WASHINGTON, July 27, 2011 — The Defense Department’s acquisition organization is 18 to 24 months away from completing the integration of practices that is changing the way the Pentagon buys goods and services, the director of defense pricing said today.
Shay D. Assad, who until June 11 was director of defense procurement and acquisition, spoke to reporters at a meeting of the Defense Writers Group here.
The practices — together called the Better Buying Power initiative — arose from the Defense Department efficiencies effort launched in May 2010 and from a memo in June of that year to acquisition professionals from Ashton B. Carter, undersecretary of defense for acquisition, technology and logistics.
The memo described a mandate to deliver better value to taxpayers and warfighters by significantly improving the way the department does business.
Carter’s reform plan targeted five areas. He wanted the acquisition enterprise to target affordability, incentivize productivity in industry, promote competition, improve tradecraft and reduce bureaucracy.
“Most of the policy [and the execution plans] are already in place,” Assad said, noting that even now progress is being made toward building an integrated enterprise.
“Because we’re talking about some remarkable change,” Assad added, it will take time to implement the plan among 26,000 contractors and 3 million contracting actions.
“I think it’s going to take 18 to 24 months to put everything in place that we want to do, especially from a pricing point of view,” he said.
Assad’s new job also arose from the need to integrate Better Buying Power policies and practices into the existing enterprise. Assad’s former deputy, Richard Ginman, became director of acquisition and contract policy as Assad became director of defense pricing.
The division of duties enables him to spend more time with the field in implementing the Better Buying Power initiatives, Assad said, participating in major programs and helping program executive officers “to get those programs on track in terms of what they do cost, what they should cost and what we’re paying.”
Carter’s five-part strategy targets affordability as the No. 1 priority, Assad said, noting that Carter and Frank Kendall — the principal deputy undersecretary of defense for acquisition, technology and logistics — have talked about establishing cost almost as a key performance parameter.
Cost is as important as any other factor in the acquisition process, he added.
“We’re getting on it early in the program,” he said, “so we don’t go down the path of spending a tremendous amount of money in engineering, manufacturing and development only to find out that what we’ve designed and developed, we can’t afford.”
The Defense Department is trying to do more engineering up front, Assad added, “so we can be more specific in the development program.”
“That’s what we’re trying to accomplish,” he said, “and it’s a very different approach.”
One of Assad’s current pricing projects is the Joint Strike Fighter Program. Price overruns have cost Lockheed Martin millions of dollars in bonuses and delayed the program for more than a year. Assad said he is assisting Navy Vice Adm. David J. Venlet, tapped last year to take over the fighter program, “in coming up with what it is we think [the program] should cost.”
The Navy is responsible for negotiating the contract, Assad said, but he will be “assisting them quite a bit.”
“We are in process now of evaluating the Lockheed Martin proposal as well as all the subcontractor proposals,” the director said. “We expect that sometime in the fall, we’ll commence negotiations and, if it goes according to plan, we should have a deal signed by the end of the year.”
Normally, Assad said, Lockheed Martin alone would evaluate the proposals of its subcontractors, but the world has changed in terms of the composition of the cost of products the Defense Department buys.
“Twenty-five years ago, it was not uncommon for a contractor to perform 60 or 70 percent of the work internally within his own organization,” he explained. Today, Assad said, major prime contractors still build a portion of a plane, for example, but they also integrate or do the final assembly of the plane.
“What we’ve learned is that a lot of the money we’re spending is at the subcontract level, so we’re following the money,” the director said. “We want to make sure we have a complete understanding of what we think a fair and reasonable subcontract price should be.”
Carter and Kendall are in the lead for the sweeping changes occurring in the Pentagon’s acquisition agency, Assad said, and his job is to help and advise them in getting the changes into play. In some cases, the change is being embraced and executed really smartly, he said. In others, he acknowledged, change is hard.
“My role is to work with program executive officers and heads of contracting activities, saying, ‘What’s the plan? Here’s what we’re trying to do. How are we going to execute it in your … buying command?’”
A senior integration group regularly discusses the execution plans, Assad said. The question now, he added, is “how to take a couple of hundred thousand people and make this happen.”
U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)