The Department of Defense has recently released the fourth in a series of annual performance reviews of the DoD acquisition system.
Frank Kendall, who has been Under Secretary of Defense for Acquisition, Technology, and Logistics for five years said the report “continues my long-term effort to bring data-driven decision making to acquisition policy.”
Kendall said the report shows that DoD is making progress to improve acquisition and is “moving in the right direction with regard to the cost, schedule, and quality of the products we deliver.” He cited moderating program cost growth as an example. “The 5-year moving average of cost growth on our largest and highest-risk programs [is] at a 30-year low,” he emphasized.
The acquisition performance report complies with the Improve Acquisition Act of 2010 and the Weapon Systems Acquisition Reform Act of 2009 and Office of Management and Budget (OMB) requests on analytical studies on acquisition performance.
The report notes that analysis and data support the following improvements: 1) Cost control has improved significantly (as shown in fewer Nunn-McCurdy breaches and cost overruns) ; 2) Most programs deliver the original baseline quantity (planned at Milestone B); 3) Operation and support costs are largely driven by external inflation factors (which cannot always be controlled); 4) High-level requirements don’t usually change on major programs (85 percent of Major Defense Acquisition Programs-MDAPS-show no requirements changes); 5) DoD acquisition can be timely and responsive (development schedule growth is lower than cost growth); 6) Contracting processes are generally fair, rigorous, and objective (protests average about 2,5 percent of solicitations-GAO); and 7) Major defense companies remain profitable (cost performance improvement align industry and DoD goals).
The report stresses that budget constraints are leading to fewer programs in the “new product pipeline,” which could “put technological superiority at risk.” To mitigate this risk, DoD is adding early stage experimental prototyping efforts, but the report cautions that this does not add capability ready for production. Tight budgets also require realistic program baselines. If baselines are not realistic, the report states, higher cost growth could result.
There is also a need for a metric for weapons system design and performance O&S costs, according to the report. Many of these costs (e.g., compensation, health care, and fuel prices) are outside of acquisition control, but need to be addressed separately from acquisition program effects, the report advises.
The report underscores the importance of focusing on acquisition fundaments and cost control. “Proactive management and creative thinking contribute significantly and measurably to cost control.” “Should cost” management has proven successful and should become permanent in the acquisition culture, the report concludes.
Fixed-price contracting should be used “judiciously” during development, the report states. Study has shown that fixed-price contract during development can be risky and counterproductive. On the other hand, incentive contracts “can yield good cost control at lower risk and lower price,” according to the report.
Finally, the report identified changes that have improved acquisition management and performance including: the Defense Acquisition Workforce Development Fund and Force of the Future initiatives; implementation of Better Buying Power (BBP) 3.0; a new DoD Instruction (DoDI) 5000.74 that establishes a management structure for acquisition of contracted services; issuance of a new Risk, Issue, and Opportunity Management Guide, to identify and quantify risks; issuance of DDPAP, 2016b, a guidebook update providing guidance on “selection and negotiation of the most appropriate and effective contract type and incentives” for specific acquisitions; issuance of an O&S cost management guidebook with tools and best practices for cost analyses; and an update of the Performance-Based Logistics (PBL) Guidebook to include guidance on intellectual property issues.