Most Acquisition Reform Policies, Plans in Place, Official Says

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)