The ability of the Department of Defense and other Government agencies to avoid facing reality or learn obvious lessons would be amusing if it was not so critically important. The Department of Defense and other Government agencies are in need of a substantial overhaul in their approach to research, development, and the deployment of new capabilities. Despite record-high budgets, the Government continues to rely on slow, expensive, and inefficient methods that would put any company out of business.
Budgets for what is called “acquisition” in Government parlance are at an all-time high! Despite this, a Wall Street Journal article recently pointed out, for example, the Air Force’s fleet of aircraft is “its leaders say the smallest and oldest since it became a separate service in 1947.” We continue to execute major projects with the old Cold War “cost too much, takes too long” system for major acquisitions. Former Senate Armed Service Committee staffer Bill Greenwalt has even stated that this approach did not help the U.S. win the Cold War but rather hindered it. Things have gotten much worse since, in a recent podcast, he said that acquisition leadership appears “delusional”.
The Government, at least the Department of Defense, not only gets the back-end of the system wrong but dulls the spear tip at the front of the system, the science and technology process. Most extramural S&T efforts are funded using procurement contracts, exactly the wrong funding instrument. What?! The Federal Acquisition Regulation (FAR) that governs procurement contracts says, “The primary purpose of contracted R&D programs is to advance scientific and technical knowledge and apply that knowledge to the extent necessary to achieve agency and national goals” (FAR 35.002). The purpose of FAR is to regulate contracts (procurement contracts) used to acquire supplies and services. But “Contracts shall be used only when the principal purpose is the acquisition of supplies or services for the direct benefit or use of the Federal Government” (FAR 35.003). ”Shall” be used “only…”
Congress has mandated that the Department of Defense create a “preference” for using non-FAR contractual instruments (“Other Transactions”) for S&T, prototyping, and for experimental purposes (sec. 867, NDAA 2018). Obviously, this has not been done, FAR procurement contracts are still used to execute most funding allocated to such efforts.
While there is talk about connecting with venture capital or other forms of private financing little has been done. Yet there are examples of how private financing has been successfully leveraged for both S&T and system upgrades. Articles on this website discuss the Technology Reinvestment Project (TRP) and the Commercial Operations and Support Savings Initiative (COSSI). TRP leveraged over $1Billion in private investment with $870 million in government funding! COSSI resulted in 30:1 cost savings (!!!) as a result of government investment that was usually cost shared with industry. These programs and their associated cost savings could be replicated but they have not.
Finally, the combination of Other Transactions with Middle-tier Acquisition (authorized by NDAA 2016) has the potential to revolutionize major systems acquisition! However, this has fallen short as a result of failed leadership and business-as-usual mindset.
The failures exemplified by an aircraft fleet that is smaller and older than any since 1947 can be corrected. Congress has provided the necessary legal authority. Examples of success already exist, we already have this knowledge. What is missing is education in using existing authorities, understanding past success, common sense business approaches, and most of all leadership. Leadership must begin from the very top. It’s time for old-line bureaucrats to embrace the new or step aside, allowing teams of forward-thinking individuals to drive change.
written by Richard L. Dunn
Darren Shaffer
My experience as a CO is the Non-FAR and FAR methods each have their place. I think there needs to be a middle ground especially when it comes to R&D to enhance or adapt an existing commercially technology and previous R&D.
Richard Dunn
Darren
Other Transactions are the flexible “middle ground” or whatever you want them to be in the domain of R&D and prototyping. They are just contracts unencumbered by non-value-added rules. They can look like FAR procurement contracts (stupid for R&D), commercial contracts, or whatever makes sense for the project. This is one of the numerous points about OTs which many DOD lawyers and contracting folks are missing. Several non-DOD agencies have OT authority broader than DOD’s but cannot image how to use the contracting flexibility available to them. There is a pitiful dearth of knowledge about contracts outside the FAR context that limits thinking about and doing things that need to be accomplished.