Projects Agency. e basic idea was to combine wide-area surveillance,
networked Command, Control and Communications, and precision mu-
nitions into an operational concept that would negate the Soviet numeri-
cal advantage. e concept could be summed up as “one shot, one kill.”
From 1989 to 1994, I was responsible for the FOFA programs. In the First
Gulf War, we had a chance to demonstrate the eectiveness of this con-
cept, and we did so.
As we started operations against Saddam Hussein, most experts predicted
thousands of coalition casualties. In the event, the number was only a few
hundred. e combination of sensors like the JSTARS [Joint Surveillance
Target Attack Radar System] and precision munitions like Maverick and
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Getting Defense Acquisition Right
laser-guided bombs made quick work of Iraqi armor formations. Stealth
also was introduced to the battleeld to great eect by the F-117.
e dramatic success of American and coalition forces in 1991 did not go
unnoticed. No country paid more attention to this stunning display of
military dominance than China, followed closely by Russia. e First Gulf
War marked the beginning of a period of American military dominance
that has lasted more than 20 years. We used the same capabilities, with
some notable enhancements, in Serbia, Afghanistan, Libya and Iraq. It has
been a good run, but I am concerned that, unless we act quickly, this period
will end in the not-too-distant future.
When I le the Pentagon in 1994, the intelligence estimates suggested that,
while China might be a concern in the future, the United States then had
no reason to be worried for 15 to 20 years. It is now 2014, and I am worried.
ere has been more than adequate time for countries like Russia, with
its energy-revenue-funded military modernization, and China, with its
spectacular economic growth, to develop counters to what has been called
either the Military-Technical Revolution or the Revolution in Military Af-
fairs that the United States introduced so dramatically in 1991.
e foreign modernization programs that I refer to include investments
in cyber capabilities, counter-space systems, electronic warfare programs,
land-and-surface-ship attack ballistic and cruise missiles with smart seek-
ers, anti-air weapons, advanced platforms to host these capabilities and
many more. Taken together, these modernization programs are clearly de-
signed to counter American power projection forces and to ensure that the
United States does not interfere in the areas close to Russia or China. Even
if our relationships with these states improve and military confrontation
is avoided, the capabilities I am concerned about will still quickly prolifer-
ate to other states, such as Iran and North Korea. We cannot aord to be
complacent about our technological superiority, and we cannot allow other
less-sophisticated threats to distract us from the task of maintaining that
superiority. is brings us to Better Buying Power 3.0.
For the last 4 years, our focus in Acquisition, Technology, and Logistics has
been on improving our business outcomes. Usually, we discuss the Bet-
ter Buying Power goals in terms of productivity, waste elimination, better
business deals, and ecient execution of programs and services. In BBP
3.0, my goal is to shi our emphasis toward the actual products we are
developing, producing, elding and maintaining. We will continue our ef-
forts to improve productivity, but the focus of BBP 3.0 is on the results
we are achieving—particularly our ability to bring innovative and game-
changing technologies into elded capabilities for the warghter as quickly
and eciently as possible. Our technological superiority is not assured. I
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also do not expect the budget climate to improve for the foreseeable future.
Sequestration may well return in Fiscal Year 2016—and, even if it does not,
the threat is unlikely to be removed entirely.
We are going to have to work hard to bring the innovation and technology
we need to our warghters—and we are going to have to achieve this in a
very tough environment.
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Our eme for 2016—
Sustaining Momentum
Reprinted from Defense AT&L: March-April 2016
It’s hardly a secret that we are headed toward a change in administration
next year. I’ve been through these transitions several times, as have most
acquisition professionals. During my previous experience in the Pentagon
organization of the Under Secretary of Defense for Acquisition, Technolo-
gy, and Logistics, I worked for a total of eight Under Secretaries in as many
years, and I went through one same-party and one other-party administra-
tion change.
As some of these transitions approached, there were attempts to cram a
lot of accomplishment into a very short time. is generally caused a lot
of work and wasn’t very successful. In my case, I have had several years to
eect the improvements in defense acquisition I thought were most need-
ed. As a result, there won’t be a Better Buying Power (BBP) 4.0 this year
and, while I do plan to modify Department of Defense Instruction (DoDI)
5000.02 on the margins and to make it consistent with current law, there
also won’t be a major acquisition policy rewrite this year, although we will
be implementing the changes required in the Fiscal Year (FY) 2016 Na-
tional Defense Authorization Act. We still have a lot to do in implementing
the existing BBP actions, however. Also, the new DoDI on the acquisition
of services has just gone into eect, so we still have work to do on imple-
mentation of that as well.
What I would most like to accomplish during the balance of this year is
to sustain and build on the momentum we have achieved over the last few
years. I don’t know what will happen in the election, and, depending on
how it turns out, I also don’t know what opportunities I may have. But I
do know that we have the better part of a year together in which to make
more progress on the areas in which we have been working. I also know
that we are improving acquisition outcomes. e evidence is clear from the
most recent Annual Report on the Performance of the Defense Acquisition
System and other data that contract costs and schedule overruns are being
reduced, as well as cycle time, and that we are tying prot more eectively
to performance through the use of incentive structures. I would like to dis-
cuss some of the actions that stand out as important areas in which to sus-
tain and build on the momentum we have gained as we get ready for a new
administration next year.
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Promote Technical Excellence and Innovation: We are well into imple-
menting BBP 3.0, but we have many actions in progress that need to be
completed. My concerns about technological superiority that motivated
this edition of BBP are reinforced every time I receive a daily technical
intelligence update. is year’s budget includes a number of advanced
technology demonstrators and experimental prototypes and we need to get
these provisions enacted and the projects started. Steve Welby, who has
been conrmed as Assistant Secretary of Defense for Research and Engi-
neering, and his teams completed the Long Range Research and Develop-
ment Planning Program, which was very inuential in the FY 2017 budget.
We are strengthening the ties between operators, intelligence experts, and
acquisition professionals. We will continue to manage the ongoing actions
to improve our workforce’s technical capacity, and to extract as much ben-
et as possible from all of our various Research and Development accounts
and from industry’s investments. Bill LaPlante has le his position as As-
sistant Secretary of the Air Force, but his dictum to “own the technical
baseline” is an enduring imperative to all of our technical and management
professionals working to bring new products to our warghters. As I have
said many times, our technological superiority is being challenged in ways
we have not seen since the Cold War, and we must respond.
Continue Establishing and Enforcing Aordability Analysis and Caps:
We have been doing this for more than 5 years now, and there is solid evi-
dence that both the analysis process by Service programmers and the en-
forcement of caps by the acquisition chain and the requirements chain are
having a benecial impact. e use of long-term capital planning analysis
was a new concept when we introduced it, but it is becoming institutional-
ized. We can’t predict future budgets accurately, but we can do analysis
now that helps us make better decisions. Enforcing the resulting caps is
the most dicult aspect of having them, but if the caps are to be meaning-
ful, they have to be enforced. We’ve learned from our experience, but this
is still an evolving area. e caps should be set at a level that leaves some
margin; they are neither cost positions nor program baselines, nor budgets.
ey are tools to ensure meaningful long-term capital investment planning
and to guide cost versus performance trade-os during development. I am
hopeful that the Department of Defense (DoD) will continue to establish
them and enforce them in subsequent administrations.
Promote Increased Use of “Should Cost” as a Management Practice:
I believe that in many, but not all, cases “should cost” is now a normal
part of business. It should be. Every manager should understand the cost
structure under his or her control, analyze it for savings opportunities, set
goals to achieve those opportunities and act on those goals. Aer several
years of eort, the use of “should cost” has proliferated across the DoD. It is
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Getting Defense Acquisition Right
changing thought patterns and behaviors in a positive way. at imple-
mentation isn’t uniform, however, and I’m afraid it hasn’t been fully em-
braced in all cases. Some still regard this initiative as a threat to their bud-
gets, which it is denitely not. Others seem reluctant to set signicant goals
for fear of being unable to attain them. e “culture of spending” isn’t dead
yet, and the perverse incentive of execution rate targets isn’t going away.
We need to continue to strike the right balance and to encourage our work-
force to do the right thing for both the taxpayer and the warghter by not
wasting resources that could be saved and put to a better purpose. Of all the
BBP initiatives over the years, this is the most fundamental thing we have
done. Use of “should cost” targets has saved the DoD billions of dollars,
and we need to continue expanding and supporting its use.
Provide Strong Incentives to Industry: As I have said and written many
times, industry is easy to motivate. Corporations exist for the purpose of
making money for their shareholders, so the motivation tool is obvious and
eective. e trick for the DoD is to align this self-interest with the DoD’s
interests, and to do it in a way that will be eective at improving outcomes.
We’re making progress on this, but I still see some unevenness in how our
managers structure incentives. It takes good critical thinking to get incen-
tives “right” because we deal with so many dierent business situations.
Incentives need to “thread the needle” between being easily achieved and
impossible so that they do inuence behavior. ey also need to be mean-
ingful nancially both as carrots and sticks, without asking corporations
to assume an unreasonable amount of risk. I’ll continue to focus on this
aspect of our acquisition strategies as programs come in for review, and I’ll
expect managers at all levels to do the same.
Eectively Manage Intellectual Property: Going back to BBP 1.0, we
have worked hard to mature our collective understanding of how to pro-
tect the government’s interests while also respecting industry’s property
rights. is is a complex area of law and one in which the DoD was at a
longtime disadvantage relative to industry. I occasionally still wrestle with
cases of “vendor lock” based on proprietary content. Hopefully, we have all
but stopped the practice of just accepting industry assertions of property
rights. We need to continue to grow our expertise in this area and spread
the best practices associated with eective management of intellectual
property.
It’s perfectly legitimate for a company to expect a reasonable return on the
intellectual property it has developed or acquired. In general, that return
should be in the competitive advantage conveyed by superior technology or
lower costs. On the other hand, the use of intellectual property by a rm to
sustain a decades-long grip on the aermarket for a product is something
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the DoD should and can work to prevent. We’re getting better at this, but
our eorts need to be sustained and broadened.
Acquire Modular Designs and Open Systems: is idea is anything but
new. However, our practice has traditionally not matched our policy. It
takes active technical management of design architectures and interfac-
es to make both open systems and modularity a reality. is is “owning
the technical baseline,” and the devil really is in the details. Assertions of
modularity and openness are not always valid. ere are also always cost
impacts and design trades that work against achieving these goals. We can
point to a few successes in this area over the last several years; each Mili-
tary Service can take credit for programs to provide open architectures in
general and modular designs on some specic platforms. e Long Range
Strike Bomber is a notable example. is eort should continue and ex-
pand, but success will require a technical management workforce that is
trained, experienced and empowered.
Use Monetized Performance Levels in Source Selection: We’ve had sev-
eral notable successes with this initiative. ey include the Combat Rescue
Helicopter, the Joint Light Tactical Vehicle, and the Amphibious Combat
Vehicle. is is a relatively new concept; it asks the requirements com-
munity to do something that it has traditionally resisted—put priorities
and relative value on requirements. Industry traditionally would simply
bid threshold values of performance. is initiative gives industry a reason
to aim higher, as long as it can do so for a reasonable cost. By providing
industry with information on how much we are willing to pay, and how
much competitive source selection evaluation cost credit we will give in
an evaluated price, we motivate industry to create better products for us.
We also get the benet of more objective source selections. is is a use-
ful property in a period in which protests are more common. e fact is
we have to make these best value judgments anyway. We are better o to
make them rationally prior to asking for bids. I hope to see several more
successful examples of this approach over the balance of the year and to see
it continued indenitely.
Improve the Acquisition of Services: With the publication of DoDI
5000.74, we marked the transition to a more structured way of looking at
management of contracted services acquisitions. is is one culmination of
a series of steps that date back to BBP 1.0, where we took Air Force initia-
tives introduced by now LTG Wendy Masiello when she was the Air Force’s
Program Executive Ocer (PEO) for Services Acquisition and expanded
them to the rest of DoD. Over the last several years, we have built on these
initial steps. Despite this progress, I remain convinced that this area of
spending, which is now well above the spending on products, oers the
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greatest potential for savings and eciency in the DoD. My Principal Dep-
uty, Alan Estevez, has led this eort and it is starting to pay big dividends.
As we go through this year and gain experience implementing the new
DoDI, I would expect us to gain insights that will lead to some modica-
tions, but overall I think we are the right track. is is one area in which
I will ask the Service Secretaries and Chiefs to become more involved. A
great deal of contracted services are acquired and managed outside the
standard acquisition chain and institutions. As Gen. David Petraeus once
wrote to his sta in Afghanistan, “Contracting is commanders’ business.”
is is as true outside the operational contingency arena as it has been in
Afghanistan and Iraq. However, many of our operational and institutional
leaders are not focused on the management of these extensive resources.
During the coming year, we can and will do more to change that.
Continue Our Annual Acquisition Assessment Activities: We have in-
stituted three sources of annual assessments that will be continued this
year. ey are: the Annual Report on the Performance of the Defense Acqui-
sition System, the Annual Preferred Supplier Program, and the Program
Mangers’ Annual Assessments. e rst of these provides a growing body
of statistical data and analysis on the performance of the acquisition sys-
tem using a range of metrics. e third edition, released last fall, shows
strong evidence of improved performance over the last several years. Each
year we have added additional data and analysis to this volume and we
will continue to do so this year. e second item provides public feedback
to industry on the relative performance of major business units based on
the Contractor Performance Assessment Reporting System (CPARS). We
struggled to get this o the ground, but thanks to the Navy’s pilot eort
led by Sean Stackley and Elliot Branch we were nally successful. Last year,
all three Military Departments published their results simultaneously. We
will continue that practice this year. e third item is the Program Man-
ager’s Annual Assessments, of which I published a subset last fall. I pub-
lished them (with the writers’ permissions) because I was very impressed
with the inputs I received and because I thought providing them to a wider
audience was a great way to educate outside stakeholders on the great va-
riety of real life problems that our program managers face, and how pro-
fessionally they deal with those problems. I recently requested this year’s
assessments and they will be submitted by the time this piece is published.
At the PEOs’ request, I am also giving PEOs an opportunity to provide a
similar input. I will do my best to dedicate two solid weeks to reading and
responding to each of the 180 odd assessments I will receive. Last year’s
reports highlighted a number of problems and opportunities that needed
to be addressed; and I expect the same this year. I also will request another
round at the end of 2016.
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Build Even Greater Professionalism: e DoD has an incredibly profes-
sional workforce. When building professionalism was introduced in BBP
2.0, there were some who took that as an assertion that our workforce is
not professional. Nothing is further from the truth. However, we all can
become even more professional through experience, training, education
and personal eort. None of us should ever be complacent; there is always
more to learn and always opportunity for increased levels of expertise and
broader experience. We also all have a duty to improve the professional-
ism of those who work with and for us. If there is one legacy each of us
should strive for, it is to leave a more professional workforce behind us than
we found when we arrived. We are fortunate to have the support of the
Congress and Secretary of Defense Ashton Carter in this endeavor. Our
Director of the Human Capital Initiative for acquisition personnel, Rene
omas-Rizzo, has worked hard with the Under Secretary for Personnel
and Readiness Brad R. Carson to include provisions in Secretary’s Force
of the Future initiatives that will benet our workforce. We will work hard
with the Congress and internally to see those initiatives enacted this year.
Increase the Involvement of the Service Chiefs in Acquisition: e most
recent National Defense Authorization Act included provisions strength-
ening the Service Chiefs role in acquisition. I fully support this direction
and have already met with all four Service Chiefs to discuss their role. e
areas in which I think they can make the greatest contribution are in re-
quirements, budgeting and personnel. As stated above, I also think they
can do much to improve the management of acquisition activities that take
place outside the acquisition chain of command. During the year we will
be implementing this direction.
e BBP initiatives have spanned several major areas of emphasis, included
dozens of specic initiatives, and involved more than 100 actions—in each
version. ere also have been any number of steps we have taken over the
past several years to improve acquisition outcomes across the full range of
products and services that DoD acquires. Many of them have been outside
the specics of the BBP initiatives.
Underlying all this eort are some fundamental cultural goals. One of
them is to move from being a culture that focuses on spending to one that
focuses on controlling costs. is may be the area in which we have made
the greatest gains. Another has been to encourage a culture that values
and encourages the critical thinking needed to confront the huge range
of problems acquisition professionals must deal with. We are not engaged
in cookbook activities where one way of doing business always works. A
third goal is to achieve the widespread appreciation of, and a culture that
values, professionalism inside our workforce and, perhaps more important,
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outside it. Our success depends entirely on the eorts of thousands of true
professionals in the full range of disciplines needed for new product design,
testing, production, and support. Finally, there is the resurgent importance
of being a culture that values and rewards the technical excellence and in-
novation needed to stay ahead of the committed and capable adversaries
we may face in combat. Building and sustaining these aspects of our cul-
ture is a task that should never end.
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MEMORANDUM FOR CHIEFS OF THE MILITARY SERVICES
SUBJECT: Defense Acquisition
December 8, 2016
Dear Military Department and Service Leadership:
For literally years I have been mentally composing a letter to you on your
role in Defense Acquisition and how you can help make your Service’s ac-
quisition efforts be more successful. With the recent changes in Service
civilian and military leadership, as well as the changes in the FY 2016 Na-
tional Defense Acquisition Act (NDAA), which I fully support and which
affects your role, it seems like a good time to set my thoughts down and
provide them to you. I’d like to start by talking about the aspects of de-
fense acquisition where I think you can have the most positive impact;
requirements, budget, and—most of all—the acquisition workforce. I fol-
low that with some comments on things to avoid, some thoughts on our
relationship to industry, and close with some comments on my role in
defense acquisition.
I encourage you to actively manage requirements and major require-
ment trades at your level. All acquisition programs start with user re-
quirements –they drive everything in the program; the risk profile and
resulting reduction and mitigation phases and activities, the contracting
approach and incentives, and the test program structure, just to name a
few. Acquisition programs can get into trouble in a lot of ways, but if the
requirements are not reasonably achievable and clearly stated so that
they can be put on contract and tested, the program is likely to be headed
for trouble from day one. Each Service has its own structure and authori-
ties for determining and setting requirements. This in itself is not the
source of the problems in requirements that I’ve observed. In my experi-
ence I have most often seen the following problems with requirements
set by the Services: technical infeasibility, arbitrary levels with marginal
operational benefits achieved only at high cost (most often in the area of
reliability numbers, but sometimes in other performance levels), vague-
ness, and rigidity. Getting requirements to the right place depends on an
open, constructive, and continuous interchange between operational, in-
telligence, and acquisition communities. You can have a major and posi-
tive influence in this area.
One of the Better Buying Power initiatives, monetizing differences in de-
sired performance levels, has an important impact on the requirements
communities. The idea behind this is simple; if we tell industry how
much we are willing to pay for higher performance levels and give them
monetary credit for offering higher performance levels when they bid
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competitively, than they are more likely to offer the performance we
want—and to do so at a reasonable price. Historically we have set Thresh-
old and Objective level requirements. Industry then bids the threshold
level and ignores the objective level, which invariably is more expensive
and therefore less competitive. By telling industry how much in dollars
we value higher performance (meaning how much more we are prepared
to pay for it—this has nothing to do with what it costs), and by giving
industry an evaluated price adjustment in source selection, we provide
a meaningful incentive to industry to be innovative and offer us more
capability. Without this we default to threshold levels. This concept is
working, but it depends on Service leadership support and the willing-
ness of the requirements communities to prioritize and to set a value on
different levels of performance.
Another aspect of getting requirements right is the willingness to adjust
as changes occur and knowledge increases. Here you can play a major
role in streamlining decision making and encouraging the elevation of re-
quests for needed changes. In each Service, requirements are approved
at a senior level (usually the four star level, but not the Service Chief).
Once requirements have been enshrined in a four star approved docu-
ment, and for Major Defense Acquisition Programs (MDAPs) blessed by
the Joint Requirements Oversight Council, it can be very hard and time
consuming to make needed adjustments. Part of the problem is cultural.
Lower level operational community officers, usually field grade officers,
are generally tasked to coordinate with the acquisition community on be-
half of the operational community that set the initial requirement. These
people are not predisposed to go back to their superiors to request a
change in a four star approved requirement. The Service’s Configuration
Steering Boards are intended to provide a forum in which requirements
decisions and trades can be evaluated. Under our current rules, the CSBs
for MDAPs are supposed to meet at least annually. In the early stages of
development this is probably not enough. My advice to you is to create a
climate and mechanism by which both operational staff and acquisition
staff are encouraged to surface requirements issues early so that needed
trades can take place before a great deal of time and money is wasted
pursuing a goal that needs to be changed.
With the technological superiority challenges DOD faces today, time is a
more important consideration than ever. One of the more difficult choic-
es we have to make in defense acquisition is whether or not to increase a
requirement on a program that is well into a multi-year development be-
cause of new intelligence on the threat that system will face. Doing this can
be very disruptive and increase cost and schedule significantly. Sometimes
a threat change calls the very utility of the program into question. When
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intelligence reveals a change in the threat, Service operational leadership,
in consultation with both intelligence, and acquisition leadership should
make a conscious decision on how to proceed; continue as planned and
upgrade the system later, change the requirements (and the design and
the program) now, or cancel the program because it is obsolete already.
From the acquisition community perspective this is a customer decision
and the Service leadership is the customer, but it is also one in which ac-
quisition professionals want to be involved so that the operational cus-
tomer appreciates the full implications of any decision he or she makes. In
my experience our Program Managers have a bias toward stability—they
know that more stressing requirements mean increased risk, cost, and
schedule—but we are building these systems for a reason, to provide the
warfighter with the tools he needs against potential adversaries, and the
acquisition community is dedicated to that result.
Service leadership generally controls the Service’s budget, subject to
review at the DOD level. Here I would ask simply that you ensure Ser-
vice acquisition programs are adequately funded. This isn’t easy when
budgets are tight and it is tempting to talk yourself into “accepting risk”
by under-funding acquisition programs, thereby keeping more programs
on the Service’s books. I would urge you to give your acquisition leader-
ship and cost estimators a strong voice as you build your budgets. One
of the most revealing studies on defense acquisition I have ever seen
shows a very strong correlation between budget climate (“tight” or “ac-
commodating”) and future cost growth. Going back several decades,
the evidence is clear that when budgets are tight we are more inclined
to be optimistic about new program costs. This feels really good until
reality intervenes, as it always does eventually. While we have been con-
sistently improving our cost performance over the last few years, the
mean is still well above zero for our programs. Development phases in
particular tend to overrun, on average about 30%. Early production is
better behaved, but still overruns about 10% on average. Succumbing to
the wishful thinking of under-funding programs is contrary to the entire
history of defense acquisition, and it compounds future problems when
they inevitably arise.
I would also ask that you take into full account the long term affordabil-
ity of programs as you create your Service budgets and decide on any
new systems the Service will acquire. Most of the program cancellations
I have observed have been because of long term affordability concerns.
The most recent one was the Marine Corps Expeditionary Fighting Ve-
hicle, which the Commandant correctly concluded could not be afforded
in foreseeable Corps budgets under any circumstances. For the past five
plus years I have been requiring the Services to conduct affordability
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analyses in order to derive affordability caps for programs. We set af-
fordability “goals” or “targets” early in an acquisition program lifecycle
and firm them up as “caps” at the time we commit to development for
production and establish the program’s baseline. Defining these caps is
not an acquisition community responsibility; they are a Service leader-
ship responsibility. Generally the Service programmers are responsible
for the analysis and recommending caps, usually caps on unit production
cost and annual sustainment cost. Those who criticize this approach do
so based on the difficulty of predicting budgets for the 30 or 40 year life
cycle of a new program. It is true that we can’t predict budgets accurate-
ly; but is also true that conducting affordability analyses now so that we
can make better decisions now about new starts and program require-
ments can keep us from embarking on clearly unaffordable programs,
and it can help us make better informed requirements versus cost trades
as the program advances and we learn more. This is nothing other than
prudent long term capital investment planning, and I urge you to support
it in your Service.
In the second addition of the Better Buying Power initiatives, I included a
section on building the professionalism of the acquisition workforce. This
section in some form should be in any Better Buying Power or other future
acquisition improvement program. As senior leaders you are fully aware
of the importance of good leadership and management skills. I’m not sure
that you are as aware of the importance of professionalism in the acquisi-
tion workforce, which includes professionals in about a dozen fields. Those
fields include management of new product development, engineering,
contracting, testing, logistics, and maintenance. Each of these, and the
other acquisition professions, requires special expertise, not just good
leadership and general management skills, to be successful. I’m particular-
ly concerned that our technical engineering management workforce isn’t
as large or capable as it should be. Supervising new product development
is supervising engineering. Anyone managing a development program
without an appropriate technical background is largely just deciding who
to trust. In the government we generally do not hire professionals from
outside; we build them over long careers. This is particularly true of our
uniformed acquisition professionals, but it is also generally true of our civil
servants. Senior operational leaders are professionals also, but in differ-
ent fields; I doubt that any of you would consider putting someone with
no relevant operational experience in charge of an air wing, or a brigade,
or an aircraft carrier. I would ask that you do all you can to recognize the
importance to your Service of our acquisition professionals and that you do
everything you can to strengthen the professionalism of this critical part of
your Service.
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On occasion I have heard senior Service leadership talk about the gap
between operational and acquisition people in their Service. Many times,
I have seen evidence of the, for lack of a better word, tribal structure of
each Service, and how acquisition people are viewed in that structure. At
a retirement for a senior acquisition flag officer a few years ago, I heard
the Service Chief complement the retiring officer’s ability to bridge the
gap between operations and acquisition people. In my opinion this gap is
a fiction; acquisition people are fully part of the Services. They are very
much members of the team and very dedicated to the team’s success.
All acquisition officers should have been through at least one operational
tour; the operational world is well known to them. Perception is often
the equivalent of reality, however, and if the operational community per-
ceives the acquisition community as a tribe apart, that will not be lost on
your acquisition professionals. As leaders of your Services, you can do a
great deal to counter this perception. What you say and how you say it
about the acquisition workforce sends powerful messages to that work-
force, and to the rest of your Service. Spending time with acquisition or-
ganizations and people matters. Ensuring at least equivalent promotion
rates and the existence of meaningful opportunities for advancement in
the Service will speak very strongly to your acquisition workforce.
Throughout the Department, with great support from the Service Acqui-
sition Executives (SAEs), we have encouraged a culture change toward
cost consciousness and active cost management. As a result, over the
last several years we have seen significant improvement in acquisition
outcomes, particularly cost growth. The Department’s most recent “An-
nual Report on the Performance of the Acquisition System” and other
data confirms the positive trends. These improvements are the result of
1,000s of individual decisions by members or the Services’ acquisition
workforces. They are in part due to an increased focus by our workforce
on cost control, especially under a management technique that was in-
troduced in 2010 as a Better Buying Power initiative called “should cost.”
Should cost directs all our mangers to understand and assess their cost
structures, to identify opportunities for savings, to set targets, and to act
on those opportunities. Targets are established and documented, and
managers work to achieve them. The policy is that any savings remain
within the Service. Savings are not assumed or taken out of budgets until
they are actually achieved—should costs are “stretch goals” and success
is not assumed. This is a major cultural shift because our system tends
to reward spending as opposed to saving. Managers are reviewed for ex-
ecution rates, and if they aren’t spending their allocated funds quickly
enough they are subject to reductions. I’ve worked closely with the DOD
Comptroller through joint reviews in order to make sure that programs
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are not harmed if their cash flow doesn’t meet established norms. I’d ask
that you support “should cost” management everywhere we contract
for products and services and that you encourage your programmers to
work closely with your acquisition leadership to mitigate the perverse
incentive to spend no matter what that is associated with execution rate
enforcement.
As we continue to experience budgetary stress and execute mandato-
ry workforce reductions, I would ask that you protect your acquisition
workforce as much as you can. During the late ‘90s we effectively gutted
our acquisition workforce. Once this was recognized, the Department,
with support from the Congress, went through a period of increasing the
workforce in size and increasing its quality through training. This period
came to an end in about 2012 when sequestration became law and bud-
get cuts started in earnest. We have been fairly successful in protecting
the gains we made prior to 2012, and under Better Buying Power and
other initiatives we have increased our focus on developing and retain-
ing the professionals we have. I am very concerned that the Department
or individual Services may reduce their acquisition workforces in order
to preserve operational force structure on the margins. I’d ask that you
pay close attention to this area as you consider both civilian and military
personnel reductions. In the near term I am seeing problems in the ad-
equacy of our contracting workforce—this shows up as increased time
to award and as quicker, but not better or more cost effective, forms of
contracts being more widely used. This can deprive us of needed support
and it leads to higher costs that dwarf the short term savings. In the lon-
ger term it can also mean not having the engineering expertise we need
to manage contracts with industry. People matter most—no acquisition
policy anyone can invent will compensate for lack of expertise or capabil-
ity within your Service’s workforce.
So far I’ve tried to emphasize the ways in which I think you can help your
Service’s acquisition efforts move in the right direction. I’d like to address
the other side of the coin now, the ways in which you might unintention-
ally do harm. This isn’t speculative. I’ve seen all of this too many times.
Our military culture includes elements that serve us well operationally;
a can do spirit, the ability to make decisions in the face of uncertainty,
strong leadership, obedience to authority. When these same qualities are
applied to acquisition decisions by leaders with the best of intentions, but
who know little or nothing of the acquisition professions, the results can
be unfortunate.
First of all avoid arbitrary mandates, especially for schedules. The great-
est disaster I know of in acquisition history occurred in large part be-
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cause a Service Chief set a totally unrealistic schedule goal. The “can
do” attitude and respect for authority led the acquisition leadership in
place to take huge risk, with predictable results. When the Service Chief
in question retired, four years were added to the schedule, but the dam-
age had already been done. Your acquisition professionals, and historical
data, provide a good basis for assessing the realism of schedules. The
simple determiner of schedule is complexity. New product development
times are driven by the work that had to be done, which is related di-
rectly to the complexity of the product. An F-35 is orders of magnitude
more complex than an MRAP, or almost anything else we’ve ever built.
Arbitrary performance levels can be problematic also. Both performance
risk and technical risk were compounded when the Navy was directed to
change course on the aircraft carrier USS FORD and implement higher
performance, but higher risk, subsystems more quickly than the Navy’s
acquisition professionals thought wise. I think it is fair to say that if the
honest professional judgement of competent acquisition professionals
had been elicited and listened to in each of these cases, that major prob-
lems could have been avoided. Our military culture can make it very hard
for subordinates to tell senior leadership things they don’t want to hear.
I would urge you to challenge your acquisition professionals to do better,
make sure they understand your sense of urgency, but at the same time
encourage them to be candid and listen to their advice about subjects
they understand. An analogy I like to use is that of a patient who is told
by his brain surgeon that an operation on a tumor will take several hours.
Would you insist that the brain surgeon competed the operation in half
the recommended time?
Don’t mistake events like contract awards for real progress; signing a
bad business deal isn’t progress—it’s a trap that will be sprung later. For
years we have encouraged our program management and contracting
people to take the time to get a good business deal for the government
while treating industry fairly. Sometimes this leads to long negotiations.
When this is the case your acquisition people will need your support as
they face industry and sometimes political pressure to get a contract
awarded. Once we have a signed contract that document defines our re-
lationship to industry for the period of performance of the work; we need
to get these agreements right, and sometimes that takes time. In every
negotiation time favors one side or the other; we shouldn’t artificially
constrain our own negotiators by putting too much pressure on them to
sign awards so that we can have the appearance of progress.
Please don’t create additional bureaucracy to fulfill your new formal
responsibilities. The NDAA requires your concurrence in programs at
Milestone A (the start of any contracted risk reduction needed prior to
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commitment to development for production) and at Milestone B (the
start of development for production) when we really commit to a pro-
gram and establish the program baseline for the duration of the product
lifecycle. For programs for which I am the Milestone Decision Authority
(MDA) we have introduced a simple way for you to provide this concur-
rence in writing. For programs for which the Service Acquisition Execu-
tive (SAE) is the MDA you will need to work out a similar procedure dem-
onstrating concurrence. We already have too much bureaucracy as it is,
and I would urge you not to create more review process or organizations
to help you with this new statutory requirement. In fact I would urge
you to examine the existing review and staffing processes within your
Services to see if it can be reduced. For the past several years (in every
version of Better Buying Power), the SAEs and I have tried to reduce the
unproductive bureaucracy associated with acquisition programs. We’ve
made some progress, but I’m not happy with where we are. This is still a
work in progress, but the fact is that most of the bureaucracy associated
with programs exists within the Services rather than OSD, and it is some-
thing that you have control over. I would also add that staffing and review
processes are not the problem with defense acquisition nor are they syn-
onymous with it. They do add overhead to our programs, and they do
distract our managers from their real work, but the problems with cost,
schedule, and performance that we encounter are not because of our
bureaucratic processes, which generally run parallel and concurrent with
the actual contracted work. The big problem with those processes is that
they sometimes fail in their fundamental purpose—to prevent programs
from having major problems that could have been avoided or mitigated.
Understand the difference between risk reduction prototypes and pro-
duction prototypes. They both have their purposes, but they are not the
same thing. Engineers love to build risk reduction prototypes. They don’t
take as long or cost nearly as much as production prototypes; they in-
clude the most interesting and important technical challenges associ-
ated with the new product; they provide a gratifying physical demonstra-
tion of what a producible product could do; and they provide a basis for
experimentation with how a production version would be used in prac-
tice. They also may also provide some operational capability, on a limited
scale. Despite all these good things, risk reduction prototypes are not
a substitute for a complete design that meets reliability and suitability
requirements and provides all the features our operators need. In a crisis
we do produce clones of risk reduction prototypes, but when we do so we
pay a price. Global Hawk provides a good example. It took years to work
off the supportability problems and the program was nearly canceled in
favor of the venerable U-2, largely because of high support costs. I’m
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a big proponent of risk reduction prototyping and experimentation; we
have a number of demonstrations funded in the FY 17 budget. Please do
not equate these demonstrators to production prototypes, however.
I would ask that you be wary of claims of “acquisition magic.” There is
no acquisition magic. We all share the frustration that programs overrun
and take longer than we would like. In my forty odd years in defense ac-
quisition I have seen a lot of versions of acquisition magic. While some of
them included sound ideas that make for marginal improvements, none
really change the fundamentals. They took the form of Firm Fixed Price
Development, Total Quality Management, Reinventing Government, To-
tal System Performance, Lead System Integrators, and others. We can
learn lessons that are sometimes applicable from each of these, but at
the end of the day new product development and transition to production
remains what it has always been, a challenge that demands experience
and professionalism for success and that can never be totally free of risk.
Creating something new as efficiently as possible means setting reason-
able achievable goals (requirements), doing the necessary risk reduction
to ensure the product has a good chance of being created within reason-
able cost and schedules (sometimes, but not always, including full scale
risk reduction prototypes), planning and executing all the tasks needed
to complete a design for production that balances many often compet-
ing features, making and testing production prototypes, correcting prob-
lems and ramping up production. All of this entails risk, and most of this
is done by industry in a relationship defined by the terms of a contract
under some degree of Service supervision, which brings me to the next
topic I want to address; our relationship to industry and your involvement
in that.
Industry is very simple to understand. One of the things I liked about
working in industry is that everyone in a corporation knows what the def-
inition of success is and how it is measured. In short, if something makes
money for the firm it is good. If it doesn’t it isn’t. Industry tries hard to de-
liver products to us successfully; when industry fails it isn’t because they
don’t care about achieving results or aren’t trying. Stronger incentives
can lead to better performance, but only so much. The more financial
impact achieving success has, the more industry will focus its efforts,
its talent, and its resources to achieve success. For example, on average
development contracts yield about 6% profit. Production contracts yield
about 11%. That’s a strong a motivation to get through development and
into production. There is nothing wrong with this system; the quasi-free
market approach the United States has taken to defense acquisition has
served us well. Market incentives and competition have been very effec-
tive at providing us with the best weapons systems in the world.
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Getting Defense Acquisition Right
One of the things we have tried to do over the last few years is to provide
stronger financial incentives to industry that align profit with industry
performance. Industry would on the whole prefer as easy an environ-
ment as possible in which to make money, so some of our initiatives have
not been popular. We have to strike the right balance here; if we squeeze
industry too hard we will drive firms out of the defense industrial base.
As we have sharpened our own business practices, however, industry
has continued to report good margins, so at this point I’m not highly con-
cerned. I am concerned that we have too few new products in our pipe
line and I am concerned about trends in the structure of our research and
development accounts and of the industrial base. There are limitations
to what can be accomplished with financial incentives and you should
be aware of them. Industry can only absorb so much financial risk, and if
that risk is realized industry reacts very predictably—as it did in the in-
famous A-12 case. As a result, the SAEs and I think very carefully before
we authorize fixed price development contracts. At the end of the day we
are the ones who need the product, the risk that it will never be produced
is always ours.
Service leadership is also often the recipient of marketing by industry.
I encourage you to be open to discussions with industry; they are the
source of most of the innovation contained in our weapons systems. To
be successful they need to know our requirements and challenges, and
we need to hear their concerns and ideas. While self-interest can safely
be presumed, that doesn’t mean their ideas don’t have value. Many times
they will be good for government and industry both, and we should be
open to them. I would just make the point that a marketing pitch isn’t
always the whole truth. As much as industry can be considered our part-
ners or team members (I refer to the industrial base as part of our force
structure, which in effect it is), at the end of the day industry has to make
money to survive and shareholders rightfully hold defense firm manage-
ment accountable for success as a business above all else. I would ask
that you work closely with your acquisition professionals to ensure that
your Service, and the DOD, present a consistent and stable set of posi-
tions to industry.
Finally a word or two about my role in defense acquisition. I provide ac-
quisition policy for the Department. Statute governs much of what we do,
but within the limitations of statute I work with the SAEs to identify and
promulgate best practices for the Department. That’s what every ver-
sion of Better Buying Power has tried to do; not magic, but incremental
improvement based on results as measured by data. I’m also very in-
volved in the development of the acquisition workforce, which comprises
approximately 150,000 people, mostly civilian. I provide some measure
173
Chapter Five: Responding to External Forces and Events
of leadership for that workforce, but this is a shared responsibility with
Service chains of command. For those programs for which I am the MDA,
I make the major milestone decisions which commit large sums of tax-
payer funds to the next phase of the products life cycle. These decisions
are based on Service plans which are presented for approval. In doing
this I focus on the affordability and executability of the Service’s plan. I
ask the basic questions about requirements firmness and clarity, techni-
cal feasibility, funding and schedule reasonableness, soundness of the
contracting approach and incentives, test planning, and production and
life cycle support planning needed to make the due diligence decision for
the Department that the program has a reasonable chance of success.
Program planning, management, and execution are Service responsibili-
ties. If a program encounters serious problems, I work with the Service to
determine the best corrective action.
I’ve covered a lot of ground, much of it I hope is familiar to each of you.
Some Service leadership has extensive experience in acquisition, but
most uniformed leaders and many civilian leaders do not. It is a com-
plex and challenging activity, one among many, which the DOD tries to
accomplish for our country. I would be happy to discuss the content of
this letter and any other acquisition related topic with you at any time.
You also have a standing invitation to any meeting I might hold on any
of your Service’s programs or acquisition activities, including Defense
Acquisition Boards. We are united in our desire to improve acquisition
outcomes, and I look forward to working more closely with you as we all
do everything we can to improve the efficiency and effectiveness of all
aspects of defense acquisition.
Sincerely,
Frank Kendall
USD (AT&L)
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Getting Defense Acquisition Right
When and When Not
to Accelerate Acquisitions
Reprinted from Defense AT&L: November-December 2016
Why don’t we do all our acquisition programs faster? What keeps us
from having all acquisition programs be “rapid” acquisitions? e
short answer is that, if we choose to, we can trade quality for time.
Sometimes that is smart, and sometimes it isn’t.
Oen, and for good reasons, we demand high quality, and that takes more
time. What I mean by “quality” in this case is the suite of features we want
in the equipment intended for a large fraction of the force and that we keep
in our inventory for a long time—30 or 40 years, in many cases. Quality
includes high reliability, maintainability, operation in a range of climates
and terrains, modularity and upgradability, well-designed user interfaces,
cybersecurity, robustness against responsive threats, and eective training
and logistics systems. None of these things is free, and they all take time to
design for and test.
For most so-called Programs of Record, we do take the time to design and
build products of the quality desired by the customers, our operational
communities. If you want something quick, it is generally going to be of
lower quality—but that may be perfectly ne, depending on what you want.
is is the operator’s call; the acquisition system responds to operator re-
quirements. As acquisition professionals, we do want a two-way continu-
ing discussion about requirements throughout the design and development
process—and beyond. at conversation is necessary because design and
development always involve a voyage of discovery. And because many de-
sired design features have to be traded o against each other and against
cost, those trade-os should be operator/customer decisions, but should
still be decisions informed by acquisition professionals.
To do anything, we need money and a contract. ere are vehicles that let
us spend some money quickly, particularly for early stage prototypes, and
there are some contract types that allow us to move out quickly, but they
have limitations on scope, purpose, and amount we can spend. Lead time
can be close to zero, or up to 2 years if we have to wait for a budget to be
prepared, submitted and funded by Congress. We can work contracting
activities (preparation of the request for proposal or even source selection)
and milestone review processes (Defense Acquisition Board document
175
Chapter Five: Responding to External Forces and Events
preparation, as required) in parallel with the process of getting money—
and usually we do so. If we already have the money, then some time is
needed to have a contract. Again, for some limited purposes, this can be
fast—but for major competitive awards this now takes about 18 months,
close to the time it takes us to get funding from Congress. at’s twice the
time it used to take a couple of decades ago, and one of the actions we are
working is to reduce this lead time.
If we just want a small number of prototypes for experimental purposes,
and we only care about some key features and not the overall quality of the
product, we can deliver in a matter of months or a few years, depending
on how much new design work has to be done and the lead time for build-
ing small numbers of items or acquiring any needed subsystems from the
manufacturers in the supply chain. If we want to try out a new kind of ca-
pability, to experiment, and don’t care about long-term ownership quality
quality-related features, then rapid prototyping is the way to go. We can do
this sort of thing fast, and the technical community loves to work on proj-
ects like this. However, some quality aspects such as safety must be dealt
with when we work with energetics such as munitions and rocket propel-
lants. We can do experimental prototyping without having a program of
record, so no acquisition system bureaucracy overhead need be involved in
an experimental prototype program. e product you will get from an ex-
perimental prototyping program is unlikely to be one you can just replicate
and eld in large numbers—it wasn’t designed for that. Sometimes we have
liked the key features of experimental prototypes and just bought more of
them. Because of their poor quality for long-term ownership and use, this
has oen been a disaster (see Global Hawk and the Exoatmospheric Kill
Vehicle, as examples).
Next up on the quality hierarchy are assembled items that focus on one or
two key performance parameters that we do want in larger quantities, but
where we are willing to sacrice some aspects of quality in order to have
an important operational capability fast, usually for operational reasons or
maybe because we’ve been surprised by a threat. ink Mine-Resistant Am-
bush Protected (MRAP) vehicles, which were pulled together from existing
automotive components. e goal was to get more protection to the eld and
to get it fast. MRAPs were a big success. We saved a lot of lives. MRAPs are
relatively simple designs assembled from existing components and designed
for low-end threats. ey lack a lot of the features needed or desired by the
Army, however, and almost all of the 30,000 or so we built are going out of
the inventory now that the major counterinsurgency campaigns are over.
Next on the quality scale are new designs that take into account all the
things the customer wants. ese are high quality products, and they take
176
Getting Defense Acquisition Right
longer, but that’s because we ask for more of them and have to do more
work designing, building and testing. We want integrated designs that
have many features desired by the customer (again requirements). ink
of the Joint Light Tactical Vehicle (JLTV). e JLTV is a much higher qual-
ity product than any of the MRAPs. It will be in the Army inventory for
decades, and most of the cost will be in maintenance and sustainment. e
Army wants a highly reliable, maintainable design that will operate in a
wide variety of terrain and in any climate. is is very dierent from what
we did with MRAPs. JLTV is still a relatively simple design, but it has taken
several years to mature the designs and pick a winner. For most of these
systems, we do use the standard acquisition system milestones associated
with decisions to start risk reduction (if needed), design for production and
production itself. When the acquisition system’s set of milestone decisions
is needed, we do this in parallel with the actual work so we don’t slow pro-
grams down. e decision process adds overhead, but it generally does not
add time.
Highest of all in terms of quality are systems like the F-35 ghter jet. ese
are designs that integrate the newest technology, have the highest possible
performance, and that we count on for a signicant, decades-long military
advantage. We want quality features like high reliability, maintainability,
upgradability for tech insertion, well-designed user interfaces, cybersecu-
rity, anti-tamper, resilience against jamming and responsive threats, and
a host of other things our operators understandably desire. ese systems
are the Formula 1 race cars that are going to win against the best there
is and do so for years, not just for one racing season. ey are not Chev-
ies. ese are our highest quality and most dicult products, but these
are also the ones that oen make the most dierence in terms of techno-
logical superiority and operational dominance. ey take several years in
development, and oen we need to do a risk-reduction technology matura-
tion phase before we start designing for production. at adds 3 years or
more if we build risk reduction prototypes before we start designing for
production. For these systems, you do have to wait about 10 years, but they
are what populates most of our force. ink F-18 combat jet, Aegis missile
defense, DDG-51 destroyer, the Virginia SSN submarine, F-15 and F-22
ghter jets, C-17 military transport aircra, AMRAAM air-to-air missile,
Abrams tank, Bradley ghting vehicle, Patriot missile, and Apache heli-
copter. Notably, every one of these high quality systems struggled to get
through development and into production. Most were close to cancellation
at some time in their development cycles.
e acquisition system can produce experimental prototypes quickly, but if
our customers want a high quality product that we will have in the invento-
ry in large numbers for a lot of years, that takes longer. Many of the demon-
177
Chapter Five: Responding to External Forces and Events
strations we have funded in the budget are experimental early prototypes.
We are eectively buying options to do lower risk follow-on Engineering
and Manufacturing Development phases leading to production. e abil-
ity to aord those follow-on programs, or even a subset of the concepts we
will have demonstrated in the next few years, will be problematic. Unfortu-
nately, the threats we are most worried about are not low-end threats—we
are going to need high quality robust designs.
178
179
Chapter Six
Measuring Progress in
Improving Acquisition
“People only ask questions when they’re ready to hear the answers.”
—John Irving
As I write today, cost growth in the DoD’s most risky contracts is at a 30-
year low. is remarkable result has been achieved aer several years of
consistent management and continuous improvement eorts centered on
the three versions of the Better Buying Power initiatives. Figure 4 provides
the data that support this statement.
Figure 4. Contract Cost Growth on Highest Risk
(Major) Programs
Contract Growth: Development and Early Production
(scope growth + overruns; in dollars, after ination)
Better Buying Power
31-year average
Reagan Buildup
War on Terror
1
2
3
4
5
Post Goldwater-Nichols
Reinventing Gov’t
Transformation
Total System Performance
Responsibility (TSPR)
FY1985 1990 1995 2000 2005 2010 2015
10%
8%
6%
4%
2%
0%
SOURCE: AT&L (2016, p. xxviii).
NOTE: is is a 5-year moving average of annual growth in development and early produc-
tion contract costs for major DoD programs aer ination, including overruns and work
added to the contracts. ese data reect 18,470 reports on 1,123 major contracts for 239
major programs.
180
Getting Defense Acquisition Right
is chart and many others reecting the DoD’s acquisition performance
exist because of my decades of frustration with how we careened from one
acquisition policy to another. One of my great frustrations has been the
tendency to signicantly change acquisition policy on 10- or 20-year cycles
without ever determining rst whether a policy was improving results or
not. Developing new designs beyond the state-of-the-art weapons systems
will never be free of risk, but there seems to be an expectation that all pro-
grams should execute perfectly on time and schedule. is doesn’t happen,
of course, so we are oen dissatised with results, leading to a political
and management practice of more or less constant change. e occasional
acquisition disaster further fuels this tendency. I believe rmly that we can
analyze and understand the results we are achieving and identify the poli-
cies that work and those that do not.
Several years ago, I formed a small cell of statistical analysts who have been
dedicated to analyzing and reporting on the DoD’s acquisition perfor-
mance. We have also used the work of others, such as think tanks and the
Government Accountability Oce, to further our understanding. Each of
the last 4 years the DoD has published a compendium of the results of this
analysis. As time has gone on, we have been able to identify policies that
work and policies that have no or negative eect. is record now demon-
strates quite clearly that the policies we have pursued are making a positive
dierence in our outcomes, particularly on controlling cost. Some of those
results are provided here, but I refer you to the complete volumes for a
much more complete set of data and a very rich discussion of the analysis
the DoD has compiled.
1
In addition to being at a 30-year low, our cost performance improvements
have not come at the expense of industry protability. As noted earlier,
prot is not optional for any business. Figure 5 summarizes the report-
ed prot margins for the biggest defense contractors over the last several
years. ey have generally remained stable or even increased.
1 Under Secretary of Defense for Acquisition, Technology, and Logistics. (2013). Perfor-
mance of the Defense Acquisition System, 2013 annual report. Washington, DC: Department
of Defense. http://www.dtic.mil/dtic/tr/fulltext/u2/a587235.pdf
Under Secretary of Defense for Acquisition, Technology, and Logistics. (2014). Performance
of the Defense Acquisition System, 2014 annual report. Washington, DC: Department of De-
fense. http://www.dtic.mil/dtic/tr/fulltext/u2/a603782.pdf
Under Secretary of Defense for Acquisition, Technology, and Logistics. (2015). Performance
of the Defense Acquisition System, 2015 annual report. Washington, DC: Department of De-
fense. http://www.dtic.mil/dtic/tr/fulltext/u2/a621941.pdf
Under Secretary of Defense for Acquisition, Technology, and Logistics. (2016). Performance
of the Defense Acquisition System, 2016 annual report. Washington, DC: Department of De-
fense. http://go.usa.gov/xkf4t
181
Chapter Six: Measuring Progress in Improving Acquisition
16%
14%
12%
10%
8%
6%
4%
2%
Underperforming acquisitions drove
$2 billion writedown of goodwill
Figure 5. Profits of the Six Largest DoD Primes
18%
Lockheed Martin
Northrop Grumman
Raytheon
General Dynamics
Boeing BDS
BAE Systems
Average
0%
2010 2011 2012 2013 1024 2015
SOURCE: Company 10-K lings; AT&L (2016, p. xlviii).
NOTES: Prots are corporate scal year earnings before interest, taxes, depreciation and
amortization (EBITDA).
Under Better Buying Power, in every version, the DoD has stressed the
importance of managing cost by identifying and setting targets for cost
reductions and working to obtain those savings. Figure 6 reects the major
increase in the percentage of the DoD’s programs that are achieving cost
savings relative to their original baselines for both programs in develop-
ment and programs in production. is is a dramatic improvement.
Getting Defense Acquisition Right
Figure 6. Percent of Major Programs with Cost Reductions
Development
As of 2009: As of 2015:
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0%
17%
46%
Better
Upward
Shift
0%
27%
Better
0%
MS B MS B MS B
MS B MS B MS B
1982–1993 1994–2002 2003–2009
1982–1999 2000–2008 2009–2015
(n=14) (n=44) (n=37)
(n=23) (n=35) (n=13)
Production
As of 2009:
As of 2015:
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0%
23%
8%
39%
Better
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
24%
47%
77%
Better
Upward
Shift
MS B MS B MS B MS B MS B MS B
1982–1993 1994–2002 2003–2009 1982–1999 2000–2008 2009–2015
(n=13) (n=40) (n=33) (n=25) (n=36) (n=13)
Signicant positive shifts from 2009 to 2015
SOURCE: AT&L (2016, p. xxvii).
NOTE: Procurement funding growth is aer adjusting for any quantity changes. e “n”
gives the number of active programs in each time window.
Unfortunately, the performance of the entire acquisition enterprise is of-
ten characterized based on one or two outlier programs that have incurred
large and highly visible cost and schedule overruns; the F-35 ghter jet,
a very atypical program, is a good example. Figure 7 shows that over the
last several years the numbers of programs having large cost increases that
trigger statutory review processes known as Nunn-McCurdy reviews have
also decreased consistently. We have analyzed the root causes of these large
cost growth events (Table 1), and many can be traced to poor decisions to
accept excessive risk in development.
182
183
Chapter Six: Measuring Progress in Improving Acquisition
Figure 7. Major Programs Crossing Critical Congressional
Cost-Growth Thresholds
0
1
2
3
4
5
8
6
4
2
0
Due to other issues
Trend (other issues only)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Due to quantity changes
SOURCE: AT&L (2016, p. 25).
Getting Defense Acquisition Right
Table 1. Root Causes for Major Programs Crossing Critical
Congressional Cost-Growth Thresholds or Other Major
Problems
Fraction Count
Inception
Unrealistic baseline estimates for cost or
schedule
29% 6
Unrealistic performance expectations
Immature technologies or excessive manu-
facturing or integration risk
Other
Execution
Poor performance by government or con-
tractor personnel responsible for program
management
• Systems engineering
10%
10%
10%
2
2
2
48% 10
43% 9
• Inadequate contract incentives 38% 8
• Limited situational awareness
• Failure to act on information
Changes in procurement quantity
Unanticipated design, engineering, manufac-
turing or technology integration issues aris-
ing during program performance
Other
Inadequate program funding or funding insta-
bility
29%
29%
19%
14%
19%
0%
Total:
6
6
4
3
4
0
21
SOURCE: AT&L (2016, p. 28).
Together with the misimpression that the DoD has a large number of high-
cost-growth programs, there is also an impression that the acquisition sys-
tem takes too long to develop and eld new systems. Again, outliers like
the F-35 are not representative of overall performance. Cycle time on major
programs has, however, increased with complexity over the last few de-
cades, but the average time from starting Engineering and Manufacturing
Development (EMD) to Initial Operational Capability (IOC) over the last
two decades averages about 7 years and is fairly stable (Figure 8).
184
185
Chapter Six: Measuring Progress in Improving Acquisition
Figure 8. Planned Length of Active Development Contracts
for Major Programs
Average (years)
Average annual cycle time
(years)
7
6
5
4
3
2
1
0
1980 1985 1990 1995 2000 2005 2010 2015
FY
SOURCE: AT&L (2016, p. 60).
For major information systems, the cycle time has decreased signicantly
at the median over the last few years (Figure 9). Also, we have been reduc-
ing schedule growth on individual contracts overall since 1985 (Figure 10).
186
Getting Defense Acquisition Right
Figure 9. Planned Major Information System Development
Time
Median (years)
7
6
5
4
3
2
1
0
5.0
3.2
Started Before 2009 Started Since 2009
(n=22) (n=19)
SOURCE: AT&L (2016, p. xxxviii).
Figure 10. Contract Schedule Growth on Highest Risk
(Major) Programs
Schedule Growth
12%
10%
8%
6%
4%
2%
0%
Actual Model
downward trend
in time
1985 1990 1995 2000 2005 2010 2015
SOURCE: AT&L (2016, p. xxxviii).
187
Chapter Six: Measuring Progress in Improving Acquisition
As we try to understand the factors that aect the performance of the acquisi-
tion system we need to look beyond the obvious acquisition and contracting
policies. One signicant, compelling result was obtained by the Institute for
Defense Analysis in a study of the relationship between budget climate (tight
or decreasing versus loose/obliging or increasing) and future cost growth
(Figure 11). is correlation is the strongest one we have identied to explain
program cost growth. e data below show that, until now at least, acquisi-
tion policy has been much less important than budget climate in explaining
cost growth in programs. is fact makes the results we are currently achiev-
ing during a period of tight budgets even more signicant.
Figure 11. Cost Growth on Highest Risk (Major) Programs
Started in Different Budget Climates
Median
50%
40%
30%
20%
10%
0%
Budget:
Acquisition
Era:
no Obliging
comparison
no Obliging
comparison
n/a
n/a
Obliging
FY 1981-
1982
Tight
FY 1987-
1989
Tight
FY 1970-
1980
Obliging
FY 1983-
1986
Tight
FY 1990-
1993
Obliging
none
Tight
FY 1994-
2000
Obliging
none
Tight
FY 2001-
2002
Obliging
FY 2003-
2007
DSARC Post-Carlucci DAB AR Post-AR
29%
23%
28%
40%
50%
9% 9%
5%
SOURCE: McNicol and Wu (2014); AT&L (2015, p. xxxiv).
e rst article in this section is a progress report on the Better Buying
Power initiatives written in 2014, approximately 4 years aer the rst ver-
sion of Better Buying Power was introduced and 2 years aer version 2.0
was implemented. e “core” initiatives that I believe should be in any ver-
sion of Better Buying Power (under any label) are emphasized. ese in-
clude the use of aordability caps, the requirement to use “should cost”
management approaches, and the need for strong nancial incentives
tightly coupled to the government’s goals. Perhaps most important among
these “core” initiatives are those designed to improve the professionalism
of the government workforce. Whatever progress we have made over the
188
Getting Defense Acquisition Right
past several years is all due to the many actions across the vast defense ac-
quisition workforce taken by our dedicated professionals as they go about
the day-to-day business of extracting as much value as possible from every
taxpayer’s dollar they are trusted to spend on behalf of our warghters and
our country.
e second and nal article in this section is the foreword to the fourth and
most recent annual Report on the Performance of the Defense Acquisition
System. is article summarizes some of the measurable results reected in
the annual report.
189
Chapter Six: Measuring Progress in Improving Acquisition
Better Buying Power—
A Progress Assessment
Reprinted from Defense AT&L: July-August 2014
We are now four years since Dr. Carter and I began work on the rst itera-
tion of Better Buying Power, the label Dr. Carter gave to the original set of
policies we promulgated as part of then Secretary Gates’ eciency initia-
tives in 2010. In the intervening years, I’ve released the second iteration,
or BBP 2.0 as it’s called, and I’ve also recently made some statements in
public that BBP 3.0 may be on the horizon. Has all this made a dierence?
I believe it has, although I’m also certain that we have ample room for ad-
ditional gains in productivity and other improved outcomes. Despite some
comments I’ve made about BBP 3.0, the commitment to the enduring prac-
tices and policies from both the original BBP and BBP 2.0 remains. e
whole concept of Better Buying Power is of a commitment to continuous
incremental improvement; improvement based on experience, pragmatism
and analysis of the evidence (i.e., the data). Four years on, as we to begin to
consider the next steps we may decide to take, it’s a reasonable time to take
a look at what we have done so far.
When I introduced the second iteration of Better Buying Power, we had
already made a number of adjustments (continuous evolutionary improve-
ments) to the initiatives in the rst iteration. Under 2.0, most of the BBP 1.0
initiatives continued, either under the 2.0 label or just as good best practices
we may not have emphasized under BBP 2.0. Where changes were made, this
was clearly articulated in 2.0. For example, the overly restrictive guidance on
xed-price incentive contract type (never intended to be as proscriptive as it
may have been interpreted to be) was changed to emphasize sound decision
making about the best contract type to use in a given circumstance. We also
relaxed the model constraints on time to recompete service contracts that
proved too restrictive. In general, BBP 2.0 moved us in an incremental way
from the set of model rules or best practices that tended to characterize BBP
1.0, to a recognition that, in the complex world of defense acquisition, critical
thinking by well informed and experienced acquisition professionals is the
key to success—not one-size-ts-all rules. is is equally true of the acqui-
sition of contracted services for maintenance, facility support, information
technology, or anything else we acquire from industry, as it is for the various
aspects of the large programs that we normally associate with defense acqui-
sition. I won’t cover every initiative in BBP 2.0, but in general here’s where
190
Getting Defense Acquisition Right
I think we are in improving defense acquisition, and where I think we still
need to go on these initiatives.
Achieving Affordable Programs
Over the past 4 years we have continuously increased the number of major
programs with assigned aordability targets (Milestone A or before) or caps
(Milestone B) as programs come through the milestone review process. I re-
cently reviewed the status of compliance, and, in all but two or three cases,
programs with caps have so far remained under their caps. e few that need
to act immediately to reduce costs have estimates that are very close to their
caps. I believe we have been successful in applying the caps. e aordabil-
ity analysis process is also detailed in the new Department of Defense In-
struction (DoDI) 5000.02, and in most cases this process is being followed
by service programming communities who do the long-term budget analysis
needed to derive caps on sustainment and production. For smaller programs
that are a fraction of the considered capability portfolio, assigning a cap can
be problematic, but it still needs to be done to instill discipline in the require-
ments process. Looking forward, the Department has a signicant problem
in the next decade aording certain portfolios—strategic deterrence, ship-
building and tactical aircra are examples. is situation will have to be ad-
dressed in the budget process, but I think we can say that we are making
reasonable progress in the acquisition system in constraining program cost,
especially for unit production cost, which is easier to control than sustain-
ment. Nevertheless, we have challenges particularly in understanding long-
term aordability caps outside the 5-year planning cycle, especially under a
sequestration level budget scenario.
Controlling Cost Throughout
the Acquisition Life Cycle
e implementation of “should-cost based management” is well under way,
but work is still needed to instill this concept deeply in our culture and
the way we do business. “Should cost” challenges every DoD manager of
contracted work to identify opportunities for cost reduction, to set targets
to achieve those reductions, and to work to achieve them. Managers at all
levels should be taking and requiring that these steps be taken and reward-
ing successful realization of cost savings. I am seeing more and more of the
desired behavior as time passes, but I am also still seeing cases where im-
plementation seems to be more token than real. We also have work to do in
understanding and teaching our managers the cra of doing “should cost”
for our smaller programs (e.g., Acquisition Category IIIs, Services, etc.)—
this remains a work in progress. Overall, “should cost,” as a single mea-
sure alone, if fully implemented, will cause fundamental change in how we
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Chapter Six: Measuring Progress in Improving Acquisition
manage our funds. e letter the Under Secretary of Defense (Comptroller)
and I signed 2 years ago laying out our expectations for major program
obligation rate reviews is still operative; the job is not to spend the budget,
it is to control costs while acquiring the desired product or service and to
return any excess funds for higher-priority needs. e chain of command
still has to learn how to support that behavior instead of punishing it. For
major program “should cost” realization, the saved funds will continue to
remain with the Service or Agency, preferably for use in the program or
portfolio that achieved the savings.
We are making progress at measuring and understanding the performance
of the acquisition system. Last year I published the rst edition of the An-
nual Report on the Performance of the Defense Acquisition System. e
next report should be published at about the time that this article goes to
press. Each year we will try to expand the data set with relevant informa-
tion about all aspects of defense acquisition performance. We will also add
analysis that will help us understand the root causes of good and poor re-
sults and that correlates the results we are seeing with our policies. We need
to make decisions and track our performance via data and robust analysis,
not anecdote or opinion.
Further, it isn’t always easy to look in the mirror, and some government
institutions or industry rms may not like what the report reveals, but the
road to improvement has to begin with an understanding of where the
problems lie.
I believe we are also gaining ground with regard to cooperation between
the requirements and acquisition communities. My own partnership with
the Vice Chairman of the Joint Chiefs of Sta and the Joint Requirements
Oversight Council is intended to set the example in this area. We meet
frequently to discuss issues of mutual concern and to reinforce each other’s
roles in the requirements and acquisition systems. e use of aordability
caps and expanded use of Conguration Steering Boards or “provider fo-
rums” are also strengthening the linkage to the requirements communi-
ties. ere is an ancient debate about which comes rst, requirements or
technology. e debate is silly; they must come together and it cannot be
a one-time event in a program but continuous. Requirements that are not
feasible or aordable are just so many words. A program that doesn’t meet
the user’s needs is wasted money.
e BBP 2.0 program to increase the use of defense exportability features
in initial designs is still in the pilot stage. I believe this concept is sound,
but the implementation is dicult because of some of the constraints on
our budgeting, appropriations and contracting systems. Support for U.S.
defense exports pays large dividends for national security (improved and
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Getting Defense Acquisition Right
closer relationships), operationally (built-in interoperability and ease of co-
operative training), nancially (reduced U.S. cost through higher produc-
tion rates), and industrially (strengthening our base). is initiative will
continue on a pilot basis, but hopefully be expanded as the implementation
issues are identied and worked out.
Incentivize Productivity and Innovation
in Industry and Government
Our analysis of the data shows that we have more work to do in aligning
protability with performance. is year’s Annual Report on the Perfor-
mance of the Acquisition System will provide the data. In most cases we
get it right—good performance leads to higher prots, and poor perfor-
mance leads to lower prots. In some cases, however, there is no discern-
able impact of performance on margins, and in a few cases prot actually
moves in the opposite direction from performance. In addition to getting
the correlation right, we also need to make the correlation stronger and to
tie increased rewards to real accomplishments. We want win-win business
deals, but we aren’t always obtaining them.
In BBP 2.0, we modied the guidance from BBP 1.0 to focus attention on
professional judgments about the appropriate contract type, as opposed to
emphasizing one type over others. As we analyze the data on major pro-
grams, it shows that in general we get this right, particularly with regard to
choices between xed-price and cost-plus vehicles. We are still in the pro-
cess of providing updated guidance in this area. One thing is clear from the
data: Where xed price is used, there is benet to greater use of xed-price
incentive vehicles, especially in production contracts and even beyond the
initial lots of production. We are increasing the use of xed-price incentive
contracts in early production—and it is paying o.
We have begun to monetize the value of performance above threshold
levels, however this practice is still in its early phases of implementation.
Requirements communities usually express a “threshold” level of perfor-
mance and a higher “objective” level of performance, without any indica-
tion of how much in monetary terms they value the high level of capability.
It represents a dicult culture change for our operational communities to
have to put a monetary value on the higher than minimum performance
levels they would prefer—if the price were right. e Air Force Combat
Rescue Helicopter was the rst application of this practice now in the pro-
cess of being applied more widely across the Department. Forcing Service
requirements and budget decision makers to address the value they place
on higher performance (which has nothing to do with the cost) is leading
to better “best value” competitions where industry is well informed about
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the Department’s willingness to pay for higher performance, innovation is
encouraged and source selections can be more objective.
One of the strongest industry inputs we received in formulating the BBP
2.0 policies was that the “lowest price, technically acceptable” (known as
LPTA) form of source selection was being misused and overused. We have
provided revised policy guidance that, like other contracting techniques,
LPTA should be used with professional judgment about its applicability.
is technique works well when only minimal performance is desired and
contracted services or products are objectively dened. LPTA does sim-
plify source selection, but it also limits the government’s ability to acquire
higher quality performance. I believe we have been successful in reducing
the use of LPTA in cases where it isn’t appropriate, but we are open to con-
tinued feedback from industry on this.
Instituting a superior supplier incentive program that would recognize and
reward the relative performance levels of our suppliers was a BBP 1.0 ini-
tiative that we have had great diculty implementing. I’m happy to report
that the Navy pilot program has completed the evaluation of the Navy’s
top 25 contracted service and product suppliers. e evaluation used the
Contractor Performance Assessment Rating System (or CPARS) data as its
basis. Major business units within corporations were assessed separately.
e Navy is providing results divided into top, middle and lower thirds.
Business units or rms in the top third will be invited to propose ways to
reduce unneeded administrative and overhead burdens. e Superior Sup-
plier Program will be expanded DoD-wide over the next year. We expect
this program to provide a strong incentive to industry to improve perfor-
mance and tangible benets to our highest performing suppliers. Finally,
we expect to build on this Navy pilot and expand it to the other Services.
BBP 2.0 encouraged the increased use of Performance Based Logistics
(PBL) contract vehicles. ese vehicles reward companies for providing
higher levels of reliability and availability to our warghters. If the busi-
ness deal is well written and properly executed, then PBL does provide cost
savings and better results. e data shows that we have not been able to
expand the use of PBL for the last 2 years and that prior to that the use
was declining. Declining budgets as well as the budget uncertainty itself,
and therefore contract opportunities, are part of this story, as is the fact
the PBL arrangements are harder to structure and enforce than more tra-
ditional approaches. ose factors, combined with the imposition of se-
questration, furloughs and a government shutdown last year are likely to
have suppressed the increased use of PBL. is area will receive additional
management attention going forward; we are going to increase the use of
this business approach.
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Another major input to BBP 2.0 received from industry concerned the
large audit backlog with the Defense Contract Audit Agency (DCAA). e
backlogs both delay contract close-out payments and extend the time be-
fore new awards can occur. Pat Fitzgerald, the DCAA Director, has worked
very closely with the acquisition community to address this. Pat is a regu-
lar participant in the monthly Business Senior Integration Group meetings
that I chair to manage BBP implementation. Under Pat’s leadership, DCAA
is well on the way to eliminating most of the incurred cost audit backlog
and expects to eectively eliminate the areas with the most excessive back-
log over the next year. is is being accomplished despite all the workforce
issues the Department has been forced to deal with.
Strengthening discretionary research and development by industry was an
early BBP initiative. I am concerned that industry is cutting back on inter-
nal research and development as defense budgets shrink. is is an area
we have tried to strengthen under BBP. We have made good progress in
providing an online forum for industry to understand the Department’s
technology needs and internal investments, and for industry to provide
research and development results to government customers. If company
R&D isn’t being conducted, then these steps certainly can’t substitute for
doing the actual research. We will be tracking these investments carefully
going forward, and I will be working with defense company chief execu-
tives and chief technology ocers to review their investment plans. e
wisest course for industry is to continue adequate investments in R&D so
as to be positioned for the inevitable future increase in defense budgets.
Now is the time for all of us to invest in research and development. is
requires discipline and commitment to the long-term as opposed to short-
term performance, however. Most of the chief executives I have discussed
this with share this perspective; they recognize that the Department needs
industry partners who are in this for the long term with the Department.
Eliminate Unproductive Processes
and Bureaucracy
I would like to be able to report more success in this regard, but I am nd-
ing that bureaucratic tendencies tend to grow and to generate products for
use within the bureaucracy itself, together with the fact that the comfort-
able habits of years and even decades are hard to break. is is all even
truer, in my opinion, within the Services than it is within the Oce of
the Secretary of Defense (OSD). On the plus side, however, we are making
progress and I have no intention of stopping this eort.
I have taken steps to reduce the frequency of reviews, particularly re-
views at lower sta levels. Whenever possible we are combining OSD
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Chapter Six: Measuring Progress in Improving Acquisition
and Service reviews or using senior-level in-depth reviews without pre-
ceding sta reviews and briengs. I have also instituted an annual con-
sideration of major programs for delegation to the Services for manage-
ment. Where the program risk has been signicantly mitigated and/or all
major Department investment commitments have already been made, I
am delegating programs for Service oversight. I am also looking for op-
portunities to conduct pilot “skunk works” type oversight of programs
which will, among other features, substitute in-depth but short on-scene
reviews for the numerous formal documents with attendant stang pro-
cess that are normally required to support milestone decisions. I have
also set rm and short time spans for sta review of some key documents
so that issues are identied quickly and elevated rather than debated end-
lessly at the sta level.
Our efforts to increase the role and primacy of the acquisition chain
of command are also making progress, but have additional room for
improvement. A full-day workshop the Service Acquisition Executives
(SAEs) and I recently conducted with all the Department’s Program
Executive Officers (PEOs) was very effective in communicating our
priorities and in obtaining feedback on Better Buying Power and other
initiatives. That feedback will be very helpful as we adjust our policies
going forward. I also recently conducted a half-day workshop with our
PEOs and program managers who manage and direct the Department’s
business systems. This is an area where I feel strongly that we can re-
duce some of the burdensome overhead and bureaucracy associated
with these programs. I will need the support of the Congress to achieve
this, however.
Time is money, and reducing cycle time, particularly long development
times and extended inecient production runs would improve the De-
partment’s productivity. I have reviewed the data on development time-
lines and they have increased, but not on average by outrageous amounts;
the average increase in major program development time over the last few
decades is about 9 months. Much of this increase seems to be driven by
longer testing cycles, brought on by the growth in the number of require-
ments that have to be veried, and by the increased complexity and size,
and therefore development time, of the soware components of our pro-
grams. We are still collecting data and analyzing root causes of cycle time
trends, but the most debilitating one is obvious: Budget cuts in general
and sequestration cuts in particular are forcing the Department to adopt
low production rates, in some cases below the theoretical minimum sus-
taining rate. Lowering production rates is stretching out our production
cycle time and raising unit costs almost across the board.
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Promote Effective Competition
Competition works. It works better than anything else to reduce and
control costs. Unfortunately, the current data shows that the Department is
losing ground in the percentage of contracted work being let competitively
each year. e erosion is not huge, and I believe that decreasing budgets,
which limit new competitive opportunities, are a major root cause. e Air
Force launch program provides an example; we were moving aggressively
toward introducing competition when budget cuts forced the deferral of
about half the launches scheduled for competition. is is an area that I
will be tracking closely and managing with the SAEs and agency heads in
the coming months to try to reverse the recent trend.
Under BBP, we have recognized that for defense programs, head-to-head
competition isn’t always viable, so we are emphasizing other steps or mea-
sures that can be taken to create and maintain what we call “competitive
environments.” Simply put, I want every defense contractor to be worried
that a competitor may take his work for DoD away at some point in the
future. As I review programs, I ask each program manager and PEO to
identify the steps they are taking to ensure the existence of a competitive
environment for the eorts they are leading.
Open systems provide one opportunity to maintain competition below the
prime level and to create a competitive environment for any future modi-
cations or upgrades. Open systems and government “breakout” of compo-
nents or subsystems for direct purchase are not necessarily in the interest
of our primes, so careful management of interfaces and associated intellec-
tual property, especially technical data rights, is key to achieving competi-
tion below the prime level and for future upgrades. Industry has a right to a
fair price for intellectual property it has developed, but the government has
many inherent rights and can consider the intellectual property implica-
tions of oerings in source selection. Our principal eort in this area has
been to educate and train our workforce about how to manage this complex
area. is is an eort that will bear fruit over time and in which I believe
reasonable progress is being made. As we mature our practice in this area,
we need to also guard against overreaching; industry cannot be forced or
intimidated into surrendering valid property rights, but the government
has to exercise its rights and protect its interests at the same time as it re-
spects industry’s.
Further, we in the government must have strong technical and programmat-
ic capabilities to eectively implement open systems. e Long Range Strike
Bomber program is applying modular open systems eectively in its acquisi-
tion strategy and provides a good example of how this balanced approach
can work—again, if there is strong technical leadership by the government.
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Small businesses provide an excellent source of competition. Due in no small
part to the strong leadership of the Department’s Oce of Small Business
Programs Director, Andre Gudger, we have made great progress over the last
few years. We have improved our market research so that small business op-
portunities are identied and we have conducted numerous outreach events
to enable small businesses to work more eectively with the Department.
While much of our eort has been directed toward increasing the amount of
Department work placed with small businesses, this has been done with the
recognition that work allocated to small businesses will be provided through
competition, and competition that involves rms without the overhead
burdens of our large primes. At this time, the trends in our small business
awards are positive, despite the diculties of the last few years, and I have
strong expectations for our performance this scal year.
e Department continues to emphasize competitive risk-reduction pro-
totypes—when the business case supports it. is best practice isn’t called
for in every program; the risk prole and cost determine the advisability
of paying for competitive system-level prototypes. e available data shows
that when we do acquire competitive risk-reduction prototypes we have to
work harder on the government side to ensure that the relevant risk associ-
ated with the actual product we will acquire and eld is really reduced. BBP
2.0 reinforces this maxim, and I believe we have been correctly applying it
over the last few years. is is one of many areas where simply “checking the
box” of a favored acquisition technique is not adequate; real understanding
of the technical risk and how it can best be mitigated is necessary. It is also
necessary to understand industry’s perspective on these prototypes; indus-
try cares much more about winning the next contract than it does about
reducing the risk in the product that will be developed or produced under
that contract. Competitive prototypes are successful when government ac-
quisition professionals ensure that winning and reducing risk are aligned.
e data show that in many past cases they were not aligned.
Improve Tradecraft in Acquisition of Services
We have increased the level of management attention focused on acquisi-
tion of services under both BBP 1.0 and 2.0. I still see this as the greatest
opportunity for productivity improvement and cost reduction available to
the Department. I have assigned my Principal Deputy, Alan Estevez, to
lead the Department’s initiatives in this area. He is working with the Senior
Service Acquisition Managers that we established under BBP 1.0 in each
of the Military Departments. We have also now assigned senior managers
in OSD and in each of the Military Departments for all of the several ma-
jor categories in which we contract for services: knowledge-based services,
research and development, facilities services, electronics and communica-
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tion, equipment-related services, medical, construction, logistics manage-
ment and transportation.
Our business policy and practices for services are improving. A counter-
part to the oen revised DoD Instruction for Programs, DoDI 5000.02, has
been completed in dra and will soon be implemented. We have begun the
process of creating productivity metrics for each of the service categories
and in some cases for sub-areas where the categories are broad and diverse.
We are also continuing eorts begun under BBP 1.0 to improve our ability
to conduct eective competition for services, including more clearly de-
ned requirements for services and the prevention of requirements creep
that expands and extends the scope of existing contracts when competition
would be more appropriate. Services contracting is also an area in which
we are focusing our small business eorts.
Services are oen acquired outside the “normal” acquisition chain by peo-
ple who are not primarily acquisition specialists—they are oen acquired
locally in a distributed fashion across the entire DoD enterprise. Services
are also oen paid for with Operation and Maintenance (O&M) funds
where specic eorts have much less visibility and therefore less oversight.
e results achieved as a result of acquisition practices for service procure-
ments are oen not as evident to management, nor as well publicized as the
results for weapon system. We are working to correct this by strengthening
our business management (not just contract management) in these areas
and to identify and encourage best practices, such as requirements review
boards and the use of tripwires.
In summary, I believe that we have made a good start at addressing the po-
tential improvements that are possible in contracted services, but we have
more opportunity in this area than in any other.
Improve the Professionalism
of the Total Acquisition Workforce
e total acquisition workforce includes people who work in all aspects of
acquisition; program management, engineering, test and evaluation, con-
tracting and contract management, logistics, quality assurance, auditing
and many other specialties. All of these elds require high degrees of pro-
fessionalism. I’m proud of our workforce; it is highly professional, but there
isn’t a single person in the workforce, including me, who can’t improve his
or her professional abilities.
e addition of this major category in BBP 2.0 was the most signicant
adjustment to BBP 1.0. e specic initiatives included several measures
to enhance our professionalism. Under the Defense Acquisition Workforce
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Improvement Act, the Department created three levels of acquisition pro-
ciency. I don’t believe that the standards for these levels as currently de-
ned or implemented are adequate for the key leader acquisition positions
that carry our highest levels of responsibility. We are in the process of cre-
ating and implementing higher standards for these positions. at process
should conclude within the next year. As part of this initiative, we are con-
ducting a pilot program to establish professional qualication boards. e
pilot is being conducted by the Developmental Test and Evaluation com-
munity under the leadership of the Deputy Assistant Secretary of Defense
for Developmental Test and Evaluation, David Brown.
ese boards will help to establish a culture of excellence in our acquisi-
tion career elds and DoD-wide standards for our key leaders. We are also
taking steps to better dene the qualication requirements for all our ac-
quisition specialties. ese qualications will rely more heavily on specic
hands-on work experience than we have in the past. Finally, we have taken
steps to more fully recognize and reward our top performers. At my level,
this includes spot awards as well as our standard periodic awards. We are
making a particular eort to recognize the contributions of teams as well
as individuals and to recognize exceptional performance in the full range
of defense acquisition activities.
People matter. If there is one legacy I would like to leave behind it is a stron-
ger and more professional Defense Acquisition Workforce than the one I
inherited from my predecessors. e tide would seem to be against me be-
cause of events like pay freezes, sequestration, furloughs, shutdowns and
workforce reductions—all brought about by the current budget climate.
However, if there is one thing that has impressed me during my 40-plus
years in defense acquisition, most of it in government, it is the dedication,
positive attitude, resilience and desire to serve the taxpayer and our Ser-
vicemen and -women well that characterizes this country’s acquisition pro-
fessionals. Neither the public, nor everyone in Congress, nor even all of our
operational communities seems to fully appreciate the nation’s acquisition
workforce. is country owes a lot to you; together with our industry part-
ners, you are the reason we have the best-equipped military in the world. I
think that’s a good note to close on. anks for all that you do.
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Foreword to the 2016 Report
Reprinted from the Fourth Annual Report on the Performance of the
Defense Acquisition System, October. 24, 2016
Eliminate all other factors, and the one which remains must be the truth.
—Sir Arthur Conan Doyle in “e Sign of the Four”
As this report is being published, I am concluding 5 years of serving as
the Under Secretary of Defense for Acquisition, Logistics, and Technol-
ogy. is fourth report in the series continues my long-term eort to bring
data-driven decision making to acquisition policy. is report demonstrates
that the Department of Defense (DoD) is making continuing progress in
improving acquisition. e overall series presents strong evidence that the
DoD has moved—and is moving—in the right direction with regard to the
cost, schedule, and quality of the products we deliver. ere is, of course,
much more that can be done to improve defense acquisition, but with the
5-year moving average of cost growth on our largest and highest-risk pro-
grams at a 30-year low, it is hard to argue that we are not moving in the
right direction.
Each year we add cumulative data and new analysis to the report. is year
is no exception. While that data can show us ways and places to improve, I
believe there is no secret to what it takes to achieve good results in defense
acquisition. e short form of this is to: (1) set reasonable requirements, (2)
put professionals in charge, (3) give them the resources that they need, and
(4) provide strong incentives for success. Unfortunately, there is a world of
complexity and diculty in each of these four items.
Creating new—and sometimes well beyond the current state of the art—
weapons systems that will give our warghters a decisive operational
advantage far into the future will never be a low-risk endeavor. at risk
can be managed, however, and while we should not expect perfection, we
should be able to keep the inevitable problems that will arise within rea-
sonable bounds. We should also be able to continuously improve our per-
formance as we learn from our experience and work to improve our ability
to make sound acquisition decisions. is volume and its predecessors are
dedicated to these propositions.
We open this volume with some accrued insights and an attempt to refute
some popular myths about defense acquisition. Too much of our decision
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making on acquisition policy has been based on cyclical and intuitive con-
ventional wisdom and on anecdote—or just the desire, spurred by frus-
tration, to aect change. As I’ve worked in this eld for more than four
decades, it has become clear to me that there is no “acquisition magic”—no
easy solution or set of solutions that will miraculously change our results.
Most attempts to direct or legislate acquisition “magic” in some form have
been counterproductive and oen only increased the system’s bureaucracy
and rigidity or led to excessive risk taking—neither of which is helpful.
What we need, and always will need, is professionalism, hard work, at-
tention to detail, and exible policies and incentives that the data show
align with the results we desire. Improving each of these is a continuous
endeavor of which this volume is a part.
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203
Conclusion
“Any fool can make a rule and every fool will mind it.”
—Henry David oreau
I would like to end this anthology where I began Chapter 1, with the sim-
plest formulation of how to get defense acquisition right that I’ve been able
to conceive:
• Set reasonable requirements.
• Put professionals in charge.
• Give them the resources they need.
• Provide strong incentives for success.
If we can nd a way to do these four things, we will have done almost all
that is possible at the senior management level.
e rst of these, setting reasonable requirements, is a job for military op-
erational customers working in very close cooperation with acquisition
professionals. Requirements should include not just performance, but also
cost, urgency, and desired features. ey should include well-dened pri-
orities and, when possible, monetized value judgments to guide trade-os
and inform industry. Requirements maturation and the cooperation be-
tween operational and acquisition communities should occur over the life
cycle of the product, but be particularly strong during the early stages of
development when all the major decisions that will drive the design of a
new product are made.
e second applies to the government acquisition workforce particularly,
and to all the leaders that inuence that institution. Defense acquisition
is managed by a collection of professions. If you want a champion sports
team or a rst-in-class organization of any type, you recruit the best and
you develop talent. e entire acquisition chain of command and each key
acquisition leader in all of the dozen or so acquisition professions should
be qualied, trained, and experienced professionals. is includes the De-
fense Acquisition Executive and the Service or Component Acquisition Ex-
ecutives. Building this professional workforce is a job for everyone who can
aect the result, by action or inaction. is includes Congress, the leader-
ship of the Department and the Services, and everyone in the chains of
command of the people comprising the defense acquisition workforce. It
starts with appreciating the challenges the workforce must overcome and
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the great diculties they face in doing so, and it includes a host of measures
that can be taken to strengthen that workforce.
e second point also addresses the authority that should be granted to
those professionals. Put them in charge, let them do their jobs, and hold
them accountable for the results, but be realistic about expectations. Frank-
ly, the DoD’s acquisition professionals get far too much direction in how to
do their jobs from people and institutions who know next to nothing about
what it takes to develop and deliver a new product. Washington seems to
be full of people with theories about how to “reform” acquisition, and no
experience whatsoever in actually delivering products. Along those lines,
one risk of the move to increase Service Chiefs’ and Secretaries’ involve-
ment in acquisition is just this. Almost without exception Service Chiefs
have no experience or training in acquisition, in developing and delivering
a new cutting-edge design. Also, the most recent version of the NDAA, the
2017 bill that recently became law, contains incredibly detailed language on
newly devised acquisition approaches that seem to be totally divorced from
the reality of new product development and all the painful lessons of earlier
statutory or management experiments. One cannot manage acquisition by
remote control, and statutory constraints are just that, constraints that get
in the way of sound situation-based decision making by professionals. I
would ask Congress to stop telling the Department’s acquisition profes-
sionals how to do their jobs. Give them the exibility they need to be suc-
cessful, and then hold them accountable for the decisions they make, even
if there is a delay of several years, as there oen is, from the decision to its
consequences becoming apparent. I, for one, am fully prepared to testify
someday on the decisions I made as USD(AT&L). I’m sure I made mistakes,
and if the Department can learn from those mistakes so as not to repeat
them, I fully support that process.
e third applies to all the resources needed for success, but especially
time and money. Programs that begin with unrealistic schedules and in-
adequate funding are headed for failure from day one. e major risk I
see in the trifecta of the current enthusiasm for “rapid acquisition,” com-
bined with a climate of tight budgets and the delegation of more authority
to the military Services, who are always motivated toward optimism, is
that we will set programs up for failure, as we oen have in the past. e
Under Secretary for Acquisition was established to address precisely this
issue. I worked on the Army’s Future Combat Systems in industry (at least
$10 billion and nothing delivered to the warghter), and I was involved in
oversight of the A-12 combat reconnaissance aircra asco in government
(several billion spent, nothing delivered to the warghter, and a 20-year
lawsuit). I know what this looks like, and I hope we have learned not to
repeat these experiences, but I’m skeptical.
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e last point, “provide strong incentives for success,” is trickier than it
sounds. Its application to industry is relatively clear, but not always straight-
forward or easy. Industry responds to nancial incentives, but that is not
the end of the story. Aligning those incentives so that they work eectively
and consistently with the government’s goals can be a delicate balancing
act. I have stressed this aspect of acquisition planning, and the data reect
that we have made progress. It’s important for government people, acquisi-
tion and otherwise, to realize that industry is motivated, rst and foremost,
to win contracts. Aer that they are strongly motivated to make money on
those contracts. Both motivations are important, and both can lead to be-
havior that is or isn’t in the warghter and the taxpayer’s interests.
Incentives within government are more subtle and diverse. ey include
organizational and personal rewards that are generally not monetary, and
they include positive and negative incentives (carrots and sticks). One fea-
ture of those incentives is that they are rather limited in both directions.
Providing more incentives for the behaviors we want by our government
team is a leadership challenge that I and many other leaders throughout
the acquisition chains of command work on constantly. We need the help
of other leaders in and out of DoD. I cringe whenever I hear an operational
leader complain about the acquisition community’s perceived shortcom-
ings, or a congressman reect negatively on the government workforce.
Both are strong disincentives for bright young people to join or stay in the
eld of government defense acquisition.
As I was rolling out one of the versions of Better Buying Power at a Wash-
ington, DC think tank, someone asked me what grade I would give the
defense acquisition system. My answer was a B+ or maybe an A-. If the
defense acquisition enterprise, industry and government combined, were
a professional sports team, in football say, we’d be the repeat Super Bowl
winners year aer year. In fact we’d win almost all of our games. We’d also
have a fumble, or drop a pass, or miss a tackle once in a while. More directly
we deliver almost all of the products we set out to build, even the most dif-
cult and advanced products. We have fewer overruns and schedule slips
than many commercial product developers, and we easily outperform the
cost and schedule performance of large public works projects. Even as criti-
cized a program as the F-35, which was very much an outlier in many ways,
is delivering a best-in-the-world product that will anchor our dominance
in the air for years to come.
I close with one more article, the last I expect to publish for the DoD ac-
quisition workforce as USD(AT&L). It is a collection of anecdotes or stories
drawn from over my career. I believe in the use of data to drive acquisi-
tion policy, but like everyone else I’ve been inuenced by my experiences.
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As human beings, we learn well from the stories we hear or read as well
as from the ones we live. I think I learned something from each of these
experiences, and I hope that others may nd something useful somewhere
in them also.
is isn’t a broken system that needs radical overhaul. It does need to be
improved, and it can be. I believe, and the data support, that we have made
signicant improvements over the past several years, but there is more
work to be done. We do have too much bureaucracy, and we do need to
tailor and streamline our programs more. We can improve in almost every
facet of acquisition, but that improvement is going to come from the hard
work and professionalism of the people in the ring—industry and govern-
ment—ghting every day to deliver high quality products to our warght-
ers. ose people deserve our respect and gratitude.
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Adventures in Defense Acquisition
Reprinted from Defense AT&L: January-February 2017
For what is likely to be my last communication to the acquisition workforce
as Under Secretary of Defense for Acquisition, Technology, and Logistics
(USD[AT&L]), I thought I would share with you a few stories, all true, from
my 45 or so years working in various aspects of defense acquisition, either
in uniform, as a civil servant, in industry, or as an appointee. I’ve put them
more or less in chronological order, starting with an experience I had while
serving in Europe during the height of the Cold War. ere has certainly
been a lot of water under the bridge since then, and a lot has changed, but
the things I’ve learned along the way are in many cases timeless.
During the 1970s, as an Army captain, I commanded a Hawk air defense
battery in West Germany. We had a new battalion commander take over
during that time. He immediately started a program he called “Victory
rough Integrity” or VTI. is was the period of the readiness crisis and
the “hollow force” following the end of the war in Vietnam.
Our new commander’s ideas on logistics included that cross-leveling parts
between units and cannibalizing down items of equipment, like our radars,
was a violation of our integrity. We stopped doing these things and went
nonoperational for several months while we stubbornly stuck to our “prin-
ciples” about these maintenance policies. During that period, training as
well as operational readiness suered enormously. Eventually, the battalion
commander was told to change his policies. He very reluctantly obeyed the
order. I believe it is always important to act in a principled way, and in par-
ticular to act with integrity, but in this case I felt that my commander had
confused integrity with reasonable choices in management policy. Leaders
will always have initiatives and labels to describe them (e.g., Better Buy-
ing Power), but when they represent management choices they should be
viewed as just that—choices that can be reversed or changed based on new
information (data) about how well they are working, or not.
In 1980, while still an Army captain, I attended my rst congressional
hearing. I believe it was the House Armed Services Committee. I was
there in support of my boss at the time, the Army major general who was
the Army’s Ballistic Missile Defense program manager. He was one in a
series of program managers providing testimony that day. is was about
3 years before President Reagan announced the Strategic Defense Initia-
tive (SDI) program.
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Getting Defense Acquisition Right
One of my most vivid memories of that hearing was the lead professional
sta member for the committee holding up a schedule and chastising a wit-
ness for the degree of concurrency in his program. What I can’t remember
is whether he was for or against concurrency—but, whichever it was, he was
passionate about it. We’ve been for and against concurrency several times
since that hearing. Like many other decisions, the degree of concurrency
(overlap between development and production) in a program is a judgment
call motivated by many factors, rst among them being condence in the
stability of the design. Early in my tenure as USD(AT&L), I referred to the
extraordinary amount of concurrency, and the specic decision to start
production on the F-35 ghter jet before any ight test data had been ac-
cumulated, as “acquisition malpractice.” e press loves pithy expressions
like this, so the comment got a lot of exposure. Concurrency decisions, like
many others in acquisition, require critical thinking, sound professional
judgment and taking a lot of program specic factors into account.
Careers can take strange turns. One of mine may have hinged on a 2 a.m.
ight from Andrews Air Force Base in Maryland to Nantucket Island in
Massachusetts. I was the Assistant Deputy Director of Defense Research
and Engineering for Strategic Defense programs. My boss’ boss’ boss, the
Under Secretary for Acquisition, was on vacation in Nantucket and was
tasked on short notice to come back to Washington for a hearing on the
SDI. I volunteered to y to Nantucket on the MILAIR ight that would
bring him back to DC and to prep him during the ight for the hearing,
which would be held the same day. We picked him up at about 5 a.m. No-
body had told him I would be on the airplane, so he was a little surprised to
see me. He was also pretty impressed that I had gone the extra mile to stay
up all night so I could brief him. I accompanied him to the hearing, which
went very well, in part because I had a chance to prep him thoroughly. Just
aer that, I applied to be the acting Director of Tactical Warfare Programs
when the incumbent le government. is job, overseeing all of the De-
partment of Defense (DoD) conventional weapons system programs and
reporting directly to the Under Secretary, was my dream job at the time. I
got the job.
While I was still the acting Director for Tactical Warfare Program, a period
of 2.5 years when I didn’t know if a political appointee would replace me,
there were four changes in the oceholder of Under Secretary of Defense
for Acquisition. One of these was a former executive from Ford who was to-
tally new to Washington and DoD and who had just come onboard. At the
time, we were struggling to get the Advanced Medium-Range Air-to-Air
Missile program (AMRAAM) through testing and into production. Late
on a Friday aernoon, I received a preliminary report from the Air Force
that we had experienced a ight test failure. ere was very little informa-
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Conclusion
tion on what had happened, so I decided to wait until I knew more before
informing the Under Secretary. On Monday morning, I was at Patuxent
River Naval Air Station in Maryland, getting a medical so I could do an
F-18 ight out to a carrier. A perk of my position was that there were oen
good reasons for me to experience rsthand the performance of our con-
ventional weapons programs.
Just as the ight physician was about to take my blood pressure, I received
a call from the Under Secretary. e press had heard about the ight test
failure and had asked the Secretary of Defense about it. He was clueless
so he asked the Under Secretary, who was also clueless because I hadn’t
informed him yet. When asked, the Air Force was understandably quick to
point out that I had been informed right aer the failure. e Under Sec-
retary proceeded to rip me a new one, as they say. As soon as I got o the
phone, the ight physician took my blood pressure. Eventually I did get to
experience the F-18 ight, and eventually the “acting” status was removed
from my title, but it took some time to recover from that initial impression.
Nobody likes surprises, and the more senior one is the less one likes them.
Bad news does not improve with age.
In addition to having problems completing ight test, the AMRAAM
struggled for at least a year to demonstrate that it could meet one specic
reliability requirement, the average number of hours it could be carried on
an aircra before a failure occurred. e requirement had been set arbi-
trarily at 450 hours. is was a totally unrealistic number that later analy-
sis showed had no operational value or cost eectiveness. e requirement
could have been dropped to 250 with minimal cost or operational impact.
So why did we spend more than a year making holes in the sky to prove we
could achieve 450 hours? Because we had failed operational testing and it
had politically become a high-interest item. e program had a bad repu-
tation and was at real risk of cancellation. e Services concluded that it
was better to keep ying to try to achieve the requirement than to take the
political risk associated with reducing it; so we kept ying. In those days,
requirements were oen set by relatively junior people with a high degree
of arbitrariness. e missile AMRAAM was replacing had a mean time
between failures of 200 ight hours. So what was a good number for the
replacement? How about 450 hours? Seemed reasonable. Acquisition and
operational people have to work in close cooperation. If you don’t, this is
the sort of thing that happens.
One of my programs in DoD was a special access Navy program to develop
the A-12 stealthy ghter bomber. It had already started Engineering and
Manufacturing Development when it fell under my portfolio. It was also
touted as a new model for how to do acquisition eectively at the time—
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Getting Defense Acquisition Right
little oversight, rm xed-price development, an acquisition approach that
in the development phase teamed two competitors who would later com-
pete for production, and a very aggressive schedule tied to xed-price pro-
duction options. It was a disaster waiting to happen. e A-12 is taught as a
classic case study in how not to do acquisition, and for good reasons.
We have a lot of programs that struggle to get through development and into
production, but most of them do get there. Programs like the A-12, where
we spend billions of dollars and get nothing, are travesties. I won’t try to tell
this whole story here; it is available elsewhere in great detail. At that time, the
Secretary of Defense was Dick Cheney, and we were doing something called
“e Major Aircra Review.” In one of my briengs to Secretary Cheney, I
had told him that based on earned value data (but not what the contractor
or military Service were saying) the program was in big trouble, and would
overrun by at least a year and $1 billion. I found that out from the DoD
Earned Value Management guru at the time, Gary Christle.
Aer the A-12 blew up, guratively speaking, and was canceled (proper-
ly so, as the Supreme Court nally concluded about 20 years later) there
was an investigation, led by a general ocer, into who knew what when. It
turned out that John had briefed a member of my sta several weeks earlier,
but no one had informed me. e data provided compelling evidence of
where the program was headed. at member of my sta who had been
briefed was a very capable Navy ocer. However, instead of informing me
of the data, he had immediately called the Navy sta to warn them about
this threat to the Navy’s program in the Oce of the Secretary of Defense. I
was rather upset when I found out he hadn’t seen any reason to inform me,
the person he was supposed to be working for. During the investigation, I
brought this up, and in the report that followed I was criticized for not hav-
ing adequately trained this ocer in the fact that he had a duty to inform
me, his supervisor, of any relevant information about the program he was
overseeing for me. I’m not making this up. Service loyalties run deep.
e A-12 cancellation came about in part because the Secretary of Defense
had testied that the program was progressing more or less on track. I don’t
know for a fact, but my guess is that he simply forgot about the concerns I
had expressed to him during the major aircra review. He had no reason to
dissemble, and he was put on the spot by a question he had not anticipated.
A few months later, the contractors requested a bailout, embarrassing the
Secretary, who subsequently ordered the program canceled. Two people on
the Secretary’s sta argued against cancellation—me and the Director of
Acquisition Policy, Eleanor Spector. Our new boss, who replaced the pre-
vious Under Secretary for Acquisition at about that time, listened to us
but kept his cards close. e decision meeting with Secretary Cheney took
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Conclusion
place early one morning, and neither Eleanor nor I attended. A few hours
later, another member of the acquisition sta, who had been in the Secre-
tary’s brieng room for a subsequent meeting, dropped o a hard copy of a
set of brieng charts he had found at the podium. ey were the charts my
boss, the new Under Secretary for Acquisition, had used to brief the Secre-
tary. e nal chart read: Recommendation—Termination. I don’t know to
this day if that was the right decision or not. Most of the time, as Eleanor
and I maintained, one is better o working through problems to get the
needed capability. is isn’t always the case, however. I do know that 25
years later the Navy still doesn’t have a stealthy tactical aircra operating
from a carrier, but we are getting close.
e Advanced Self-Protection Jammer or ASPJ is another program that
didn’t make it through the transition from development to production and
elding. ASPJ was another product of the fad of xed-price development
that was tried in the late 1980s. A good deal of my time in the early 1990s
was spent cleaning up the many messes that this policy created. I have good
experience-based reasons for wanting to avoid xed-price development.
ASPJ had another problem, however, and it had to do with algebra.
ASPJ was a jamming system for tactical aircra. Its job was in part to jam
enemy air defenses so that tactical aircra wouldn’t be shot down. In order to
get through the Operational Testing phase to transition to full-rate produc-
tion, ASPJ had to demonstrate that it could adequately perform this function.
e metric for success was expressed as an algebraic equation that had to be
statistically tested. e equation was built in part around the success of the
jammer at defeating a threat aer an air defense missile was launched against
the aircra with ASPJ on board. We made the mistake of not including the
cases in which ASPJ was eective at preventing the launch, so these successes
didn’t count as part of the test. Again, we found ourselves in a situation where
changing the rules would have been viewed with suspicion in the political
environment around struggling acquisition programs. In this case, we did
make the needed changes, but for other reasons the program was canceled
in the defense drawdown that followed the Cold War. It was later resurrected
with a dierent name and ultimately elded.
A few years later, I had taken a position at Raytheon as Corporate Vice
President of Engineering. We were in a tight competition with our most
ferocious competitor, Hughes Aircra, to build the next generation short-
range air-to-air missile, the AIM-9X. We thought we had a much better de-
sign than our competitor and were sure we could oer the customer much
better operational performance. We had a problem, however. From what
we could tell from the dra request for proposals we had seen and from
discussions with the Air Force, there was no way our higher performance
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Getting Defense Acquisition Right
could be considered in the source selection. We also anticipated a price dis-
advantage because our missile design, though innovative, was more com-
plex—and we believed more costly as a result.
I spent a lot of time in the Pentagon trying to get the program management,
the operational community, or the Under Secretary for Acquisition to pro-
vide some way for our better operational performance (a bigger engage-
ment envelope and higher probability of kill) to be considered in source
selection. I failed. In this case, we lost—but this occurred just as Raytheon
was buying Hughes. Hughes had bid very low; we speculated that this was
done so Hughes could book the business to enhance its attractiveness as an
acquisition. In some respects, this was a lowest price technically acceptable
source selection, something many in industry complain about today and
something I have tried to limit to cases where it is really appropriate. Most
of the time we do want higher performance, if it is at a price we would con-
sider reasonable. For the last few years, I have been encouraging or direct-
ing the military Services to provide bidders with a monetized adjustment
in source selection as a means of encouraging innovation and obtaining
best-value solutions. Aer several examples, it is clear that this approach
is working. I wish it had been used in the 1990s when we were bidding on
AIM-9X.
While I was in industry, I served for some time on the Army Science Advi-
sory Board. One study we were involved in was a review of a weapon system
that had featured prominently in the First Gulf War. It happened to be a
weapon system that my company produced. I don’t recall the reason, but
as part of the study we needed some technical data on the system’s perfor-
mance. For reasons we didn’t understand, we just couldn’t get the program
oce to give us the data, despite several requests. Finally, one of the study
group’s members, retired Gen. Jack Vessey, the former Vice Chief of Sta of
the Army, called the Chief of Sta to ask for some help. We got the data. I,
however, got a call through my corporate headquarters to go to Washing-
ton to meet with a brigadier general on the Army sta responsible for the
program to explain my reasoning, as I was associated with the request. e
program oce, fearing it might look bad somehow, had been slow-rolling
us in providing the data and I was being called to task for having gone over
everyone’s head to the Chief of Sta through Gen. Vessey. My management
wasn’t pleased. Corporations know where their money comes from, and
sometimes the people who control those funds have narrow ideas of what
is right and what is wrong.
Another incident from my time in industry involved what I can only de-
scribe as abuse of power by a government acquisition ocial. At the time,
my rm had two matters, totally unrelated and involving two programs,
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Conclusion
that we wanted resolved by the Service in question. One was a protest of
a bid we had lost. It was not at all common for my rm to protest. We felt
that it would upset our customers and that it was unlikely to succeed. In
this case, we had lost a bid on something we considered a core business—a
share of the market and a product that we had controlled for a very long
time. We felt we had a legitimate reason to protest the source selection and
it was important business—so we protested.
e other matter was a request we made of the same Service on another
program that was coming up for source selection. We wanted some chang-
es to the request-for-proposal language, changes we felt were fair and that
just happened to be to our advantage. With these two matters on the table,
we were visited by a senior ag ocer from the Service involved. He asked
us which of the two matters was most important to us and told us that
the Service’s decisions on them were “linked.” I was shocked. In my view,
then and now, the government should be resolving disputes or issues with
industry on a case-by-case basis on the merits. I never found out if this
conduct was illegal, but I’m certain that it was unethical. e government
should not cut backroom deals in which it coerces a contractor to give up
a legal right to a decision on the merits in return for a competitive ad-
vantage. e government has immense power over contractors, and has an
obligation to not abuse that power. When it does abuse its power, trust is
destroyed. By the way, my colleagues from industry and I did exactly the
right thing: We ignored the question.
While I was in industry, I spent several years as an independent consul-
tant. One of the projects I participated in was the Army’s Future Combat
Systems program or FCS. Like A-12, this program wasted billions of dol-
lars and delivered basically nothing to the Army. It was hugely ambitious,
driven by a “vision” that was divorced from reality and hobbled by totally
unrealistic direction on schedule, imposed from the top of the Army.
e acquisition community within the Army took huge risks trying to exe-
cute the unrealistic 4.5-year schedule from start of development to a produc-
tion decision—for the largest and most complex program in the history of
the DoD. e acquisition strategy risks, including the contracting approach,
a Lead System Integration, the immaturity of the requirements and the early
loss of competitive incentives doomed the program before it started. e san-
ity check that the Under Secretary for Acquisition is supposed to provide
failed under Service pressure to proceed. As soon as the responsible lead-
ership departed the Army, the schedule was slipped 4 more years—but the
damage had already been done. is is the most extreme example of some-
thing I have seen too many times; operational and Service leadership is al-
ways in a hurry and usually has no real understanding of what it takes to
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Getting Defense Acquisition Right
design, prototype, test or produce a specic product. is mistake cost the
Army more than $10 billion of precious research and development funds and
several years of modernization that can never be recovered.
e Services do have distinct cultures, and that includes how they relate to
outside stakeholders and authorities. e classic allusion to “the dumb, the
devious, and the deant” isn’t wholly accurate, but there are times when it
seems apt. A better characterization might be that the Army knows how to
salute to a fault, the Air Force likes to cite Oce of the Secretary of Defense
(OSD) direction as to why it is acting in a certain way, and the Navy would
strongly prefer that there be no OSD direction. at is certainly an over-
simplication, but it is a rough approximation of reality.
I could tell stories all day from my current tenure as USD(AT&L) about
the Services, but here is one from my tenure as Principle Deputy Un-
der Secretary: For some reason, we were having a meeting in my office
with a brigadier general from the Army’s acquisition community. We
got into a discussion of several options for how to proceed on a spe-
cific program. It wasn’t a decision meeting, and staff members were
just tossing out ideas for discussion. We did this for about 20 minutes
and the meeting broke up. About an hour later, I received a note from
the Army Acquisition Executive complaining about all the direction
the brigadier had been given. He walked out the room convinced that
he had just been directed to do every one of the things that had been
discussed, when in fact he had been directed to do none of them. Ap-
parently, he went back to his office with his hair on fire and started
ranting about all the crazy guidance he was getting from every member
of the DoD acquisition staff. I’m guessing that the Air Force would have
picked any guidance they liked and implemented it but made clear it
was at the direction of the OSD. The Navy would probably have regard-
ed it as an amusing conversation and largely ignored it. Try as I might,
I don’t know that I ever convinced the Services, at least at the program
manager level, to not take direction from random staff members with
no directive authority over them. My policy was that the staff was there
to advise me as the Defense Acquisition Executive, not to provide di-
rection to the Services—but implementing that policy isn’t as easy as it
should be. A program manager trying to get his program approved just
wants it approved, and is likely to err on the side of accepting direction
if he or she thinks it will help achieve the goal. I finally directed my
staff to identify all comments on Service plans as “Defense Acquisition
Board Issue,” discretionary, or administrative. This meant that I would
have visibility into anything the staff thought was important to change.
I think this has helped, but there is still room for progress.
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Conclusion
We spend a lot of time trying to devise acquisition strategies that will ef-
fectively incentivize industry to deliver more of whatever the government
wants. Industry has two priorities. In order of importance, they are to (1)
win contracts, and (2) make money on them. e rst is a prerequisite to
the second. Government people should never lose sight of the fact that
these imperatives always motivate industry. We can use them to get better
results, but we need to be careful about unintended consequences.
A case in point was the Joint Advanced Guided Missile or JAGM, an Army-
led joint program. e Army was conducting a competition and had asked
industry to build competing prototypes as risk reduction eorts in support
of the competition. e prototypes were to be ight tested as part of the
source selection. I had challenged the Army’s intention to use a xed-price
incentive contract for the next phase of work—Engineering and Manufac-
turing Development. My concern was the degree of risk for the upcoming
phase. I asked the Army to bring in the engineers for the program to walk
me through both competitors’ designs, the one they would use in the early
prototype testing as part of the source-selection process and the production
prototypes they were proposing to actually build in the next phase. What
I discovered was that there was no traceability between the risk reduction
prototypes and the production prototypes. Every subsystem of the missiles
would have to be redesigned. e competitors were building “proof of prin-
ciple” prototypes for the source selection. ey were not reducing the risk
in the designs they intended to build for production.
As a result of this, I directed the Army to change the contract type to one
more suited for the remaining risk. Probably more importantly, the light
bulb went on about what the competitors were trying to do. ey were not
motivated to reduce risk. at would have entailed taking some risk, and
that was the opposite of what they were motivated to do. ey were mo-
tivated to win, which meant that they wanted a low-risk and successful
ight test so that they could win the contract. e government had asked
for the things our policy supports and the Congress expects: competitive
prototypes and ight tests. e government failed to insist on prototypes
with designs traceable to the designs being bid for production and to the re-
duction of the specic risks associated with those designs. We can’t blame
industry for responding to the business incentives we provide. e govern-
ment acquisition team must have the expertise it needs to understand what
is required, and the professionalism to ensure that industry provides it.
Industry will always act to maximize its return, and the government will
get what it accepts.
It has been a great honor to have led the terric men and women in the
DoD’s acquisition workforce. You are unsung heroes who, with equally
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Getting Defense Acquisition Right
dedicated and patriotic people in industry, provide our men and women in
uniform with the products and services they need to defend our freedom.
I hope that some of these anecdotes will prove useful as you continue your
eorts to improve even more on the great work you do every day. ank
you. It has been wonderful to have been part of this team.
