Kendall shapes DoD acquisition reforms around 7 areas

Wednesday - 8/6/2014, 4:35am EDT

Jason Miller, Executive Editor, Federal News Radio

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The Defense Department added its voice to a growing list of associations and lawmakers with ideas on how to improve the military's acquisition process.

DoD's ideas center less on what Congress can do and more on what it shouldn't do.

Frank Kendall, the undersecretary of Defense for Acquisition, Technology and Logistics, sent a letter to Sens. John McCain (R-Ariz.) and Carl Levin (D-Mich.) back in June detailing seven areas where he thinks DoD needs help to improve acquisition outcomes.

For the first time publicly today at the AFCEA Acquisition Modernization conference in Washington, Kendall highlighted his seven recommendations.

Kendall said the biggest thing Congress could do is end the threat of sequestration in 2016 and beyond.

"2013 was a nightmare year. We actually implemented sequestration well into the year. We bought ourselves a little time with the deal that got us through 2014 and presumably through 2015. It's coming right back in 2016," he said. "We are working on the budget right now. The services are finalizing their [budget plans], and we will go through an exercise this fall where we will have to look at what the President will submit and something that is compliant with sequestration to see what the damage is. The damage is huge."

Kendall said it's not only the estimated $20 billion that DoD would have to cut under sequestration, but also damaging is the fact Congress will not let the Pentagon cut unneeded weapons systems or increase fees for health care and retirement.

"All of those are essentially bills to the department," he said. "The uncertainty compounds us because we are reluctant to take out force structure because you might be able to afford it later, but we don't know."

Kendall said DoD will continue to make its case to Congress, but so far it hasn't worked well.

Regulation rationalization

Beyond sequestration, Kendall highlighted several other areas to McCain and Levin, including simplifying the rules and laws DoD already has on the books.

Kendall said his office already is working on recommendations to the House and Senate authorization committees to reduce the complexity program managers face in how they have to run programs. Katrina McFarland, the assistant secretary of Defense for acquisition, asked industry for input on the regulatory burdens it dislikes the most, and already has a list of a few dozen that DoD will consider improving or just making go away.

A third area DoD wants Congress to consider is the acquisition workforce. Kendall said he wants to make sure Congress knows the value of the Defense Acquisition Workforce Development Fund (DAWDF).

"It was used initially to increase the size of the workforce. It is being used now to make key hires for key losses to some degree. I just gave people guidance that they could do that to a limited extent," he said. "It's also being used a lot now for training and improving professionalism. DAWDF is enormously valuable to us. We don't need as large a fund that we started out with. We've asked for less money this time. But keeping it going is a very, very helpful thing. It's a very valuable resource for a high return."

Kendall said Congress isn't threatening to shut down the fund or even severely cut it, but he just wanted to make sure Congress knew how much DoD counts on it.

The workforce issue is huge. DoD cut too many acquisition workers in the 1990s, and the military has increased its workforce by 21 percent since 2008.

Kendall didn't offer too many specifics about the timing of the reform packages coming from both the House and Senate. Senate lawmakers will put all the recommendations together in a compendium in the next few months.

Kendall said his office will go through that document and figure out the best approaches to work on them and if DoD needs any help from Congress.

Better Buying's improvement cycle

In the meantime, Kendall said his office is reviewing the suggestions coming from major Defense and contracting associations such as the Professional Services Council. The National Defense Industrial Association will be submitting its recommendations in the coming weeks too.

While Congress reviews and develops its acquisition reform plans, DoD has been working in what Kendall called a continuous improvement cycle.

Kendall issued Better Buying Power 2.0 about 18 months ago, and he said there are some areas where DoD is making real progress.

The Navy launched the superior supplier program pilot about a month ago, called the Contractor Performance Assessment Reporting System (C-PARS) as one of the most recent initiatives related to Better Buying Power.

Kendall said C-PARS definitely got contractors' attention.

"I had an interesting experience. I had a CEO of one of the companies who was not at the top come in and say, ‘Well, I got it and now I have to go brief my board on why I'm in the bottom group,' I said, ‘Yes, that's what I want. I want you to brief your board on why you are in the bottom of the group. I want you to understand why you are at the bottom of the group. And I want you to do something about it if it needs to be done.' That's the reason in part why we did it. We are letting you know what the customer feels about you," he said. "We are going to expand this to the rest of the department next year. The services will do this on a by-service basis. We are going to roll forward with that."

Kendall said he understands the reporting system may not be perfect and that there may be problems with the data.

"We are going to try to improve C-PARS and we'll try to use it more so you get the feedback you need and you understand how you are doing relative to your competitors," he said. "I think that's valuable information. I think I'd want to know that if I were in business."

Affordability analysis required

Another big area under BBP 1.0 and 2.0 was the concept of should cost and affordability.

Kendall says DoD has been putting caps on programs for about four years now in light of cuts from sequestration.

"Those tools, I think, are working reasonably effectively to constrain designs and keep the requirements community mindful that cost does matter — that you can't just ask for what you'd like to have and assume it's going to be paid for. Our budgets just don't' support that," he said. "We are starting to see at the end of the current five-year plan some serious affordability problems in the 2020s. As we go through the budget process in the Pentagon this year, we are going to be looking at some of those issues. Bob Work, the deputy secretary, has commissioned some work called strategic portfolio reviews and some of those are looking at the affordability question and what do we do about the affordability problem that is confronting us. It's a bow wave but it's a little further out that bow waves often are."

Kendall said DoD is requiring the services to develop affordability analyses to ensure they don't spend money on programs they can't pay for in the future.

Kendall said program managers must receive approval that their programs are affordable before they are started. He said this concept will continue because it's helping DoD better control program costs over the long term.

Promoting innovation

Just as DoD is making progress on Better Buying Power version 2, Kendall expects to issue version 3.0 in a few months.

Kendall said version 3 will build upon BBP versions 1 and 2 and also address some new areas of concern.

One of those new areas will be a focus on best value. Kendall said DoD will increase incentives for innovative contractors. DoD will define two thresholds for best value: minimum capabilities and affordable innovations.

"What this does, I think, is it allows industry to make informed judgments about what to bid to us, and it gives industry a reason to bid above the threshold, to give us more performance, to be innovative," Kendall said. "I had a classic experience with this during my career in industry. We were offering a product to the government, a weapons system, that we were absolutely convinced had better performance and was hugely valuable to the operator if they had this performance, but we couldn't get credit for what we were doing in the proposal we were going to submit. There was no way in the source selection process to give us credit. This is a way to give credit for that. This is a way to let industry know how much credit they will get. So we will do more of that. I think defining value in monetary terms wherever we can do it is an important thing for us to do."

Another area under BBP 3 will try to address is to reduce the barriers to entry for new companies. Kendall said there is a growing concern in DoD about its technological superiority and whether other nations or organizations are surpassing the military's capabilities.

Defense Deputy Secretary Work has a major initiative coming to address this issue.

Work spoke Tuesday at the National Defense Convocation ceremony where he addressed this technology superiority issue.

"To maintain our technological superiority as we transition from one warfighting regime to another, we must begin to prepare now. ... In addition to new technologies, a new offset strategy will require innovative thinking, the development of new operational concepts, new ways of organizing, and long-term strategies," he said. "The national security community needs to stimulate new critical thinking and research on how the nation maintains its technological dominance, and to enable a smaller force to maintain overmatch against any potential adversary."

Aside from Better Buying Power 3, Kendall along with new DoD Comptroller Mike McCord soon will update a memo giving contracting officers and program managers more leeway and incentives to not spend all their money at year end.

Kendall and former comptroller Robert Hale first issued that memo in 2011.

He also included this also as a recommendation to McCain and Levin.

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