Inside the DoD Reporter’s Notebook: Pentagon launches program to recognize its best suppliers

“Inside the DoD’s Reporter’s Notebook” is a biweekly feature focused on news about the Defense Department and defense community as gathered by Federal News Radio DoD Reporter Jared Serbu.

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DoD kicks off “superior supplier” program

L ast month in this space, we reported that Defense officials were getting close to inaugurating a program designed to recognize contractors who have a consistent history of good performance, and to provide them with some sort of reward for that history. It’s an idea the Pentagon first proposed in 2010 but has struggled to get off the ground, because it’s tricky to create rewards without interfering with full and open competition.

DoD thinks it has now cracked the code, though, and as of Friday, the Superior Supplier Incentive Program is up and running. It will be modeled on a pilot program the Navy conducted, and Frank Kendall, the undersecretary of Defense for acquisition, technology and logistics, is telling the Army and Air Force to base their own programs on the Navy’s work.

Also Friday, the Navy announced the list of nine winners from its first superior supplier pilot. It includes two business units of Raytheon, two from General Dynamics, plus General Electric Aviation, Lockheed Mission Systems and Training, a helicopter logistics partnership between Sikorsky and Lockheed, Northrop Grumman Aerospace Systems and Rolls-Royce Defense Aerospace.

Sean Stackley, the assistant secretary of the Navy for research, development and acquisition, thinks the mere existence of the list and the possibility of public recognition for contractors will, in and of itself, provide incentives for good performance. But the Navy also will reward the nine companies by inviting them to examine their existing Navy contracts and propose to eliminate bureaucratic processes that add cost and reduce profit.

“Rather than telling them, ‘Here’s exactly what we think would be a good incentive for you,’ we want to engage in a true dialogue with the companies over what makes a difference to them,” Stackley said. “What is it we do that drives cost into their programs or systems or processes? If we back that off, we can reduce their costs, which should return profit to them.”

Stackley and Kendall said the Navy and eventually the Army and Air Force lists of superior suppliers will not be used to decide the winners in future source selections, and in and of itself, should not lead to an advantage of any kind in the competitive acquisition system.

“The reason it took us so long to roll this out is we want our competitions to be fair,” Kendall said. “We didn’t want this to influence source selection. This is largely about past performance, not future performance.”

On the other hand, acquisition officials already are supposed to be consulting the government’s database for past performance, the Contractor Performance Assessment Reporting System (CPARS), before they choose a winner in a procurement. That’s the exact same data the Navy uses to determine which companies to designate as “superior suppliers.”

“So if you’re not on the list and you’re competing against someone who is on the list, that’s a clue to you that his CPARS outperform yours,” Stackley said.

Defense officials say their hope is that the program will give vendors a more holistic look at how the government views their work, rather than the contract-by-contract feedback they get right now. Kendall believes that input will help inform where they need to improve their business operations and also provide greater incentives to improve their overall performance on DoD contracts.

“I think we’ll see this list shift around, and I think people will respond,” Kendall said. “I think the people that will respond the most are the people on the bottom tier, who will want to get out of that tier. That’s exactly the kind of behavior we want to see. We want to recognize our good performers, but we also motivate the people who are not on that list to do better. That’s a big part of what this is about.”

Careful readers will have noticed that the above list of the nine companies on the Navy’s list are all large, traditional weapons contractors. That’s because for the pilot, the Navy only evaluated its 30 largest vendors. But Stackley said future iterations of the program will include smaller firms.

Please, no more acquisition “reforms,” DoD tells Congress

S taying on the topic of acquisition, the subject of large-scale reforms is once again in the air around Washington.

Rep. Mac Thornberry (R-Texas), the vice chairman of the Armed Services Committee, has been leading a series of detailed hearings and discussions on potential reform legislation since last fall.

Both the Senate and House Armed Services committees sent letters this spring to industry groups and other observers, asking for ideas to improve the system. After Kendall finished his rewrite of DoD’s internal acquisition guidebook (DoD instruction 5000.02) last year, he concluded DoD would need to ask for a package of changes, in order to help untangle a system that’s universally regarded as overly cumbersome. So, the department itself will be proposing legislation in time for consideration during next year’s defense authorization bill.

While neither the HASC nor SASC has laid out a comprehensive reform package so far, DoD’s view on the subject is fairly clear: it wants lawmakers to resist the urge to enact yet another big-bang attempt to “fix” the acquisition system.

In particular, the Pentagon is resistant to the idea of creating a new, separate acquisition process for information technology systems without coming to grips with exactly what constitutes an IT system.

At a Brookings Institution event last week, Andrew Hunter, the senior Kendall aide who’s heading up the compilation of DoD’s legislative proposal, asked rhetorically whether Congress would be OK with moving the F-35 Joint Strike Fighter into a theoretical “streamlined” acquisition process for IT, since its development has involved the writing of an estimated 9 million lines of programming code.

“The reality is that almost all of what the department buys has an extremely large IT component to it,” Hunter said. “What we already have is a system where we have an IT review process and an acquisition process that duplicate each other, and you don’t achieve any efficiency there. You complicate the process. I can’t absolutely rule out the idea that you could create a system that was more streamlined, but the odds are good that you’re just going to add complexity. What we need is flexibility within the acquisition process so that you can buy things like IT in a smart way.”

Things get especially complicated, Hunter noted, when DoD is building large business IT systems. There, he said, managers have to drag their programs through three different management and review regimes Congress has already created: IT reviews required by the Clinger-Cohen Act, milestones set up for major automated information systems (MAIS) and a third set of overlapping processes for business systems.

Kendall, speaking to reporters Friday, sounded a similar note. Instead of creating new processes, he’d like Congress to spend some time peeling back the layers of well-intentioned acquisition fixes it has piled on over the years and also give the department a freer hand to experiment with new approaches.

“What I object to is the idea that there’s some magic thing we can do that we haven’t found yet that’s going to dramatically improve our results,” he said. “Many of the things that we have tried don’t seem to be having much of a discernible effect, and the data shows that. Part of that is that it’s hard for us to be consistent about what we do, because our own leadership changes relatively often. One of the things I hope to do is be in this position long enough to have some consistent policies over a period of years so that we can actually understand the implications of those policies and whether things got better or not.”

The data Kendall’s talking about mostly comes from a new annual review of the performance of the defense acquisition system, a report he drafted for the first time last year and that was widely praised by Defense acquisition experts as a useful guide for which acquisition policies have had an effect and which ones haven’t. DoD released the second volume Friday, but didn’t yet post it online as of this writing.

The way ahead for the DoD CIO’s office, from its new acting CIO

A fter the departure of both DoD chief information officer Teri Takai and her principal deputy, Rob Carey, Terry Halvorsen now is in charge of the DoD CIO’s office after having moved over from the job of Navy Department CIO.

He made his first public appearance in that capacity Wednesday during AFCEA’s Navy IT Day, and my takeaways were that the DoD CIO’s philosophies are, in some ways, going to look a lot like what the DoN’s have been. With budgets coming down, the department needs to be creative, cut costs and take risks with its business IT systems so that it doesn’t have to do that to its mission systems, even when it comes to cybersecurity.

“What’s the minimum level of security required? Everybody hates it when you say it that way, but we need to understand the minimum level, not the maximum level,” he said. “When you go into combat, you accept security risk to your mission. It’s the same value equation, and we’ve got to be able to answer it. I don’t think we’ve done that very well yet, but we need to, because however we do it will drive cost.”

Halvorsen also suggested a certain attitude of humility in terms of the way he’ll manage the office, perhaps because he’s just come from the other side of the directive chain, where he was on the receiving end of a mandate or two that his particular military department didn’t see eye-to-eye with.

His speech in Tysons Corner, Virginia, spent a significant amount of time talking about creating partnerships with other elements of the Office of the Secretary of Defense, the military services, the Joint Staff and delegating authority the CIO’s office has previously held unto itself.

For example, the relationship between the DoD CIO and the department’s Deputy Chief Management Officer, he vowed, would be “seamless.”

“We will be united in almost everything we do, because between business process and business systems, that’s how you get things done,” he said. “You will see [acting DCMO] Dave Tillotson and I do an awful lot together, and when one of us speaks, one office will be speaking for the other.”

Halvorsen also gave a full-throated endorsement of the Pentagon’s plan to move to a unified, standardized system of IT protocols known as the Joint Information Environment, but indicated the CIO’s office will give more deference to the military services as they try to comply with JIE standards. As one of his first acts in the new job, he signed a memorandum, which allowed the military services to make their own decisions on data center spending, an authority that had up until last week been reserved for the DoD CIO’s office.

“But we’re still requiring that they report their expenditures so that we can compare the data and get trends,” he said. “And if they don’t give us that data, they’ll no longer have the delegation authority.”

Key DoD leadership appointments

The promotion of former Air Force DCMO Dave Tillotson, who assumed the role of DoD assistant deputy chief management officer (and for now, acting DCMO), is one of a few notable Pentagon personnel moves over the past couple weeks. The below is by no means an exhaustive list, but just to highlight a few others:

• On Thursday, the Senate confirmed Mike McCord as the new undersecretary of Defense for financial management (comptroller). He’s relieving Bob Hale, who’s served during interesting times since the beginning of the Obama administration. McCord previously was the number two official in the comptroller’s office.
• On Tuesday, Defense Secretary Chuck Hagel nominated Maj. Gen. William Bender to be the Air Force’s next CIO, replacing Lt. Gen. Michael Basla. Per Bender’s official bio, he’s spent most of his career in the world of air mobility and not much in IT, though he did serve a little more than a year in a senior position in the Air Force CIO’s office beginning in 2009. At the moment, he’s the number two DoD official in the Office of Security Cooperation-Iraq in Baghdad, where one imagines his plate has been very full over the past couple weeks.
• The Army picked Maj. Gen. Thomas Horlander to be its next budget director. He comes to the job from his previous post as director for business operations in the Army’s Office of Business Transformation. He’ll replace Maj. Gen. Karen Dyson, the budget director since 2012.

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