Expert panel takes first crack at reforming DoD acquisition system

First volume of three expected reports from the "Section 809" panel seeks changes in areas ranging from business IT to contract oversight and commercial buying.

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The advisory panel Congress established to help streamline the Defense Department’s acquisition system said Wednesday that DoD should be allowed to eliminate more than a dozen different legally-mandated offices and positions within its bureaucracy, cease the annual publication of at least 20 reports to Congress that are of questionable value, and repeal 165 government-unique contract requirements as some of the first steps toward bringing more agility to the department’s procurement of goods and services.

The suggestions were among a sweeping set of recommendations the group of experts, known as the Section 809 Panel, made in the first volume of its final report following more than a year of study, public testimony and private interviews with government and industry personnel. It intends to send Congress two additional volumes within the next year.

The panel emphasized that removing the statutory requirement for certain DoD offices wouldn’t necessarily eliminate them, but would give the Secretary of Defense the ability to reorganize the department as he or she sees fit. Some of the organizations the report targets for potential elimination: the Office of Corrosion Policy and Oversight, the Office of Technology Transition and the the office of Performance Assessment and Root Cause Analysis along with the executive agent for printed circuit boards and small business advocates within each of DoD’s audit agencies.

Arguing that Congress’ appetite for annual reports on a myriad of acquisition issues tends to be a burden that outweighs its benefits, the panel said lawmakers should at least temper the effects of those demands by passing new legislative language that automatically does away with every reporting requirement after five years. And the advisory group said two dozen of them should be done away with immediately because they are obsolete or redundant, including annual reports on integration of major satellite programs, procurement of equipment for reserve forces, cooperation with commercial space companies and cost estimates for the Ford Class aircraft carrier.

Across more than 600 pages, the report makes dozens of other recommendations that are meant to make more sweeping changes in various areas of DoD procurement, including for business systems, commercial items, contract compliance and audit procedures and service contracting.

As to business IT systems, panelists said they were distressed to learn that years of attempts to improve DoD’s performance had collectively led to nine different layers of oversight that any particular Defense business system (DBS) must navigate in order to gain approval, with no one in particular responsible for success or failure.

“Fragmented and overlapping oversight processes create a burdensome, parallel acquisition system that hinders flexibility for programs needing it most,” the panel wrote. “DBS programs are implementing fast‐changing technology solutions and changing business processes (i.e., the way people do their jobs) as a result. To be successful, such projects require maximum flexibility to adjust as new information or new technology solutions become available. The current system, however, saddles DBS programs with additional oversight beyond that of a traditional DoD acquisition program.”

As a remedy, the report recommends that DoD create a single, “empowered” entity in charge of overseeing most aspects of business systems, adopting commercial best practices and reorganizing business system portfolios into smaller projects that encourage agile development. Also, Congress should eliminate what the panel said was a duplicative requirement: that business systems get an annual certification by DoD’s Investment Review Board. And because business systems are different from weapons systems, they should also be funded differently, with flexible dollars that can be carried forward from year-to-year instead of annual appropriations split between procurement, operations and maintenance, and R&D accounts.

With regard to commercial items, the panel found DoD’s progress has “stagnated” since Congress enacted legislation in the 1990s designed to prod the department toward those types of items and use simplified buying procedures. The department, in fact, has regressed in just the last few years, with dollars spent on commercial items falling 29 percent between 2012 and 2017, according to the panel’s analysis of data in the Federal Procurement Data System.

The report blames those statistics, in part, on the array of regulations and contract clauses DoD and Congress have imposed since lawmakers last attempted to streamline the system: since 1994, the number of stipulations DoD tacks onto its commercial contracts has increased by 188 percent, and the number that impose demands on subcontractors to those commercial agreements has increased five-fold.

“The [Federal Acquisition Regulation]’s commercial buying terms are confusing, poorly defined, or undefined altogether,” the panel wrote. “The term ‘commercial item’ is overly broad, encompassing both commercial products and commercial services. The terms commercial item and commercially available off‐the‐shelf item appear in the U.S. Code in numerous sections, but do not incorporate the same universal definition; in some instances, the terms are defined differently, and in other instances they lack any definition at all.”

The report recommends that Congress “harmonize” 75 separate sections of U.S. Code so that everyone’s clear on what a commercial item is, while also clearly distinguishing between commercial products and commercial services. Congress, the panel said, also needs to settle on one definition of what constitutes a subcontractor. Under current law, there are 21 separate definitions.

Panelists said DoD itself was also to blame for adding unnecessary complexity to the process of buying commercial items. Of the 85 DoD-unique regulations the panel reviewed for commercial purchases, 71 were implemented without any written determination by the department as to why they were justified to bypass Congress’ general preference for simplified procedures.

The report made nine separate recommendations to reform DoD’s processes for ensuring vendors are complying with the terms of their contracts, saying those sometimes-onerous procedures are a significant barrier for firms who might otherwise be interested in doing business with the government, as evidenced, in part, by a backlog of incurred cost audits at the Defense Contract Audit Agency.

The panel said one main focus in the reforms it proposed was to improve DCAA’s “focus” on the contracting officers and acquisition teams whose main mission it should be to support, not to perform audits for audits’ sake. The contract audit process, it said, should center on the acquisition team’s mission, become simpler, and treat speed a key objective.

“DoD’s oversight functions must provide timely, useful advice to contracting officers and contractors on compliance matters,” the report said. “They must also provide timely advice to contracting officers regarding cost/price negotiation positions. Timely execution of DoD’s internal control activities will provide contracting officers and oversight professionals with insight into contractors’ current operations. Timely solutions to compliance challenges will reduce future oversight burden for both contractors and oversight organizations.”

The length of the first volume of the panel’s report is due in large part to the deep detail presented in each of its sections. For each topic, members and staff drafted extensive historical explanations of what the advisory group believes contributed to the problems it identified, and for each recommendation, the report offers Congress proposed legislative language to implement what the panel believes are the necessary changes.

The decision to include legislative text in the report seemed to be emboldened by preliminary successes the 809 Panel has already had in convincing lawmakers to alter acquisition law. It made three recommendations in an early interim report last summer, each of which were adopted and enacted as part of this year’s National Defense Authorization Act.

The report’s first volume also provided a preview of formal recommendations the panel plans to include in forthcoming editions, proposals which would implicate a more systematic overhaul of the Defense acquisition system.

While still a work in progress, the panel refers to the framework it is developing as an “outcome-based” system that could redefine traditional notions of requirements development and competition. The vision the panel is developing would also involve the segmentation of the current acquisition process in to four separate “lanes” — one each for products or services that are already available in the marketplace, for those that need minor or major customization, and for those that are only applicable to Defense and have to be developed from scratch.

“DoD’s current approach to acquisition does not foster meaningful collaboration with the private sector or within DoD itself,” panelists wrote in describing the need for a more comprehensive rethinking of the system. “DoD’s acquisition workforce fears that communication with industry may result in punishment. This concern undermines DoD’s ability to work with industry as a true partner. An inability or unwillingness to collaborate with industry results in DoD lacking awareness of the full range of available potential solutions; creates barriers for nontraditional contractors to enter the defense marketplace; and results in DoD acquiring suboptimal products, services, and solutions. DoD must foster collaborative partnerships across the entire marketplace to accomplish its mission today and in the future.”

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