Reforming the Standards

February 1996

FEDERAL ACQUISITION GUIDE

DoD works to eliminate military-unique specifications.

The Defense Department has spent the last two years working to eliminate more than 30,000 military-unique contract specifications-the kind responsible for $300 hammers and 700-page chocolate-chip cookie contracts. A decision was made in 1994 to move to off-the-shelf commercial products and performance-based service standards whenever possible. The migration is expected to save the Pentagon close to $1 billion a year and significantly reduce contract paperwork.

"We need better access to commercial industry because we cannot afford the cost of a separate defense industrial sector, nor the missed opportunities of the technological advances being made every week in commercial industry," Defense Secretary William J. Perry says.

The Pentagon originally intended to move to commercial standards as new contracts were initiated. But after determining the bulk of DoD contracting dollars was in existing contracts-since fewer new weapons systems were being procured-the Defense Department revised its policy and announced in December that it would eliminate unnecessary specifications on existing contracts.

Using what it calls a "block change" modification approach, the Pentagon plans to consolidate or eliminate multiple processes and standards in all contracts on a facilitywide basis, rather than a contract-by-contract basis. So instead of renegotiating the 4,400 contracts it holds with McDonnell Douglas, for instance, DoD plans to ask the company to voluntarily move to commercial standards and performance specifications on all its defense contracts.

The Pentagon acknowledges that contractor transition costs will, in many cases, offset short-term savings. Although DoD will not be picking up the tab for these expenses, it insists the migration will reap big financial rewards in the long term.

"It initially will be difficult for companies because it means a whole new approach to business," says Colleen Preston, deputy undersecretary of Defense for acquisition reform. "They will be bearing a lot more risk because we will no longer be dictating every last detail, but the results will be greater efficiency and easier contract administration."

The problem now is that defense contractors use different specifications and work processes for similar operations. An airplane manufacturer, for instance, might have one set of rules for commercial customers, another set for the Air Force and yet another for the Navy. This leads to increased costs, which then are passed on to DoD.

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