DoD to scrub out burdensome, costly acquisition regulations

The Defense Department is taking a scrub brush to its acquisition regulations and getting rid of any nasty growths that have been slowing down the process over the years.

The Pentagon already tested a handful of these changes and is finding success in taking out layers of bureaucracy.

One pilot looked at whether the concept of earned value management (EVM) is consistently applied across DoD, what benefits it brings and how could services use it better.

“At about a year in, it was very evident that our relationship with industry in doing this study had really matured,” said Katrina McFarland, the assistant secretary of Defense for acquisition after her speech at the National Contract Management Association’s World Congress on Sunday. “We were getting really good data in and really getting good exchange, very candid and very open, and with the different participants that work with industry – Defense Contract Management Agency, Defense Contract Audit Agency and the Defense Procurement Activity. And in the end, we are actually putting out a report that demonstrates reductions, not only in full-time equivalents of people on the government side that we will repurpose for other work, but also things that we will no longer ask for.”

McFarland said DoD will issue that report by the end of the calendar year.

“We will go out with a change to the Defense Federal Acquisitions Regulations to adjust what we do to be more efficient and reduce costs,” she said. “It will be cost avoidance for the most part, but the people will indeed be savings. Mr. [Frank] Kendall [the undersecretary of Defense for Acquisition, Technology and Logistics] has reviewed it, approved the results, briefed its senior integration group with all the service acquisition executives, and we’ve actually started on the second part to slowly carve away at next efforts.”

The pilots and ensuing report is actually the second time DoD has looked at simplifying procurement regulations. In the 1990s, the Pentagon hired Coopers and Lybrand to do the analysis.

But since that initial study, the number of laws and regulations have increased dramatically.

McFarland said sometimes DoD and industry are spending tens of thousands of dollars to comply with these requirements on a contract that is worth half or a quarter of that oversight spending.

“We have things that are valued at less than $1,000 and we have things that are valued at billions, and we treat them the same way,” she said. “There should be a materiality discussion to determine what and how much risk we want to apply because frankly time is money and some of this doesn’t warrant the time we are spending.”

In the EVM pilot, McFarland said her office worked with DCAA leaders to find areas where trading risk for efficiency was acceptable.

“We are looking at the organization as a whole instead of the sum of its pieces,” she said. “We have been having very good success in reducing how many times we contact industry partners. For example, submissions during a negotiated contract that’s protracted – how many times do we want for a resubmission of subcontractor costs? How many times do we need to audit that? There are a whole bunch of activities that we are looking at together that we are coming to consensus on how we can do those processes more efficiently.”

Along with the EVM pilot, McFarland said DoD also tested contract close out services.

“We have a lot of backlog in that area, and we are looking at how can we literally through a process of that we call material nature, which is looking at the substantive risk that is being taken and how can we address it through different methods to reduce the backlog with industry,” she said. “There are things that you can do to alleviate that innate risk you are feeling. You can do sampling techniques. There’s known statistical practices that will allow for people to retain a confidence. So if there is a contracting officer who has a concern about a particular proposal she or he can still call that audit in and they can do a sampling technique that if something comes out that shows there is a concern, they can reinstate all the processes that they’ve used historically to manage and ensure that the system is working to where it should be in terms of the risk associated with an audit.”

The impetus for this effort is two-fold. McFarland said over time regulations grew as reactions to problems without enough thought into whether the issue was the process or the person.

Second, and maybe more importantly, the cost of these regulations is growing for both industry and government and neither can afford to have enough people to meet all of these requirements.

The workforce issue is directly related to the need to reduce acquisition bureaucracy.

DoD, like nearly every agency, can’t hire enough acquisition workers. By reducing some of the burden, McFarland said DoD hopes it will help expand the workforce’s impact on more critical procurement areas.

At the same time, McFarland said DoD is placing a greater focus on talent management of its acquisition workers.

“We have attrition, but we have to understand how does that fit into how we mold our workforce and what are our tools to manage and understand where our needs are in terms of weaknesses?” she said. “When we have budget cuts, they involve people. How do I ensure that the people that are being looked at to have their positions removed are the people that we can afford to lose?”

McFarland said her office is working with the services to build a talent management toolkit so employees can plan out their career advancements.

At the same time, McFarland said DoD is “dusting off” some tools and reminding the services that they exist, such as hiring retired annuitants or highly qualified experts, which lets DoD retain or hire a few thousand people at more competitive salaries, or the Intergovernmental Personnel Act, which lets agencies bring experts in on a temporary basis from other levels of government.

“We are providing a standardized method to go about utilizing them and making sure there is an actual education from our senior leadership down to our humblest employee at the entrance level that these tools are out there and how to use them,” she said. “The goal is to source not only talent, but from their own career perspective if they want to retire, but want to give back to the organization, how do they do that? Where can we use that to fill in the gaps? There are a lot of opportunities that we really need to have clear visibility on. That’s what’s going on right now is a complete review of that. It’s being done at the very senior undersecretary level and we expect within a year to have a book out for people to train to and all our human resources people trained up to use that.”

Another tool that isn’t getting a lot of attention throughout government is phased retirement.

McFarland said she recently asked for her employees to take a look at the tool and figure out how best to use it.

All of these efforts come on the heels of yet another attempt at DoD acquisition reform by Congress.

The National Defense Authorization bill includes a host of provisions to try to fix what some would call long-standing problems.

Defense Secretary Ash Carter wrote a letter to lawmakers in June outlining DoD’s concerns with some of the provisions.

McFarland said for the most part the NDAA includes good proposals, but one in particular is giving DoD concern. The move to dismantle the reforms made under the Goldwater-Nichols Act.

“I understand fully why there needs to be an enterprise view,” she said. “I think just exposure to the understanding of cross-service equities and making sure that in the terms of risk and optimism particularly in the budget decline, we have people who are able to look at products and proposals from each of the agencies and the department writ large, have a good scrub so the department doesn’t go awry in the future.”

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