USA — Acquisition Reform Plays Key Role in Pentagon’s Cost Savings

WASHINGTON — The Defense Depart­ment has the oppor­tu­ni­ty to save bil­lions of tax­pay­er dol­lars through acqui­si­tions reform, but only if it grows its work­force with the right fed­er­al work­ers in place to over­see con­tracts, a senior Pen­ta­gon offi­cial said today.

“There is a sig­nif­i­cant oppor­tu­ni­ty to save bil­lions of dol­lars, but only if we have a well-trained and suf­fi­cient work­force,” Shay Assad, the act­ing direc­tor of the department’s pro­cure­ment and acqui­si­tion pol­i­cy, said dur­ing a Sen­ate Bud­get Com­mit­tee hear­ing.

Assad called acqui­si­tions reform and improved effi­cien­cies a top pri­or­i­ty of Defense Sec­re­tary Robert M. Gates, with a goal of $100 bil­lion in sav­ings over five years, start­ing in fis­cal 2012. He said the sec­re­tary ordered his staff to con­sid­er two ques­tions with regard to old-style con­tract­ing pro­ce­dures: Is this respect­ful of the Amer­i­can tax­pay­er at a time of eco­nom­ic and fis­cal duress? And, is this the best use of lim­it­ed dol­lars?

With cost sav­ings derived from bet­ter effi­cien­cies, Assad said, depart­ment offi­cials hope to attain 2 to 3 per­cent net growth in warfight­ing capa­bil­i­ties with­out a mir­rored bud­get increase.

Ear­li­er this month, Ash­ton Carter, under­sec­re­tary of defense for logis­tics, “direct­ed all ech­e­lons of the depart­ment to take a hard look” at ways to cut costs, Assad said. Carter’s direc­tive, he said, “real­ly was about increas­ing the buy­ing pow­er of the depart­ment and in get­ting a bet­ter deal for tax­pay­ers.”

“We need to exam­ine not only what we acquir­ing, but how we are acquir­ing it,” Assad added.

The depart­ment pro­cured three mil­lion con­tracts in fis­cal 2009, amount­ing to $375 bil­lion, Assad said. It spent $372 bil­lion in con­tracts last year, he said. About 53 per­cent of those costs, he said, go to con­tract­ed ser­vices, while 47 per­cent go to prod­ucts, such as equip­ment.

Over­all, the entire fed­er­al gov­ern­ment, includ­ing defense, spent $560 bil­lion in fis­cal 2009, accord­ing to Daniel I. Gor­don, admin­is­tra­tor of fed­er­al pro­cure­ment pol­i­cy in the White House’s Office of Man­age­ment and Bud­get, who tes­ti­fied along­side Assad. That com­pares to $535 bil­lion the gov­ern­ment spent in fis­cal 2008, Gor­don said, adding that this year’s amount would have been much larg­er with­out major cost-cut­ting ini­tia­tives.

Agen­cies are now pool­ing their pur­chas­es, using more fixed-price con­tracts, hav­ing Inter­net-based “reverse auc­tions” for con­tracts, and pay­ing more atten­tion to con­tract man­age­ment, Gor­don said. The result, he said, is a drop in annu­al con­tract growth that aver­aged 12 per­cent every year between 2001 and 2008, to an aver­age of 4 per­cent since then.

Dur­ing that time, Gor­don said, there was no expan­sion of the fed­er­al work­force to over­see the “tsuna­mi” of con­tracts com­ing through. Over the next sev­er­al years, the Oba­ma admin­is­tra­tion is invest­ing in hir­ing thou­sands of new fed­er­al pro­cure­ment offi­cers, the “lifeblood” of acqui­si­tion reform, he said.

To improve the pro­cure­ment of ser­vices, Assad said, the defense depart­ment also must expand com­pe­ti­tion, move away from long­stand­ing “incum­bent” con­trac­tors, ensure that work state­ments are under­stood, and use prop­er con­tracts.

With regard to weapons sys­tems, Assad said, “It’s all about prop­er­ly defin­ing the require­ments.” Con­trac­tors now are “spend­ing a lot of time up front” to ensure that con­tracts are real­is­tic to avoid future add-on costs, he said.

In the past, defense pro­cure­ment offi­cials spent too much time mea­sur­ing process­es rather than out­comes, Assad said. And that, he said, is where expand­ing the work­force with high­ly trained acqui­si­tion pro­fes­sion­als comes in.

The Pen­ta­gon plans to add 20,000 fed­er­al pro­cure­ment work­ers over the next five years, Assad said. Among oth­er things, he said, the addi­tion­al work­ers are need­ed to prop­er­ly over­see con­tracts “from an arm’s length.”

The depart­ment is mak­ing good progress, hav­ing already hired 4,600 acqui­si­tions and pro­cure­ment work­ers, Assad said. Many of the work­ers, he said, are for­mer ser­vice­mem­bers who’d used the equip­ment and ser­vices they will now help to pro­cure.

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)