Navy sharpens acquisition pencil to find savings

The service is taking a four-pronged approach to improve its procurement process and find savings. A review board looks at all acquisitions to make sure its str...

The Department of the Navy’s fiscal year 2013 budget request was $1.4 billion less than in 2012. The service, like other Defense Department organizations, expects next year to be the beginning of a steady budget decline.

To help counteract that expected budget decrease, the Navy is sharpening its acquisition pencil to find both efficiencies in how and what it buys.

This is especially true in services, where the DoN spends about $11 billion annually.

Elliot Branch, the Navy’s deputy assistant secretary for Acquisition and Procurement in the Office of Research, Development and Acquisition, said the service is focusing on four key procurement areas:

  • Demand management
  • Acquisition strategy
  • Contract formation
  • Contract administration

“All of these are about better understanding where the money is going and what value the Navy is getting from it,” Branch said Wednesday during a panel discussion on the future of multiple award contracts sponsored by the Coalition for Government Procurement in Vienna, Va. “The department is on a journey of discovery about what we need to buy and how best to buy it.”

Agencies are looking for ways to reduce acquisition spending because of the pressure from potential budget cuts.

Civilian agencies under budget pressure

NASA’s SEWP IV government-wide acquisition contract, for example, is seeing more business and higher dollar value orders.

Joanne Woytek, NASA’s SEWP program manager, said agencies are submitting a lot of commodity buys and consolidating contracts to buy more in bulk.

Elliott Branch, deputy assistant secretary for Acquisition and Procurement in the Office of Research, Development and Acquisition, Navy
The Homeland Security Department is relying more on strategic sourcing, which includes some components of bulk buying but also the consolidation of contracts.

Mike Smith, director of DHS’ Strategic Sourcing Program Office, said the agency has 42 department-wide initiatives that come under the strategic sourcing umbrella and helped DHS save $1.6 billion since 2006.

Last year, DHS said it saved or avoided spending $336 million through strategic sourcing.

For the Navy, however, savings is just one goal.

Branch said the DoN is focused on efficiency and effectiveness around procurement as well as meeting all the procurement goals outlined by the DoD and Congress. The main goal for any acquisition is ensuring it benefits the warfighter.

“I’m very encouraged because what I’m seeing is a change in behavior,” Branch said. “I’m seeing people come to work every day and be more thoughtful about how they are spending the dollars they have been entrusted with. That’s very encouraging.”

Navy looks to demand management

Branch said the focus on demand management and the acquisition strategy has been especially beneficial for the Navy.

“Demand management is a question of what you buy, how much of it do you buy and how you describe the requirements,” he said. “That really starts off the acquisition process because what I ask industry to provide and the way I ask them to provide it usually drives the cost of what I get. We are looking at exactly what it is we buy in terms of quantities, where it’s bought and how we describe what we buy with the objective to getting some insight into how best we articulate that requirement to get the best deal with industry.”

As part of this effort, the Navy is using requirement review boards made up of the people responsible for providing the acquisition resources, both money and people, to understand their strategies and plans.

“They are much like our entire organization – they are highly decentralized. We’ve been doing them for about six months or so,” he said. “This didn’t start as a centralized policy initiative. But we had folks who said ‘If we are really going to structure this to run efficiently and effectively, we’ve just got to ask these questions.'”

Branch said the second area of focus, acquisition strategy, ensures the Navy understands its industrial base.

“It’s important to understand how that industry (is) constituted, how they do business and what motivates their behavior to provide good products or services at a reasonable price, at the quality we are looking for,” he said. “We can then formulate the right strategy to buy from that particular industry.”

As part of that effort, the Navy is reviewing product service codes to better understand what it buys the most and which ones would makes sense to set up a strategic sourcing program.

Getting the contract correct

The final two focus areas, contract formation and contract strategy, are related.

Branch said contract formation is driven by what goes into a request for proposal, like terms, conditions and the source selection approach.

“What are the elements in the deal that we really need and what are the elements that comprise constraints that industry will have to bid against?” he asked.

Contract administration focuses on after the Navy awards the contract.

“Are we doing the things we need to do as a government to hold their feet to the fire to hold them accountable for what they promised they would do in the contract formation phase?” he asked. “As my boss likes to say, ‘You improve the system one deal at a time.’ So what are we working on? We are working on getting the requirements right. We are working making every dollar count, raising the bar on performance, making sure we have an industrial base to go to and rebuilding the acquisition workforce.”


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