Pentagon Ranks Top Suppliers to Spark Competition Among Contractors

"First and foremost, we need to get rid of sequestration, with all the budget uncertainty it creates for the department and industry,” Frank Kendall said "First and foremost, we need to get rid of sequestration, with all the budget uncertainty it creates for the department and industry,” Frank Kendall said Defense Department file photo

The Defense Department’s acquisition chief on Friday released a ranking of the top 30 supplier units within the contracting industry as part of a continuing effort to improve the government’s largest procurement operations by curbing costs and professionalizing the workforce.

Frank Kendall III, undersecretary of Defense for acquisition, technology and logistics, introduced the first rankings from a Navy Department pilot project called the Superior Supplier Incentive Program. Designed to help industry “recognize its better performers” based on past performance and evaluations by program managers, such a list is planned for all the services beginning to build incentives, Kendall told reporters. “The industry people who will respond the most will be the ones at the bottom,” he said. 

Sean Stackley, assistant Navy secretary for research, development and acquisition industry, said “industry best practices include recognizing the best suppliers, which gives them an incentive to sustain superior performance.” The selections were made through a process designed to be “fair and objective and understood by the public and Congress, as well as easy to manage,” Stackley said.

His team began by picking the top 30 contracting companies, which captures 85 percent of the acquisition “spend,” and then broke them into 80 business units, before ranking the top 30 units in nine companies that “stand out.” The goal of making the list public is to provide “an important incentive for the corporate business units to talk to each other rather than have us dictate,” Stackley said.

Here's the full list of units:

First Tier

  • General Dynamics Combat Systems 
  • General Dynamics Marine Systems 
  • General Electric Aviation 
  • Lockheed Mission Systems and Training 
  • MHSCo Sikorsky Lockheed Partnership 
  • Northrop Grumman Aerospace Systems 
  • Raytheon Integrated Defense Systems 
  • Raytheon Intelligence, Information and Services 
  • Rolls-Royce Defence Aerospace 

Second Tier

  • BAE Electronic Systems
  • BAE Systems Land and Armaments
  • Bell Helicopter
  • Boeing Military Aircraft
  • General Dynamics Information Systems and Technology
  • Ingalls Shipbuilding
  • Exelis
  • L-3 Communication Electronic Systems
  • Northrop Grumman Electronic Systems
  • Raytheon Missile Systems
  • Raytheon Space and Airborne Systems
  • Rockwell Collins Simulation

Third Tier 

  • ATK Defense
  • Austal USA
  • Bell Boeing Joint Project Office
  • Lockheed Martin Aeronautics
  • Lockheed Martin Space Systems 
  • Navistar Defense
  • Newport News Shipbuilding
  • Sikorsky
  • UTC Propulsion and Aerospace Systems

Kendall presented a new report updating the state of the defense acquisition system and his pair of Better Buying Power initiatives. He said nearly all of the main 30 programs are within their affordability caps and touted some progress in employing more “incentive-type” flexible contracts rather than fixed priced ones. “The profitably of industry is important to us and to industry, but we try to align profitability with good performance,” he said. “We’d like to create a competitive environment in which some companies that have been sole-source fear that they will lose the business and will work at it harder to hang onto it.”

The acquisition division strives to “communicate to industry what is the best value for DoD,” which allows not just for the lowest price but for innovation, Kendall added. “We should pay more for more value, as long as they stay within the caps.”

Kendall said he finds the term “acquisition reform” misleading because it implies “there are dramatic things we can do when in fact it’s more of a continuous process,” he said.

“First and foremost, we need to get rid of sequestration, with all the budget uncertainty it creates for the department and industry,” he said. Second, we need to improve the professionalism of the acquisition workforce, to give us the tools to grow the talent.” Acquisition is “incredibly complicated-- if you get anything wrong, including management, the deal, the technology, you get poor results,” Kendall said.

Kendall said he has appointed a task force to study how to “simplify the body of [contracting] law,” particularly the rules affecting information technology procurement, which are the rules for everything. "Rules that don’t allow us flexibility are not helpful,” he said.

The acquisition chief has met with Rep. Mac Thornberry, R-Texas, the Armed Services Committee member heading up an acquisition reform effort that might include simplifying the Defense Federal Acquisition Regulation and the broader Federal Acquisition Regulation. “I object to the idea that there’s a magic thing we can do to solve the problem,” Kendall said. “Most things we’ve tried haven’t worked. The data is very noisy, and it’s hard to pull out results. But I hope to be on this for a long enough time to have some impact.”

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