Pentagon Poised For New Round Of Acquisition Reform
A new phase of acquisition reform is beginning, and this time it is targeting the weaknesses exposed by the last round of changes. A roughly six-year effort by two presidential administrations has created a maze of alternative paths around the regulations and procedures that govern the U.S. Defense Department’s 60-year-old acquisition system.
As those new paths still lead to programmatic dead-ends at the low-level research and prototyping stage, the challenge now for reformers is to find a way to scale up the alternative paths for the existing system, and usher new technologies across a bureaucratic chasm filled with time-consuming regulations and procedures into programs of record.
The person selected by the Biden administration to design the new reforms is Michael Brown. The former CEO of the world’s 10th-largest software company has served as the director of the Pentagon’s Defense Innovation Unit (DIU) since 2018 and now has been nominated to be the next undersecretary of defense for acquisition and sustainment.
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Established in 2015, the DIU is itself at the forefront of the defense acquisition reform movement, serving as the Pentagon’s front door to high-tech innovation clusters in Silicon Valley, Boston and Austin, Texas.
Brown entered government service in 2016 as a White House Presidential Innovation Fellow. Like this latest round of acquisition reform, Brown’s involvement has spanned the Democratic administration of Barack Obama and the Republican administration of Donald Trump. Brown led commercial software companies and then worked to escort others into the defense industrial base.
“That’s why I’m so excited about Mike Brown being chosen—because he’s kind of the perfect guy to help,” says Jerry McGinn, the executive director of the Center for Government Contracting at George Mason University.
If confirmed by the Senate, Brown will inherit an acquisition system with a set of new and expanded authorities to finance rapid prototyping, including:
- Other Transaction Authority (OTA), a 63-year-old process codified and expanded by Congress in 2017 that allows small companies privileges such as bypassing the byzantine rules governing defense contracts and proceeding directly to a simple agreement;
- Middle Tier Acquisition (MTA), a five-year-old statute that allows defense acquisition officials to bypass the traditional defense acquisition system, proceeding to a rapid prototyping demonstration within five years or the rapid fielding of a new capability within five years of an approved requirement, as long as production can begin within six months; and
- Software acquisition, a one-year-old authority that offers a pathway to bypass the traditional acquisition system for software-intensive systems, as long as the program can demonstrate the viability and effectiveness of a new capability within a year of a contract award.
Armed with these new authorities, military contracting officers have signed hundreds, if not thousands, of deals with defense contractors, commercial companies and startups.
The effectiveness of the proposed reforms remains to be seen. For example, the first contracts to use MTA authority—including such pivotal deals as the hypersonic Lockheed Martin AGM-183A Air-launched Rapid Response Weapon and the Northrop Grumman Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) satellite—were signed in 2018. The first prototypes are not due to be demonstrated and delivered until next year.
But some complaints have already been raised. The sources include lawmakers concerned about the over-application of alternative pathways and small companies wondering what to do next after an OT project expires with no follow-up.
“You can get a $50,000 contract, and build a prototype and then what? If there’s no program or record to go to afterward, then it becomes a different kind of valley of death,” McGinn says.
The Air Force’s embrace of MTA shocked some in Congress—but not in a good way. Shortly after the authority was granted in 2018, the Air Force almost immediately named 20 programs that would use the fast-track authority. A concept that some lawmakers believed would only be applied to midsize acquisitions was suddenly being applied to some of the Air Force’s most expensive and technologically challenging projects such as the AGM-183A and Next-Gen OPIR.
Will Roper, former assistant secretary of the Air Force for acquisition, technology and logistics, remembers the backlash. “There was a huge push-back within the Pentagon, because it was expected that you would use this Middle Tier Acquisition authority sparingly,” Roper says.
For the Air Force, the opportunity presented by the MTA authority to escape from the traditional defense acquisition process—known as the Joint Capabilities Integration and Development System (JCIDS)—was compelling. “The relief it gave . . . allowed us to put industry on contract prior to having all of the normally, statutorily required documentation on the program,” Roper says. “And on average, that saves a year and a half per program.”
Under the JCIDS process, a contract award cannot be signed until the government acquisition office completes several reports consuming thousands of pages, including a life-cycle cost estimate and test-and-evaluation master plan. An irritation embedded in that process, says Roper, was the knowledge that all that work would have to be redone after the government signed the contract and started negotiating with the contractor about their actual costs, technical maturity and schedule.
By adopting the MTA authority, an acquisition program could bypass requirements for most of the documentation before contract award and proceed directly to working with the contractor on engineering.
“My argument was: Why would I tell any program, ‘I choose to not let you get industry to be part of your team; I choose to deny you a year of extra engineering; I choose to make you redo your documentation once you have better information to do it’?” Roper says. “So when I read the Middle Tier Acquisition [authority], I realized this is the way we’re going to do every program, and it went like wildfire across the Air Force and Space Force.”
Roper’s philosophy is based on his experience of managing the Pentagon’s Strategic Capabilities Office from 2012 to 2018. That office emphasized acquisition procedures that focused on moving as rapidly as possible to engineering and prototyping work.
“The complexity of defense systems requires the most engineering time that we can afford program teams,” Roper says.
But the absence of routine pre-contract-award procedures stirred controversy. The Government Accountability Office (GAO) applies a rigid “best practices” model to acquisition procedures. Accordingly, a GAO report published in 2020 sharply criticized Roper’s acquisition plan for the Advanced Battle Management System (ABMS) for lacking standard documentation such as a detailed life-cycle cost estimate. At the time, Roper argued that creating a decades-spanning cost estimate for a software-intensive system with a rapid refresh rate is at least impractical, if not impossible. But Congress, heeding the GAO’s concerns, chopped the Air Force’s budget request for the ABMS by nearly half in the fiscal 2021 budget.
The ABMS example highlights the challenge of applying to modern technology procedures from an acquisition system the Pentagon invented in the early 1960s, McGinn says. “The challenge is that applying the regulatory oversight mechanism is hard to do [with the ABMS],” he notes.
In effect, the acquisition reforms of the last five years created an all-or-nothing approach to regulatory oversight. Either a program must endure the combined process required by the two-year Program Objective Memorandum cycle for budgeting and the pre-award documentation required by JCIDS, or they are allowed to bypass them quickly.
For small companies, the former is often too cumbersome, but the latter offers little assurance of transitioning a successful prototype into production. For expensive and complex programs, oversight authorities such as the GAO and the Pentagon’s Cost Assessment and Program Evaluation office remain suspicious of acquisition strategies that deviate from the traditional process.
A possible solution is to find a bridge between those extremes. If a life-cycle cost estimate for the ABMS program is not the right answer, the Air Force needs to develop other metrics to ensure that taxpayer-provided funding is not being wasted.
“You have got to give GAO something else to evaluate,” McGinn says. “We’ve got to rethink the frameworks by which you do oversight of these kind of efforts.”