Lawmakers propose acquisition overhaul at Defense

By Katherine McIntire Peters

April 14, 2010

A bipartisan group of key House lawmakers on Wednesday introduced legislation that would significantly overhaul the way Defense spends money on services and technology -- 80 percent of what it buys.

The IMPROVE Acquisition Act, H.R. 5013, would implement recommendations of the House Armed Services Committee Panel on Defense Acquisition Reform. The panel issued its final report in March after a year-long comprehensive review of how Defense buys goods and services.

The bill would build on reforms enacted last year with the 2009 Weapons Systems Acquisition Reform Act, said Rep. Ike Skelton, chairman of the committee.

"Weapons systems make up only a small piece, 20 percent, of our defense acquisition spending," the Missouri Democrat noted. The legislation introduced by Skelton and ranking member Howard McKeon, R-Calif., and other lawmakers addresses the remaining goods and services the Pentagon buys.

"When you consider that 60 percent of the Pentagon's procurement dollars are for services contracts alone, the legislation we are introducing today has the potential to affect major changes at the Department of Defense and save billions of taxpayer dollars," said McKeon.

Among other things, the bill would require the department to revamp the requirements process, apply performance management to the defense acquisition system and create metrics supported by goals and standards. The newly created Office of Performance Assessment and Root Cause Analysis would be responsible for assessing compliance with the metrics.

Workforce changes are potentially substantial: The bill requires Defense to tie salary increases, bonuses, promotions and awards to performance. It directs the Defense secretary to "use individual performance management plans for the acquisition workforce," apply lessons learned from a demonstration project, "develop attractive career paths, encourage continuing education and training, and develop appropriate procedures for due process for members of the acquisition workforce who consistently fail to meet performance standards."

Some of the most significant changes would affect financial managers. The Defense comptroller would be required to "extend preferential treatment to any DoD component that has financial statements validated as ready for audit earlier than the current statutory deadline of Sept. 30, 2017, including: priority in the release of appropriated funds, relief from non-statutory financial reporting, relief from departmental obligation and expenditure thresholds, the size of bonus pools available to the component's financial and business management workforce, the rates of promotion for such workforce, awards for excellence for such workforce and the scope of work assigned to such workforce."

In the event that an organization's financial statements are not ready for audit by 2017, the bill would require the Defense secretary to take "corrective measures," including delaying the release of appropriated funds and consequences for key personnel.

Rep. Rob Andrews, D-N.J., chairman of the Panel on Defense Acquisition Reform, said, "The point isn't that you have a bunch of incompetent people [working in acquisition and financial management]. The point is you have a bunch of competent people without adequate tools" and incentives.

"The central pillar of the defense acquisition system is the acquisition workforce. Only through supporting, empowering, rewarding and holding accountable the acquisition workforce can the defense acquisition system be expected to improve," Andrews said.

"To achieve this, the bill gives the department the flexibility to efficiently hire qualified new employees, and to manage its workforce in a manner that promotes superior performance," he said.

Rep. Mike Conaway, R-Texas, was the architect of many of the financial management reforms included in the bill. "The reliability of financial data is crucial to improve acquisition outcomes. Without understanding where the department's money is being spent or understanding what assets it owns, there will never be any traceability for acquisition costs or new requirements," he said.

Conaway noted that the Army Corps of Engineers was the only Defense entity that has achieved a clean audit on its financial statements.

"If we accomplished nothing else in this bill, I'm convinced that insisting on auditable financial statements would yield the greatest savings and have the greatest impact on reducing waste, fraud and abuse," Conaway said.

Andrews and Skelton said they conservatively estimate the bill would prevent at least $135 billion from being wasted during the next five years, assuming modest efficiencies of 5 percent to 7 percent are achieved. Many experts project waste in the acquisition system is as high as 20 percent, Andrews said.

Skelton said committee lawmakers would append the legislation to the 2011 Defense authorization bill, a tactic that would guarantee Senate lawmakers take it up for consideration.

By Katherine McIntire Peters

April 14, 2010