Defense Department Aims to Modernize Services Acquisition

Two new policies have been released in recent weeks that tackle long standing concerns within how defense organizations procure services. Mid 2015, Deputy Undersecretary of Defense Alan Estevez spoke at a conference on federal technology and acquisition. Commenting on the decentralized state of contracted services, Estevez noted that, “[the Defense Department spends] more on services than we spend buying what people think of as direct combat capability.” Estevez put that figure as $145 billion compared to $155 billion in 2014, and he went on to observed that those billions of dollars are being spent on services without the same oversight or scrutiny that is performed for buying products.

Defense Services Acquisition

The newest Department of Defense Instruction (DoDI 500.74) addresses the full range of services acquisition. Released January 5, 2016, the instruction formally establishes the Defense Department’s service acquisition policy; outlines organizational responsibilities; underscores the commitment to leveraging small business capabilities and encouraging competition; notes limitations imposed on use of contractors for inherently governmental functions as well as work currently performed by DoD civilians or work designated for performance by DoD civilians; promotes the use of existing federal contracts prior to making new contract awards; and addresses intellectual property issues. Service acquisitions are divided into five categories based on the total estimated dollar value, which determines the necessary level of decision authority. Procedures will be established by DOD components to ensure the automatic collection and reporting of service acquisition contract data.

Nine portfolio groups are identified for services: transportation, logistics management, equipment, electronics and communications, medical, facilities, knowledge-based, research and development, and construction. The first seven of these portfolio groups will be overseen by Functional Domain Experts (FDEs), appointed by the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD AT&L). To support FDEs with monitoring the acquisition life-cycle process, Component Level Leads (CLLs) will be appointed by the Component heads. As part of their oversight of contracted services, the FDEs and their leadership teams will complete semi-annual reports. These updates, which will be provided to the USD AT&L, will review progress toward strategic objectives like improved management processes and service management framework. The reports will also include portfolio spend data, requirement forecasts, major trends, and recommendations for policy improvements.

There are a few areas that won’t be covered by this new policy. This guidance does not impact major and non-major information technology (IT) acquisition programs, services that meet the Major Automated Information Systems thresholds (to include software as a service). Nor will it be applied to classified, cryptologic, and intelligence projects and service activities. Direct support of a declared overseas contingency operations, peacekeeping efforts, and emergency response will also be exempt. 

Defense IT Services

The instruction in DoDI 500.74 provides specific details for the acquisition of IT services. For instance, decision authorities and chief information officers (CIOs) are expected to ensure that acquisition strategies align with relevant related planning across the board when it comes to any acquisition of IT services. The guidance emphasizes the need for IT service contracts to comply with Clinger Cohen Act. IT service capabilities must align with the DoD’s Information Enterprise and the Joint Information Environment, which includes complying with the DoD Information Enterprise Architecture as well as the DoD-wide reference and solution architectures. A handful of other key elements of technology strategy are also addressed, such as enterprise services, IT services management, cybersecurity, cloud computing, and enterprise software. The guidance in these areas aims to deter duplication, address security control requirements, outline cloud usage reporting, and promote consideration of enterprise technology initiatives. 

Defense IT Services Management

Just before the close of 2015, another policy was issued that specifically addressed DoD Information Technology (IT) Service Management (ITSM). This Department of Defense Instruction (DoDI 8440.01) provides a DoD-wide standard ITSM framework for the implementation and management IT services. This management policy establishes a standard model for measuring service quality along with governance mechanisms to standardize service management and develop integrated capabilities. In addition to requiring the management of the Defense Enterprise Services Management Framework (DESMF), this policy establishes a requirement for a DoD-level IT service catalog, which will provide an enterprise view of IT services across the Defense Department, and outlines steps for adding services to the catalog. The new policy also directs for the ITSM capability and IT services to be evaluated for quality as well as overall effectiveness.

Shifting Decision Authority and Improving Effectiveness

The new approach pushes decision-making down to working-level officials while constructing a feedback loop for monitoring portfolio health, providing conformance standards, and assessing service delivery. Moving authority down the chain is a significant move when considering the volume and size of service contracts as well as the historically highly decentralized process. USD AT&L’s Deputy Director of Services Acquisition Kenneth Brennan observed that, unlike the Major Defense Acquisition Programs, the Defense Department’s services buying “[deals] in millions of contract actions, not just dozens of programs.” Brennan placed the average value at $350,000 — substantially lower than the new scheme’s $250 million threshold pushing approval requirements above the level of a Senior Service Manager. Combined with the establishment of metrics reporting, standards and best practices, the new approach appears to introduce elements of oversight while striving to avoid bureaucratic bottlenecks. With so many moving pieces, the freedom could just as easily help or hamper efforts to consolidate service contracts in areas like mobile computing and initiatives to improve usage of strategic sourcing vehicles.