DoD takes next step in acquisition reform, renews calls for contractor stimulus

The Defense Department just took another step toward its goal of modernizing its acquisition system. Deputy Secretary for Defense David Norquist signed DoD Directive 5000.01 on Sept. 8, which governs the roles and responsibilities for DoD’s adaptive acquisition framework.

“That, along with 5000.02, which was already signed out, really gives us the framework for how to move forward. We have a much more flexible way of doing business now codified in policy,” Ellen Lord, undersecretary of Defense for acquisition and sustainment, said during the Sept. 9 Defense News Conference. “We’ve put in place middle tier acquisition where we got statute a couple years ago, we now have a way to put working prototypes very, very quickly downrange so that we can practice how to use these new technologies so that we can learn quickly so we can iterate quickly. That along with everything we’re doing in terms of digital engineering and software modernization is really changing how we do business.”

Lord said the coronavirus pandemic shone a spotlight on some of the vulnerabilities of the defense acquisition system, which created an impetus for DoD to work with the administration to fix fragility in the supply chain, like unmanned aerial systems, rare earth metals and aircraft propulsion. While other more typical areas of recent defense spending, like nuclear modernization or hypersonics, haven’t gotten as much attention, Lord said DoD has put out almost $1 billion using Title III of the Defense Production.

In some areas where production had ground to a halt, like in commercial aviation, that money has sometimes been the deciding factor in keeping businesses open through COVID, while also supporting the warfighter.

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“What it did was allow us to put speed in the system, peel away what I would call the non-value-added bureaucracy,” Lord said. “COVID gave us a burning platform to demonstrate we could be very responsible in terms of taxpayer dollars, very responsible in terms of security of warfighter, but move at speed of relevance to get things done. So I don’t want to backslide there, and I want to make sure we take advantage of all that.”

But Lord said more money is needed to help the defense industrial base recover from COVID-19, because those effects haven’t been seen in full yet. The Defense Management Agency and Defense Logistics Agency have been tracking around 22,000 companies that DoD works with. Many of those companies have been adversely affected by COVID-19, stretching out production or giving employees time off. The system has mostly absorbed these effects so far, Lord said, but they’re going to start showing up soon.

“When we get to the point where we’re having payments and incentive fees and award fees earned, and if we haven’t done the deliveries, that’s where you’re going to see the hit,” she said.

DoD has been calling for more money for contractors since earlier in the summer.

Lord said she wants companies to account for the hits they have taken during the period from March 15 through Sept. 15, submit proposals showing those impacts, and allow DoD to assess them all at once. That process would take about six months, Lord said. About half that time would be for the RFPs to flow down through the supply chain to subcontractors. The other half would be for DoD to review all the proposals and determine what is or isn’t reimbursable. All proposals would be examine before any spending occurs, rather than the usual first-in, first-out arrangement.

Lord said she expects the total number would be between $10 billion and $20 billion. DoD already has the authorization it needs to make these payouts, but it lacks the appropriations.

“We believe we need that appropriation to maintain readiness because if we do not get that, what we are going to find is we are not going to get the number of units delivered. We are not going to maintain warfighter readiness, we’re not going to move forward in modernization,” she said. “We would like to take the one time hit and then see where we go from there.”