INTRODUCTION
The Deputy Under Secretary of Defense for Acquisition Reform, in coordination with the Office of the Secretary of Defense (OSD), Joint staffs, military departments, and defense agencies, continues DoD's efforts to fulfill the Defense Acquisition Reform vision -- ÒThat DoD will become the world's Smartest (use of best practices), Most Responsive Buyer (timely and flexible) of Best Value Goods and Services that meet our Warfighters' needs." The efforts outlined here are summaries of the major initiatives ongoing at the DoD level. There are numerous other efforts in the military departments and defense agencies, all the way down to individual program offices, purchasing activities, and contract administration and auditing offices. Collectively, the Department of Defense is striving to achieve its acquisition reform goals in support of the Department's efforts to enhance defense management.
Not only is the Department working for greater efficiency in the actual process of acquiring equipment and services, it is also striving to reduce costs through an initiative known as cost as an independent variable. Cost as an independent variable means that once the system performance and target cost are decided (on the basis of cost-performance tradeoffs) the acquisition process will make cost more a constraint, and less a variable, while nonetheless obtaining the needed military capability of the system.
In addition to DoD efforts, the Department continues to work with other government agencies and Congress to bring about acquisition reform on a national level. The Department is very proud of those DoD personnel leading and working on federal level teams, such as those implementing the Federal Acquisition Streamlining Act of 1994 (FASA), Public Law 103-355, and those individuals working with other federal agencies and Congress on new acquisition reform legislation.
ACQUISITION REFORM LEGISLATION
DoD participated as a member of the government-wide team to help bring about the Federal Acquisition Streamlining Act of 1994, historic legislation substantially overhauling federal procurement law. The Department continues to participate as it leads in implementing the Act in the Federal Acquisition Regulation (FAR), the Defense Federal Acquisition Regulation Supplement (DFARS), and other key defense acquisition-related regulations, instructions, and policy memoranda. The Program Manager for FASA, from the Office of the Deputy Under Secretary of Defense for Acquisition Reform, led the effort involving 11 teams of federal employees, who wrote the rules to implement sections of FASA in the FAR. Nine of the 11 team leaders were from DoD, as were many of the team members. FASA implementation used an integrated product team approach with interagency membership, and was substantially completed in the FAR by September 1995.
As a follow-on to the successful legislative efforts of 1994, DoD again participated in an Administration-wide effort to produce additional needed acquisition statutory reform proposals, particularly in areas not significantly affected by the 1994 legislation. The Administration's 1995 legislation efforts focused on two critical areas, bid protest reform and competition streamlining. These, along with reform of information technology (IT) management and acquisition, and procurement integrity rationalization, are among the resulting significant reforms contained in the FY 1996 National Defense Authorization Act (P.L. 104-106).
A major issue to the Administration, including DoD, is reducing the number of bid protests, which is highly disruptive to the procurement process. It takes approximately 30-40 percent longer to award a protested contract than a contract that is not protested. Almost 40 percent of the government's information technology contracts over $25 million are protested, creating a significant negative impact on the procurement process. The Administration's protest reform proposals are intended to improve the efficiency and timeliness of the acquisition process and significantly reduce the number of protests filed, while continuing to safeguard the interests of those unfairly treated in the acquisition process. Establishing a uniform scope and standard of review in all judicial and administrative protest fora is the single most important proposal in the protest area. The FY 1996 National Defense Authorization Act essentially accomplished this goal by repealing the litigation-intensive IT bid protest jurisdiction of the General Services Board of Contract Appeals.
DoD recognizes that government can no longer afford the administrative burden to meet the requirement that every potential government source must be allowed to compete, even when all of those sources do not have a realistic chance of receiving the government contract. As budgets face greater decline, some tradeoff must be permitted between allowing every potential offeror to compete and requiring only a number sufficient to ensure competition and efficient procurement of high quality goods and services. The Administration has endorsed several legislative proposals to address this issue. For instance, authorizing contracting officers to conduct a competition among those sources initially selected will permit more effective balancing of competition requirements with efficiency in the contracting process. Potential offerors will know earlier in the procurement if they do not have a likely chance for award, saving their time, money, and resources and those of the agencies. In addition, allowing agencies to limit the number of offerors in the competitive range to the number that will allow an efficient competition will enable agencies to expedite the procurement process, and will allow offerors not having a real chance to receive the award to save time and money by being removed sooner in the process. The final provisions of the FY 1996 National Defense Authorization Act authorized agencies to so limit the competitive range.
SIMPLIFIED ACQUISITION THRESHOLD
DoD was a vital part of the Administration team's effort to reform the acquisition system by obtaining legislation in 1994 which created the simplified acquisition threshold at $100,000. This meant that all purchases of a value of $100,000 or less could be accomplished with less regulatory bureaucracy and, in the long run, less cost to the government. The legislation further provided for the use of simplified acquisition procedures for procurements of $50,000 or less for all activities within the federal government and $100,000 or less for activities which are certified Interim Federal Acquisition Computer Network (FACNET) compliant. FACNET is a government-wide computer architecture which will guarantee a single face to industry and allow greater participation in government procurements for all vendors in the industrial base.
A government-wide team, led by DoD, prepared proposed and interim rules. As of February 1996, 206 DoD activities were certified Interim FACNET compliant and could utilize simplified procedures for soliciting and awarding government contracts. However, use of simplified procedures is expected to rapidly expand in 1996 and thereafter, as the FY 1996 National Defense Authorization Act removed the requirement that tied use of simplified procedures to execution of the procurement on FACNET.
COMMERCIAL ITEMS
The Report of the Acquisition Law Advisory Panel to the United States Congress recommended a new statutory regime to acquire commercial items. The enactment of this new regime in FASA and subsequent implementation in the Federal Acquisition Regulation enhanced the Department's ability to acquire commercial items and components. The FAR implementation team took a clean-slate approach and developed an integrated regulatory approach to contracting for the acquisition of commercial items, with a new Part 10, Market Research; a new Part 11, Describing Agency Needs; and finally, a new Part 12, Acquisition of Commercial Items.
The FY 1996 Defense Authorization Act further simplified commercial item acquisition by authorizing, for a three year period, commercial item buys up to $5 million in contract value to be purchased using greatly simplified procedures. In addition, the Act lifts burdensome cost or pricing data requirement from all competitive commercial item procurements. The government will be able to buy most commercial items just like any other customer, without imposing virtually all government-unique procurement requirements.
DEFENSE ACQUISITION PILOT PROGRAMS
The Under Secretary of Defense for Acquisition and Technology, in a December 15, 1994, memorandum: (1) designated five programs as participants in the Defense Acquisition Pilot Programs, as authorized by FASA; (2) provided each program with FASA commercial item exemptions; and (3) allowed one program, Joint Direct Attack Munition, early use of the statutory relief as implemented in the draft FAR rule on commercial items. The five pilot programs are Fire Support Combined Arms Tactical Trainer, Joint Direct Attack Munition, Joint Primary Aircraft Training System, Commercial Derivative Aircraft (also known as the Non-Developmental Airlift Aircraft), and Commercial Derivative Engine (F-117 Engine). In addition, the Under Secretary provided regulatory relief from FAR, DFARS, and DoD Directive 5000 policy requirements for all five pilot programs, as well as for the Defense Personnel Support Center, Advanced Field Artillery System/Future Armored Resupply Vehicle, Joint Surveillance Target Attack Radar System Ground Station Module, Patriot Advanced Capability-3 Missile, and C-130J program. The pilot programs incorporated statutory and regulatory relief into their solicitations and contracts and reported cost avoidance, reduction of intrusive government oversight in contractor's plants, and reduced documentation requirements. In the Federal Acquisition Reform Act of 1995, DoD was given authority to extend the pilot program concept to cover an entire production facility. DoD is working on implementation of this new authority, including establishing criteria and a process for selecting a pilot plant.
MILITARY SPECIFICATIONS AND STANDARDS
On June 29, 1994, the Secretary of Defense signed ÒSpecifications and Standards -- A New Way of Doing Business," mandating a performance-based solicitation process and the expanded use of nongovernment standards. The Defense Standards Improvement Council was created to carry out those policies. Today:
Since June 1994, DoD has adopted an additional 1,200 nongovernment standards, raising the total number of nongovernment standards adopted by DoD to nearly 7,000. This represents a growth from about 17 percent to nearly 20 percent of the total for all specifications and standards adopted by DoD. Additionally, every military specification and standard is being reviewed to ensure that it supports acquisition reform principles. Industry and private sector organizations are helping DoD decide whether to cancel a military specification or standard, convert it to a performance-type document, replace it with a nongovernment standard, convert it to a guidance-type document, or retain it.
To date, the Defense Standards Improvement Council has made decisions on the top 107 cost-driver standards. Nearly half have been canceled or declared inactive for new design, 20 percent will be converted to use for guidance only handbooks, and 10 percent are being retained until an adequate nongovernment standard becomes available. The rest will be converted to performance-type documents or retained. The Defense Standards Improvement Council has also decided the disposition of the remaining 1,600 military standards -- the majority of which are scheduled for cancellation, consolidation, conversion to a guidance handbook, or replacement with a nongovernment standard.
The Department is currently reviewing over 28,000 military specifications to determine which can be canceled, inactivated for new design, or replaced with performance specifications or nongovernment standards. Actions to effect the changes mandated by this review will be carried out over the next two years.
ELECTRONIC COMMERCE/ELECTRONIC DATA INTERCHANGE
The Under Secretary of Defense for Acquisition and Technology directed the Deputy Under Secretary of Defense for Acquisition Reform to execute the DoD Electronic Commerce/Electronic Data Interchange (EC/EDI) in Contracting Process Action Team Report recommendations of January 5, 1994. That report sets out a comprehensive plan for implementing EC/EDI throughout DoD. Since that date, the Director, DoD Electronic Commerce, activated 206 of 244 DoD sites and also activated 20 federal contracting sites with EC/EDI enabling technology. The 244 sites accomplish 98 percent of all simplified purchases in DoD. Since activated, the 206 ED/EDI sites have generated a cumu- lative total of 673,242 production transactions, including solicitations, contractor quotations, and purchase orders for critically needed goods and services. Twenty-seven new Value Added Networks now provide essential connectivity for the contractor industrial base. Additionally, the centralized contractor registration feature reduces registration and certification points from 1,400 to 1.
CONTRACT FORMATION AND ADMINISTRATION
In November 1994, the Under Secretary of Defense for Acquisition and Technology chartered a process action team (PAT) to recommend improvements to the defense procurement process. The team, composed of approximately 30 defense acquisition personnel primarily from contracting offices, program offices, and contract administration and audit organizations, made 27 recommendations now being implemented. Their recommendations include proposed changes to statute, procurement regulations, and policies, as well as other recommendations designed to change the culture of contracting organizations. The Office of the Secretary of Defense is evaluating implementation progress.
Also in November 1994, the Under Secretary of Defense for Acquisition and Technology chartered a Contract Administration Reform PAT to develop a comprehensive plan to reengineer specific elements of the DoD contract administration process, utilizing a risk management rather than a risk avoidance approach. The team's vision was a more efficient utilization of declining contract administration resources in order to provide the level of support required by customers of that process. The team, composed of approximately 40 defense acquisition personnel from Defense Contract Management Command and Defense Contract Audit Agency field activities, Military Services and Defense Logistics Agency buying offices, the DoD Inspector General, and the Defense Finance and Accounting Service, made 36 recommendations covering a broad spectrum of contract administration issues. These recommendations are now being implemented and will have a significant impact on the way DoD will do contract administration in the future. OSD is evaluating implementation progress.
MAJOR SYSTEMS AND TESTING
As a result of the recommendations from a PAT reviewing the oversight and review process for major systems, the Secretary of Defense issued policy direction to use Integrated Product Teams, consisting of all the acquisition process stakeholders, to build more successful acquisition programs developing executable and affordable program strategies and plans, and to identify and resolve problems early. This direction is a fundamental shift in practice from conducting after-the-fact oversight to early insight. The use of Integrated Product Teams is accompanied by eliminating a one-size-fits-all approach to decision documentation. Program Managers now have the flexibility to prepare only those documents required by law and good business practice and pertinent to the required decision.
FASA provided DoD with relief in several major systems areas. The Act repealed competitive prototyping and competitive alternative sources requirements, reducing required documentation and reporting; removed statutory detail from several other required reports; and provided an alternative means of live-fire testing at the component, subsystem, or subassembly level. DoD implemented all of these provisions. The FY 1996 National Defense Authorization Act allows for additional major systems acquisition streamlining procedures and additional pilot programs.
STATUTORY REPORT
Section 5001(b) of FASA included an annual reporting requirement to Congress relating to achievement, on average, of 90 percent of cost, performance, and schedule goals for major and nonmajor programs, and also decreasing, by 50 percent or more, the average period for converting emerging technology into operational capability.
At the law's enactment date, October 13, 1994, the average period for converting emerging technology into operational capability (program initiation to initial operating capability) was 115 months (9.5 years). As of September 30, 1995, the average period declined to 113 months. DoD is taking several actions to further reduce this average period. First, DoD is taking advantage of commercially available technologies by taking advantage of the expanded commercial item definition in FASA to simplify the terms and conditions for acquiring systems, subsystems, assemblies, and components. The Department is also expanding performance specifications use, in lieu of design-specific military specifications and standards. Second, DoD is focusing management attention on cost as an independent variable. Part of this approach is to encourage trades between cost, schedule, and performance at various stages of development. Third, DoD is expanding use of Advanced Concept Technology Demonstrations (ACTDs). ACTDs take full advantage of user and developer integrated product development and prototyping to deliver a capability to the warfighter for operational and doctrinal evaluation prior to committing Department resources to major system development and procurement. Finally, DoD is streamlining its internal acquisition oversight and review procedures and its procurement procedures.
The Department is using Integrated Product Teams to build more successful programs -- shifting from after-the-fact oversight to early and continuous insight. Also, the Department is using EC/EDI to provide information on pending procurements, receive quotes or solicitations, and make awards. These actions will take time to affect the average period of converting technology, but they are beginning to have an affect on cycle time reduction.
As of September 30, 1995, all but four major defense acquisition programs are meeting more than 90 percent of the aggregate number of cost, schedule, and performance goals for that program. The four exceptions are: (1) Comanche, which was restructured and rebaselined in January 1996; (2) Joint Standoff Target Acquisition Radar System Ground Station Module, which was reviewed and rebaselined in November 1995; (3) Maneuver Control System, which was reviewed and rebaselined in December 1995; and (4) Joint Unmanned Aerial Vehicles, which is undergoing a major restructuring.
DEFENSE TRADE AND COOPERATION
The Department, in urging the consolidation of international acquisition laws into a new Title 10 chapter as recommended by the Report of the Acquisition Law Advisory Panel to the United States Congress, proposed three distinct subchapters: (1) Purchase of Foreign Goods; (2) International and Cooperative Agreements; and (3) Acquisition, Cross-Servicing Agreements, and Standardization. Most statutory amendments recommended for subchapters (1) and (3) were enacted as part of the FY 1995 Defense Authorization Act and are being implemented in the DFARS. Congress is currently considering recommendations concerning subchapter (2) and the overarching proposal for consolidation into a new Title 10 chapter.
In addition, the Report of the Acquisition Law Advisory Panel to the United States Congress, recommended adopting a single rule-of-origin based on the Trade Agreements Act. The Department does not have the authority to adopt a single rule-of-origin. Consideration is, however, being given to a waiver of the Buy American Act, which will have a similar, but much more limited, effect.
COST AS AN INDEPENDENT VARIABLE
In the days when the United States had to meet or exceed advanced threat systems or potentially overwhelming quantities of less advanced threat systems fielded by the Soviet Union, the Services put a premium on performance, often at the price of cost and schedule. This emphasis on performance created a culture in which cost and schedule were thought of as dependent variables in the acquisition process; that is, DoD would specify the performance level that a system must meet and then relax cost and schedule constraints to achieve that outcome. Today, threats are not increasing in capability at as fast a rate as in the past, and the DoD acquisition budget is decreasing in response to this changed national security environment. Therefore it is more appropriate to make cost a stronger driver in system design. Such an approach is also more consistent with commercial practices in new systems development, where market forces drive the price at which a new system can be offered.
In 1995, the Under Secretary of Defense for Acquisition and Technology specified that a cost-performance integrated product team would, for each new acquisition system, identify opportunities to achieve cost savings through careful evaluation of a wide range of cost-performance tradeoffs. The Under Secretary has announced a broader policy that incorporates cost-performance tradeoffs, incentives programs for both government and industry, and metrics for implementing cost as an independent variable. Cost as an independent variable means picking the right, affordable cost objective and sticking to it. If warfighter needs cannot be met after exhausting the range of cost-performance tradeoffs available to the warfighter, the milestone decision authority will determine if cost targets should be raised or if the program should be canceled as unaffordable. Cost as an independent variable will work in DoD because it is built on a number of acquisition reform streamlining thrusts such as stating requirements in terms of performance, rather than in detailed, design-specific military specifications; the adoption of commercial practices and the use of commercial products; the shift to an integrated product team management approach; and the adoption of common processes in a facility.
The Department expects that cost as an independent variable will provide quality products that fully meet the warfighter's needs while allowing for substantial reductions in the cost of defense products; more stability for each program; shorter program cycle times; and clearer, innovative design, manufacturing, support, and contracting approaches.
ACQUISITION REFORM COMMUNICATION CENTER
Within the Department of Defense, there are many messages about acquisition reform directed at a variety of audiences. In order to change the behavior in the Department consistent with its vision, mission, and goals, DoD must communicate a common acquisition reform message, ensure consistency of that message, create a synergy in the process of communicating that message, provide a rapid and effective means of communicating the message, and focus the message on learning. The right message must get to the right audience in the right way and at the right time.
To accomplish this objective, the Acquisition Reform Communications Center (ARCC) was formed under the auspices of the Defense Acquisition University. The ARCC provides and disseminates information on acquisition reform and facilitates joint training of acquisition within DoD, the federal government, and industry. It has representatives from each of the Military Services, the Defense Logistics Agency, and industry. Since its inception in 1995, ARCC sponsored three major initiatives. The first were satellite broadcasts that provided the acquisition workforce with timely, up-to-date, detailed information on the changes in their duties and functions brought about by FASA. The second major initiative was the development of detailed acquisition reform training modules (ARTMs) used by the Services in an effort to get in-depth training on FASA an other major acquisition reform issues down to the desktop level. The third initiative was to develop and disseminate to the Services, agencies, and industry an interactive CD training module on Simplified Acquisition Threshold/FACNET.
CONCLUSION
Last year resulted in significant progress towards achieving the Department's Acquisition Reform goals. Consistent with the vision for Acquisition Reform, DoD will continue its efforts across the entire acquisition spectrum, from statutory reform to cultural change, from the beginning of the process -- when a requirement is generated, to the end of the process -- when the contract is closed. This broad, comprehensive approach is necessary if DoD is to achieve true reform in this critical area.
