The Defense Department unveiled the latest version of its Better Buying Power initiative Friday, shifting the acquisition improvement spotlight this time onto the need to drive more advanced technologies into the products DoD buys.

Officials say Better Buying Power 3.0 mostly represents a shift in emphasis. The first two versions mostly focused on better management of the acquisition system from a cost perspective. While the Pentagon is not abandoning those initiatives, it is placing more of a premium on specific steps officials believe are needed to drive technical excellence into the systems the military buys.

“Our technological superiority is at risk. It is eroding because we’re not making the investments we should be making,” Frank Kendall, the undersecretary of Defense for acquisition, technology and logistics said Friday during remarks at the Center for Strategic and International Studies. “The threat of sequestration — even cuts to the level we’ve already taken — poses problems for us in terms of maintaining technological superiority.”

Strictly speaking, the latest version of the initiative still is in draft form. Kendall’s office plans to spend the next few months gathering feedback from industry, think tanks and Congress before it draws up marching orders for DoD acquisition officials.

But the thrust of several of the initiatives is in keeping with the task Deputy Defense Secretary Robert Work laid out to Kendall earlier this summer: Set the stage for on a new generation of breakthrough technologies that will give the U.S. a decisive advantage in future warfare, in much the same way that research which started in 1970s made the U.S. dominant for the last three decades.

Tighter link between acquisition, intelligence

Kendall said DoD will implement a stronger departmentwide approach to long- range R&D planning — a task that until now has been largely ceded to the military services.

“We have done some planning for our research and development investments, largely focused on specific technology areas that we think are strategic and that we’ve identified at a high level. This is going to take it a step further,” Kendall said. “If you look back to the studies we did in the ‘70s, a lot of the capability we have today came out of that. Things like smart weapons, smart seekers, some of our networking technologies and other things. The idea is to get to the next generation of those things, find out what they are, do it in a coherent way, and then focus our resources on programs that are going to change the game.”

To help with that long-range planning, Kendall said he plans to build tighter links between the department’s acquisition system and the intelligence community. That portion of the initiative is an extension of an effort DoD began in the previous version of Better Buying Power, when it said it wanted to more closely pair the acquisition and requirements communities.

“What I want to do is have a more continuous interaction with the intelligence community,” Kendall told reporters last week in advance of the official release of the 3.0 initiative. “I want them to help us understand not just what the threat is doing right now, but what is the logical response by the threat to the things that we’re doing. If you take a long program like the F- 35, the threats change over that course of that period of time, right? And we have some mechanisms in place to kind of watch that and then start to react if it does. I want to strengthen those mechanisms, and I want to make them more responsive so that the intelligence community knows what we’re interested in, it’s watching for those specific things, and it alerts us as soon as it sees indications of change so that we can respond more effectively.”

While some of the specific bullet points in Better Buying Power 3.0 amount to restatements of priorities the department already has been pushing thorough other avenue, including the use of more open systems architectures and rapid prototyping programs, several of the items are new.

For instance, Kendall said the department will launch a new effort to identify and remove barriers that prevent DoD from buying more commercial technology.

“We’re going to put a team together, we’re going to work with industry, and we’re going to go develop specific things to implement this broad goal,” he said. “Technology, in a number of commercial areas can move much more quickly than in military areas. We want to take advantage of that. We want to find a way to bring innovators who are in the commercial world and give them a reason to do business with the government. And we’re open to ideas on how to do that.”

Likewise, Kendall said the department needs more of an open mind when it comes to discovering what technological advances DoD might be able to incorporate into its technology portfolio from foreign sources.

“We have a lot of very capable partners in the world. A lot of other countries who do good work. And we’re looking for opportunities to co-develop and do sharing of the burden of developing a new product,” he said. “That also gives you more economic scales once we get into production.”

Value in incentive-type contracts

The new version of Better Buying Power also includes several items that Kendall says are designed to give industry additional incentives to innovate. One of them is based on findings Kendall’s office came away with after compiling its first two annual reports on the performance of the DoD acquisition system. He said they concluded that there was a strong correlation between the use of incentive-type contracts and better performance. The new guidance emphasizes that DoD is not requiring incentive-type contracts in every scenario, but managers should give them some level of preference.

“We call them formulaic incentives, where possibilities for cost increases or savings are shared between industry and the government, and they are very effective at getting results,” Kendall said. “You can set those arrangements up in a wide variety of ways, but these seem to be the best forms of contracting for many of the things we do. And incidentally, it’s true of cost- plus incentive and fixed-price incentive. There’s actually a stronger correlation between using the incentives and our results than there is to whether it’s a cost-plus or a fixed-price contract.”

And now that the department is putting a premium on innovation, Kendall said it needs to do a much better job of communicating to industry exactly how much it’s willing to pay for added capabilities.

“We’ve already started to do this on essentially a pilot basis, but it’s something I want to do more and more broadly. The idea is we need to give industry a reason to bid higher performance to us,” he said. “The way we’ve been doing this for a very long time now is we put out requirements that have an objective level and a threshold level. An objective level is what we’d sort of like to have if it were possible and we could afford it. The threshold level is sort of our minimum that we want to have in the product. But industry bids to the threshold levels, and nobody expects otherwise, because it’s generally cheaper, and unless there’s some way to get credit for being above that level, there’s no reason to do it. We will tell industry, in specific dollar terms, what higher performance is worth to us. You still have to be below our overall affordability cap, but once industry understands that, they can decide whether it’s in their interest to bid something that’s better than the minimum. They can make an informed judgment about whether that would give them a better chance of getting the contract.”

Better Buying Power 3.0 also will begin to ask questions about the value DoD is getting for the research dollars it’s already spending, both within its own labs and for the industry-initiated research that the government winds up reimbursing.

Kendall said it’s not clear that the department is getting as much return on investment as it should be for the $30 billion it spends on its own laboratories, so his office plans an examination of their missions, strategies, organizations and productivity.

Building up engineering competencies

He said DoD will ask similar questions about both industry-independent research (IRAD) and contracted R&D (CRAD).

“We’ve done some things on IRAD under earlier versions of Better Buying Power — we’ve improved our ability to understand what industry’s’ doing, and they have a better understating of what we’re doing with our in-house R&D — but we need to go a step further,” Kendall said. “We need to understand what we’re actually getting from these pots of money. IRAD is $4.5 billion per year, and CRAD is $10 billion a year. Our total R&D budget is about $60 billion, so we’re talking about a pretty significant fraction here.”

Improving the professionalism of DoD’s own acquisition workforce has been a focus area of Better Buying Power since 2010. The technological superiority slant on that will mean a new effort to build the engineering competencies of the workforce, based on the notion that the government can’t be a good buyer if the people on its side of the bargaining table don’t have the same level of knowledge and skills as the companies they’re buying from.

In the new version, DoD officials, without spelling out many details, say they will create higher standards for acquisition leadership positions and raise the professional requirements for acquisition jobs across the acquisition community.

In particular, Kendall said he is concerned about whether the department has enough qualified engineers in acquisition leadership spots.

“Some people have the idea that if you’re a good manager and a good leader, you can run anything. I don’t believe that that is true,” he said. “I would not take a group of trial lawyers who are doing litigation and ask someone who is a good manager and a good leader, but not a lawyer, to supervise Them. I would not ask a person who is not a physician or a surgeon to supervise a group of doctors or surgeons. And I would not ask someone who is not an engineer to run a development program where the fundamental job that you’re doing is engineering. I just think that that’s a recipe for failure, and I have seen some examples of that. Some of the services are in pretty good shape on this, others are not.”

Despite a new focus on technological superiority, the new version of Better Buying Power did not offer up any suggestions for revolutionary changes in the way DoD currently operates the acquisition system.

The subtlety of the changes Kendall announced Friday were in keeping with the views he’s expressed in many of his recent remarks on acquisition reform: in sum, the process works relatively well when it’s used properly, and policymakers should resist the urge to force a large-scale shakeup.

But the latest update to an initiative that DoD has characterized since 2010 as a plan for continual process improvement fell short, in the view of some industry groups.

“The goals of BBP 3.0 make eminent sense, as do many of its individual elements. But the devil is always in the details or lack thereof,” said Stan Soloway, the president and CEO of the Professional Services Council. “It is too focused on internal process changes rather than achieving extraordinary outcomes and too many of the barriers to real innovation and efficiency remain unaddressed. The result is a blueprint focused on incremental change to the current DoD process rather than to the department’s future ability to achieve the goals of excellence and dominance it seeks.”

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