Pentagon acquisition chief focuses on workforce amid budget challenges

Improving and recognizing excellence in the Defense Department’s acquisition workforce are key to successful implementation of a new and expanded version of the Better Buying Power plan for government and industry, top Pentagon officials announced Tuesday.

In releasing a preliminary, 2.0 version of the contracting efficiency effort first unveiled in September 2010, Frank Kendall, undersecretary of Defense for acquisition, technology and logistics, promised a “new professionalization” of what the department calls its total acquisition workforce. “We grow our own people in logistics, program management and contract officers,” he said, “and we want to really recognize people who run a program, which is like having a major command.”

Kendall acknowledged, however, that efforts to rebuild the acquisition workforce after it was downsized more than a decade ago have stalled and that salary and hiring freezes are “beyond my control.” People are still “motivated by the need to protect our national security,” he said, and the current budget crunch has forced all involved to “focus on quality.”

Deputy Defense Secretary Ashton B. Carter, who worked with Kendall on the Better Buying Power initiative before moving to the Pentagon’s No. 2 post, said, “today is a recognition of the fact that we can do more to get value for the warfighter and taxpayer” by continuing to pursue “what economists call productivity growth” in spending $400 billion on goods and services annually.

The cost-cutting initiative that began under Defense Secretary Robert Gates, according to Carter, became more urgent under current Secretary Leon Panetta when planners mapped a strategy for $487 billion in defense cuts over 10 years. “The only thing we didn’t know was that we’d have this chaotic budget environment,” he said.

Carter cited cost-savings successes from the 1.0 version of better buying -- such as cutting $2 billion from the Ohio-class submarine program and $300 million from the Navy’s DDG 51 ships program. “But we knew some things were left out, that we needed some course corrections based on experience, and we knew industry would continue to come to the table with good ideas,” he said.

The new version of the Better Buying Power initiative entails 36 actions in seven focus areas, while the earlier version included 23 actions in five focus areas, with some repetition. The expansion reflects the complexity of contracting, Kendall said.

In addition to building a more professional acquisition workforce, new goals include achieving affordable programs, controlling costs throughout the product life cycle, incentivizing productivity and innovation in industry and government, eliminating unproductive processes and bureaucracy, promoting effective competition, and improving tradecraft in acquisition of services.

The updated version differs, acquisition planners explained, in its higher standards for key leadership positions, including specialized requirements, more recognition of excellence in management and a bid to “change the culture” to continue increasing the cost-consciousness of the acquisition workforce.

Kendall acknowledged that in the first approach, some components didn’t work as intended and had to be modified. “To keep the emphasis on finding ways to reduce costs, it’s the leadership people who actually administer the work with industry who are central to our success,” he said.

Specifically, he stressed that “products should be inherently affordable when we start,” noting that too many systems -- among them the Marine Corps’ Expeditionary Fighting vehicle -- were canceled because they weren’t affordable. Cost caps will be better enforced, he said, with managers aggressively pursuing “should cost” estimates even lower than independent assessments have indicated.

Some in industry are concerned the Pentagon might cut their profits, Kendall said. “That’s not our intent,” he said. “We want to pay higher profits for better performance. It should benefit both the government and industry.”

The Pentagon may have overreacted to problems with fixed-price contracts, which “lock us in and are hard to adjust,” Kendall said. “Fixed price is not a panacea, and we can motivate contractors with a fee structure.” Fixed-cost contracts work best with low-rate production contracts, he added, but “we have a range of contract types for good reasons.”

Acquisition managers have not done a good job of defining what is technically acceptable in low-cost contracts, he added.

The new plan also is designed to boost competition at the subcontractor level, reduce redundant bureaucracy, minimize risk in information technology engineering contracts, and shrink the auditing backlog at the Defense Contract Audit Agency. “I’m very unhappy with how long it takes to get products into the field,” Kendall added, “whether it’s too much testing, requirements that are too tough or industry that’s not agile -- it’s probably a combination.”

One key congressionally authorized pilot program is to build “exportability” in at the start of a project, which helps industry plan for future foreign sales in such areas as anti-tampering properties in radar-jamming equipment.

Better Buying Power also means “a new emphasis on the chain of command” within the acquisition team and more performance evaluations as required by Congress, Kendall said. “I’m a big believer in data to judge performance on the program, institutional and industry levels, to understand the root causes,” he said.

Yes, if people fail, there are consequences, usually administered quietly, according to Kendall. “But there should be some tolerance for mistakes if people are aiming to do the right thing, perhaps by trying to negotiate a better deal.” One problem with evaluating the Better Buying Power effort, he added, is the policy cycle time is five years while the leadership tenure is shorter, “so no one hangs around to correlate successes and failures.”

His team is bringing in young employees and making sure they get exposure to many different types of contracts, said Kendall, who has been in industry and government for 40 years. “Case studies show that it takes usually four and a half years and a crisis to fully train a manager,” he noted. “I have my four and a half years and perhaps this budget crisis is the crisis.”

Version 2.0 of Better Buying Power is now being circulated for comment by the acquisition workforce, industry, others in the Pentagon and Congress. A final version will be issued in January 2013, and Kendall anticipates a new iteration in two years.