DoD's latest efficiency push revolves around service contracting

Friday - 4/11/2014, 4:25am EDT

"Efficiency and Effectiveness" — a common phrase across all of government. But at the Defense Department, it's taking on a new meaning.

DoD no longer can spend more of its time worrying about the effectiveness of its acquisition programs at the expense of efficiency.

The budget reductions over the last two years make it obvious that change is necessary. Take the Army's procurement budget for example. It's expected to be 20 percent lower in 2014 than it was in 2013, and in 2013, it was 20 percent lower than it was in 2012. And, the Army had 20 percent less to buy goods and services in 2012 than it did in 2011. Over the last four years, the Army is expected to see its procurement budget drop to $65 billion from $126 billion.

But there is another reason, too.

"What's interesting about today's environment is, you look at the last 12 years of war and you hear people say, 'Hey, we want to be effective and efficient.' That's great, but they are not the same thing. In any given situation, there's a balance between effectiveness and efficiency. The last 12 years, it's been all about effectiveness," said Harry Hallock, the Army's deputy assistant secretary for procurement, Thursday at the Coalition for Government Procurement's spring conference in Falls Church, Va. "Get that product or service out to the troops, because it can save lives. So you make some decisions where efficiency isn't always the number one focus and that you wouldn't make in other environments. We were doing good things and we were being very effective."

But with the war in Iraq ended and the Afghanistan theater winding down, the Army must change its buying habits.

"We have to focus more on efficiency," he said. "It wasn't that we were focused on efficiency, but effectiveness was more important. Now efficiency is more important."

Putting discipline back into the system

This isn't just an Army problem or challenge, but one that cuts across all of DoD and really all of the government.

The military initiated a multi-pronged approach to achieving more efficiency out of its procurement dollars.

Hallock said the Army's inspector general is playing a key role by pointing out where the service was less efficient than it could have been, and how it could correct its problems.

The Better Buying Power initiative is a second way DoD is changing how contracting officers and others looked at how they buy. In many ways, it was the first step toward changing buying habits.

Hallock said the goal of Better Buying Power was to bring discipline back into the process and get contracting officers to ask better questions.

So one way the Army is addressing the efficiency issue is by asking better questions about how it buys services, specifically through strategic sourcing.

Hallock said Army Secretary John McHugh signed a charter to create a governance board to look at strategic sourcing.

"It's made up of requirements generators that it's their requirements that we are buying, the money folks in the building and the policy folks in the building to make sure we are doing the right things," Hallock said. "We also put a couple of reviews in the process that says at certain points now when you are out there buying, you have to come to us so we can look and say whether this meets our goals for strategic sourcing. What are we trying to accomplish? That's where we are now. We are trying to put those parameters in place, so when you come to these reviews, what are the goals and what do we want to come out of it?"

The Army already saved $982 million through strategic sourcing in fiscal 2011 and 2012 and has a goal of $2.5 billion by the end of 2015.

Hallock said services account for more than 60 percent of what the Army buys. He said if the Army can add more discipline to just three of its largest categories of services — knowledge-based, facilities and communications and electronics services — it can reach that goal and achieve more savings.

The Willie Sutton approach

More broadly across all of DoD, service spending accounts for more than 50 percent of all procurement dollars. In 2012, the Government Accountability Office found DoD spent $186 billion out of its $361 billion acquisition budget on service contracts.

Richard Ginman, DoD's director of defense procurement and acquisition policy, said the Pentagon is taking a cross-agency approach to bringing efficiency to service buying.