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Projects in the crosshairs at Defense
Wednesday - 9/22/2010, 9:40am EDT
Senior Internet Editor
Federal News Radio has been telling you about the Defense Department efforts to cut $100 billion from overhead expenses in the next five years. Part of that includes a change in the way DOD does acquisition.
New guidance from the Pentagon on each of the major programs include:
- Affordability - "For the large programs that are front end of development with lots of risk - this is going to mean that the Unit Cost Affordability is going to be, for the first time ever, as important as the very technical capability of that program." Before, said McAleese, technical capability was usually more important than schedule which was more important than cost.
Expect this change to impact some major programs underway: the Army Ground Combat Vehicle, the SSBN(X) Ballistic Missile Submarine Program, the highly-controversial VXX Presidential Helicopter Program, and the Next Generation Long Range Strike (NGLRS) program.
Of all the changes, said McAleese, "that clearly, to me, is the most important."
- Portfolio Capability Reviews - "The possibility of significant scrutiny is going to increase here this fall." Reviews will be looking for programs that are redundant or unaffordable. McAleese said he expects two programs to be targeted: the Multi-Platform Radar Technology Insertion Program (MP-RTIP) and the Medium Extended Air Defense System (MEADS) program.
- Should Cost Review - If a program comes in under cost, the savings would be returned to the service to re-invest in that program by buying more quantities of that platform in the program.
The biggest change that McAleese sees is the abandonment of "the old type of contracts that we used that were basically cost-plus award fee" and a shift to a fixed-price incentive fee.
This would provide both the carrot and the stick to contractors. "That, I think, is going to be the big thing that's going to get the contractor's attention," said McAleese, "and really begin to improve the cost estimates that contractors submit...and particularly improving program execution."