MA

Better Buying Power 2.0: What Can Industry Expect?

Published: June 04, 2013

Acquisition ReformDEFENSEPolicy and LegislationStrategic Sourcing

Frank Kendall, DoD's Under Secretary of Defense for Acquisition, Technology, and Logistics, recently unveiled a new initiative called Better Buying Power 2.0 to reform Defense Department procurement processes. Will this second attempt at DoD acquisition reform have the impact that is intended or will it lead to unforeseen consequences like its predecessor, BBP 1.0?

Back in 2010, Dr. Ashton Carter, then the Under Secretary of Defense for Acquisition, Technology, and Logistics, announced an initiative to improve procurement processes across the Department of Defense.  This initiative, called “Better Buying Power,” (BBP 1.0) was intended to achieve a number of key improvements, including:
  • Targeting Affordability and Controlling Cost Growth
  • Incentivizing Productivity and Innovation in Industry
  • Promoting Real Competition
  • Improving Tradecraft in Services Acquisition
  • Reducing Non-Productive Processes and Bureaucracy
Unfortunately, for all of its good intentions, BBP 1.0 created a plethora of knock-on effects that in many cases significantly hampered DoD acquisitions.  Practically all of the industry professionals who I have spoken to over the last 24-36 months agree that DoD procurements, at least for information technology products and services, are slower than ever and take longer to award.  Why is this?
 
One important roadblock is administrative as DoD procurement officials exercise greater executive oversight and demand more detailed business cases justifying acquisitions.  These challenges arose despite BBP 1.0’s stated goal of reducing non-productive processes and bureaucracy.  Then there is the insidious growth in the use of “Lowest Price Technically Acceptable” (LPTA) competitions.  The desire to ruthlessly reduce costs and accelerate acquisition timelines generated an increase in the use of LPTA.  This unwelcome development evolved despite the government’s decades of failure using LPTA to control long-term project costs.  Indeed, countering the negative effect of LPTA was the rationale for introducing “best value” evaluations more than a decade ago.  What’s old is new.  So, where are we now?
 
Arguably we are on the precipice of still more unintended consequences as two weeks ago Frank Kendall, the current USD AT&L, announced BBP 2.0, a new series of initiatives intended to take acquisition reform at DoD one step further.  Reading between the lines, one could also say that BBP 2.0 is intended to address some of the difficulties caused by BBP 1.0.  Take for example the mandated use of Fixed Price Incentive (FPI) contracts.  BBP 2.0 recognizes that fixed price contracts do not fit the bill in all circumstances, particularly in services and engineering procurements where costs are derived from the process of developing systems.  BBP 2.0 will loosen rules by allowing the use of a variety of contracting types.  The list of acceptable types and circumstances when they can be used is yet to be defined.  Fixed Price Incentive contracts will still be mandated for Low Rate Initial Production (LRIP) efforts.
 
Then there is the explicit acknowledgement that LPTA has become the contracting standard.  Unfortunately little attention is given to this, with Kendall’s memo noting only that “the Department needs to define Technical Acceptability appropriately to ensure adequate quality.”  The problem is that DoD has a very poor track record adequately defining “technical acceptability” for long-term investments. To wit, as Kendall’s memo notes, “long-term capital investment analysis covering product lifecycles of 30 or 40 years [will be] a standard part of the acquisition process.”
 
Thirty to 40 years?  Seriously?  Scope creep often manifests in even the simplest investments within weeks, if not months, of many projects.  No one would deny that the DoD needs to rein in costs.  However, doing so to the detriment of tried and true best value source selection evaluations practically guarantees that LPTA will continue to be the rule of the day.  This may reduce costs at the outset, but if the past is any indication the costs down the road will be much higher than if a best value approach is used.  To be fair, BBP 2.0 addresses “best value” source selection as well, but it states only that the DoD needs to do a better job defining performance thresholds.
 
Finally, the guidance hones the DoD’s effort to reduce the need for executive oversight by stating that greater responsibility must be shifted to Program Executive Offices and Program Managers to oversee acquisitions and program performance.  This is a laudable objective that one hopes will result in more efficient oversight of programs.
 
What should we expect moving forward?  I am speculating here, but this is what I believe lies before us.
  • Shorter Duration Contracts – The award of shorter duration contracts for limited efforts to meet project milestones, sometimes referred to as “modular contracting,” is likely to increase, in part to offset the impact of LPTA.  This suggests more frequent competitions, lower value awards, and more frequent use of task order vehicles.
  • Acquisition Delays – Despite BBP 2.0, Congress will continue to hold DoD officials’ feet to the flames when it comes to acquisitions.  This ensures that executives will continue to be deeply involved in approving acquisitions and demanding detailed business cases.
  • LPTA – This will increasingly become the norm with shorter duration procurements put forward as the solution to the LPTA boondoggle.  Adjust prices accordingly.
  • Scope Creep – Requirement development will continue to be a problem for the department, particularly in the case of newer technology areas like Big Data where the process of formulating requirements is complex and evolving.  Even the IC has admitted that it cannot efficiently develop big data requirements.  How is the DoD supposed to achieve this?
  • Strategic Sourcing – Although lip service has been given to increasing competition, strategic sourcing along the lines of the big Microsoft Enterprise Licensing Agreement is likely to become more common.  The Government Accountability Office (GAO) reported in April 2013 that industry partners often achieved cost savings of 4-15% over prior year spending through strategically sourcing the full range of services they buy.  These are savings the DoD cannot afford to ignore.  The White House is also pushing strategic sourcing, meaning the DoD will be required to respond.