Essay by Jonathan Etherton
President, Etherton and Associates, Inc.
The following essay originally appeared in a report by the Senate Permanent Subcommittee on Investigations published Oct. 2, 2014. Federal News Radio is reprinting it as part of our special report, Missing Pieces of Procurement Reform.
To maintain the world’s finest military, the Department of Defense needs three things: high quality people, realistic and constant training, and cutting-edge technology and support from industry. If we have the first two but not the last, we risk losing our ability to protect our national security interests around the world. Rapidly falling defense budgets underscore the need to achieve major reductions in the costs of what we acquire as well as the costs of acquisition processes and organizations themselves.
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Neither the current acquisition process nor its outcomes appear affordable. Yet given all of the time and energy put into the prior reform efforts and the persistence of many of the same problems in federal acquisition that were identified decades ago, it is reasonable to ask, “What will be different this time?” To reach a more successful result, the government must make careful assessments of our past experience and leverage new capabilities.
Three basic principles should underpin our future efforts toward acquisition reform.
First, individual and organizational authority and accountability are better guarantors of performance than increasing compliance requirements. Second, acquisition decision-making should be based on evidence of strong performance and outcomes rather than on beliefs, opinions, or arbitrary preferences. Third, process requirements should be matched with the resources available to properly implement them, particularly in the domains of human capital, performance measurement systems, and program funding.
To begin with, successful acquisition reform will require evidence-based decisionmaking. In the past, it was difficult to know exactly what outcomes resulted from acquisition strategies and behaviors in specific circumstances. Today we have analytical tools and “big data” capabilities to track and understand the real cost and savings drivers in the acquisition system on a systemic, scientific, and statistically-significant basis rather than by anecdote or even individual case study. If fully implemented, analytical tools can measure the value of different acquisition approaches across the federal enterprise. The Pentagon and Congress no longer need to guess at solutions to the problems in the defense acquisition system when both can measure the costs of particular practices compared to their outcomes in order to promote success and learn from failure. Because these emerging tools track, record, and analyze data continuously, continuous improvement of the acquisition process is now a possibility.
The Department of Defense and Congress have already demonstrated the validity of the evidence-based approach to acquisition management. The 2013 Annual Report on the Performance of the Defense Acquisition System and the more in-depth 2014 Report use such an approach to evaluating acquisition practices and, while not conclusive in many areas, they do draw conclusions where the data are clear, such as “Programs with bad starts often continue to have problems.”
The reports are admirably clear about what we can derive from their analyses and what requires further study. The Congress also strengthened this evidence-based approach in the reforms it implemented in the 2009 Weapon System Acquisition Reform Act. The Act significantly strengthened the department’s ability to learn from its successes and failures through the Office of Performance Assessment and Root Cause Analysis, an improvement evident in both Reports.
We must use emerging capabilities within the DoD to analyze the performance of the acquisition system beyond major defense acquisition programs. These analyses should rely on data already collected and analysis already performed, or data collection and analysis capabilities already planned for incorporation in defense business systems.
Further, the department and Congress should use these tools to capture and weigh different approaches to complying with new overhead requirements and the cost of alternative approaches to audits and oversight. Not only will this data offer keen insight into the most efficient way to meet new requirements, it will enable better cost-benefit analyses of current and future legislation and regulation.
In my view, the aggressive and systematic deployment of evidence-based analysis is the single greatest tool for overcoming institutional opposition to transformative change of the federal acquisition process.
The availability of lessons learned from past acquisition reform efforts is another factor which should give us hope for meaningful change. Among the richest source of such lessons is the experience with the comprehensive reform effort of the 1990s. Of all the reforms attempted by Congress and the administration during that period, arguably the least successful were those meant to transform the acquisition culture.
Laws were enacted that sought to encourage and reward acquisition professionals for using innovative as opposed to rule-based approaches. For example, various pilot program authorities were created to allow agencies to experiment with innovative strategies in larger programs, but these either did not establish successful models for broader agency use, as in the case of the Defense Enterprise Programs that were intended to streamline the management of major defense acquisition programs, or were never used at all. Most of these authorities were later repealed.
A number of factors undermined these efforts. As Congress passed the major acquisition reform legislation, the Department of Defense was cutting the acquisition workforce quickly and drastically as part of the National Performance Review. For example, the acquisition workforce in the department dropped from 460,516 in fiscal year 1990 to 230,556 in fiscal year 1999. While some reduction was certainly warranted by changes to the acquisition process and the reduction of defense spending, these reductions went too far and jettisoned too many of our seasoned professionals. Further, the laws did not reconfigure the workforce to effectively manage a process that significantly streamlined the contract formation and administration and needed correspondingly greater oversight of the requirements determination process to maximize competition and provide for effective contract management.
In the ‘90s, the theory behind workforce reform was that removing rules would cause judgment and discretion to fill the void. That theory did not play out in practice. Despite passionate cheerleading from the top, agencies did not develop or fund the education programs and opportunities needed to equip the workforce for the new acquisition model. Most of the oversight community still assessed performance in terms of compliance with rules and procedures, countermanding the emphasis on increased authority and accountability.
The lesson from the 1990s for our current efforts is that Congress and the Pentagon must fully fund the training and other workforce initiatives to implement the transformation of the acquisition process. The success of defense acquisition will always depend on the capability of a limited number of people inside and outside government whose resources of time and attention are finite. Increased skill, relevant experiences, and cultural adjustment of the workforce will occur only gradually and only with adequate funding and congressional oversight.
Congress and the Pentagon can begin to take steps toward a more skilled acquisition workforce. Congress should review and grow the annual amount in the Defense Acquisition Workforce Development Fund and use it to fund an acquisition workforce improvement plan until it is seamlessly integrated into the normal programming and budgeting process. The department should establish and sustain consistent and standard training, education, certification, and qualification for the acquisition workforce. It should follow the proven Defense Human Capital Management Planning and Competency Modeling processes to identify recruitment, training, retention, and divestment proposals for the consideration of Congress.
In addition to an increased focus on the acquisition workforce, Congress and the Pentagon should improve the requirements generating workforce. The budget for the acquisition workforce improvement plan should expand to address the needs of the requirements community, especially in the areas of non-major program, services, and information technology acquisition. The Department should improve requirements development by sustaining centers of expertise in requirements analysis and development, and agencies should ensure that all acquisitions of complex services (e.g., information technology or management) occur only with express advance approval of requirements by the program manager, user, and the contracting officer, regardless of the type of acquisition vehicle used.
While some acquisition workforce and cultural reforms may not have enjoyed hoped- for success in the ‘90s, others were quite successful. Opening up the federal market to commercial items has likely saved the government tens of billions of dollars at least, and gave the Department of Defense and civilian agencies access to commercial technologies they could not afford to research and develop in-house. The simplified procedures for low-dollar procurements significantly reduced paperwork and manpower. Many redundant, costly statutory requirements were eliminated. For a time, at least, the DoD and the civilian agencies were operating under very similar statutory requirements and policies.
Future acquisition reform efforts should solidify and build further on these reforms. Congress should reaffirm and even expand commercial item preference, both as a way to maintain access to cutting-edge technology during a period of shrinking defense research and development, and as a way to avoid substantial overhead and compliance costs. Each major program should have a separate stable program funding account based on capital budgeting at Milestone A. The Department should budget for, and the Congress should fund, a management reserve in this account.
With regard to reviewing existing acquisition statutes and regulations, the so- called Section 800 Panel of legal, government, and industry acquisition experts provided detailed recommendations that led directly to the acquisition reform legislation of the ‘90s. While such an in-depth process may be less feasible today, a process of assigning sunset dates to existing statutes and regulations at reasonable intervals and providing for open public comment could foster continuous improvement, particularly by eliminating process requirements that do not have proven value.
Among the lessons learned from past reform efforts is the degree to which lack of effective management of the requirements process can undermine efforts to reform the process downstream. Numerous improvements can and should be made to the current requirements development process.
First and foremost, the Congress should explicitly align the requirements, acquisition, and budget processes under the purview of the Service Chief and centralize accountability for Service acquisition performance in the position of each Service Chief. Next, the department should amend Instruction 5000.2 to require a consultation with industry partners across the large, medium, and small business tiers about current and future technologies to help define requirements prior to Milestone A for all major programs. In addition to this initiative, the department should establish regular roundtable discussions hosted by the Deputy Secretary of Defense with industry executives to share long-range capability development plans and to align industry with defense strategic planning.
One final lesson from past acquisition reform efforts is the great impact of boundary conditions on the success for any contemplated improvement. Perhaps the greatest challenge to reform is that each stakeholder or decision-maker in the process can only affect a relatively narrow piece of the larger enterprise and often must deal with institutional conditions or behaviors that, while out of their reach, may still dictate success or failure. Further, some of these conditions result from aspects of our political system and human nature that are either incorrigible or highly resistant to change. No policy can succeed without accounting for these conditions and their possible impacts. These boundary conditions are sufficiently influential that they deserve brief enumeration here.
The federal military and civilian personnel hiring and promotion systems for civilian employees and military service members impact the education and experience of acquisition personnel and, in the case of the military, the amount of an officer’s career that can be devoted to acquisition versus operational assignments while allowing her to remain competitive for promotion.
The budget, planning, and programming processes in the federal government dictate decisions about schedules and the availability of resources and require that a number of competing public policy imperatives be reconciled, of which cost-effective acquisition is only one. The incentives embedded in these processes can have a decisive effect on the structure, size and pace of technology maturation of federal acquisition programs, which can further have a decisive effect on cost as compared to value for a specific acquisition program.
While the industry faces significant barriers to entry into and exit from the federal market, companies’ behavior in the buyer-seller relationship is not dictated solely by changes to federal acquisition policy. Other considerations also influence a company’s response to a policy change, such as the need to demonstrate sustained shareholder value to institutional investors. Also, the federal sales of a commercial company may be quite small as a proportion of its total sales in the global marketplace, reducing that company’s willingness to participate in a highly regulated federal marketplace. These factors limit the extent to which the government can influence the behavior of companies that supply needed services and technology.
The federal audit and oversight structure and process also create challenges. The community that performs oversight and audits sometimes judges acquisition decisions based upon a narrow set of data around a specific transaction when other factors such as the use of individual judgment, innovative approaches, and prudent risk-taking in support of an agency’s mission may be more relevant to the overall success of the acquisition. This limited focus and the assessment of program success that it may inform can give an inaccurate picture of a program’s performance and may discount a well-reasoned decision to not strictly follow the rules to achieve a better overall outcome.
Last, the news media and outside organizations’ judgments of the performance of a federal program or agency have a major impact on perceptions and the support of the public and Congress for a program or a given set of policies over time. Whether accurate or not, these judgments can become the common understanding of a program’s success and even dictate the perception of success or failure of the individuals responsible for managing the program.
The fundamental question remains, “Where do we go from here?” The past has shown that process is no less important than substance.
The recent experience with the development and passage of the Weapons System and Acquisition Reform Act (WSARA) of 2009 serves as a good model for a rapid legislative process where complex issues involving multiple stakeholder communities are in play. WSARA was introduced as a free-standing bill in February 2009 and was the subject of focused hearings during which the committee considered input from all interested stakeholders. The process continued through the markup of the bill and during the House-Senate conference. The process was very collaborative and allowed for a reasonable alignment among both houses of Congress and the Department of Defense before final passage in May 2009. That alignment proved essential for successful implementation.
Similarly, the process Congress and the Executive Branch followed for acquisition reform in the 1990s, spanning several years through the passage of the Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act and the Information Technology Management Reform Act, was very successful. That process was a very complex process and yet still orderly and structured to allow for the impact of the great changes that occurred while it was ongoing, including the fall of the Soviet Union, the emergence of the Internet, and the growth of an advanced commercial electronics industry. The process kept the essential staff and members of both parties and multiple committees fully engaged, and it accommodated hard political realities to produce well-grounded, relevant, and meaningful reform. Further, Congress effectively tapped the expertise and experience of acquisition professionals from all stakeholder perspectives in government, industry, and academia throughout the process.
The scope and scale of acquisition transformation currently contemplated by Congress has much in common with the aspirations that drove the multi-year process of the 1990s. Any future process of such magnitude will encounter new and unexpected problems, issues, and opportunities, and all the parties must be prepared to accept criticism and be open to reconsidering and revising policy approaches as the evidence may dictate. Both chambers of Congress, the Executive Branch, and the industry must establish and sustain communication and collaboration throughout such a process.
The acquisition system today remains in a state of equilibrium held in place by a complex set of forces, including the boundary conditions enumerated above. History suggests that nothing short of some more fundamental disruption of such forces will prevent the system from settling back into a state very similar to what exists today, which is likely to be neither affordable nor supportive of our national defense strategy over the long run in the face of emerging threats.
A consensus is forming around the need and the direction for action. The challenges and the emerging capabilities to address them warrant a new attempt at transforming the acquisition process. All of these factors offer reasonable hope that, with patience, collaboration, and the steady application of new information, fundamental reform may result.
Jonathan Etherton, president of Etherton and Associates, Inc., has over 30 years of experience working in and with Congress and the executive branch on national security funding and acquisition policy issues. He served 18 years as a staff member in the United States Senate, including 14 years on the professional staff of the Senate Armed Services Committee. While serving on the Committee staff, Jon Etherton was responsible for managing public policy and budget issues before the Subcommittee on Acquisition and Technology, including; acquisition policy, funding for technology base and research and development programs, industrial base policy and selected defense trade issues. Serving as the principal Republican committee staff member for acquisition policy and reform from 1985 to 1999, he played a leading role in the development and enactment of such legislation as the Federal Acquisition Streamlining Act of 1994 and the Federal Acquisition Reform Act of 1996 (also known as the Clinger-Cohen Act).