New DOD acquisition strategy sparks debate

DOD's leaders want to revamp the Pentagon's acquisition processes, but analyst say much of the guidance isn't new but actually familiar regulations that have failed to be properly implemented in the past.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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