“Frankly, I think there is no more important legacy that any of us as managers can have than to leave behind a stronger workforce than the one we inherited. That is what this is all about,” said Frank Kendall, the under secretary of defense for acquisition technology and logistics, Tuesday during a press conference at the Pentagon. “We have a lot of very capable people in the workforce. We have a lot of very professional people, but we could be better and we could have a deeper bench.”
“We’re bringing in a lot of young people and we will have to develop them. I’m concerned about the demographic bathtub we have where we have people nearing retirement, then we have a bath tub in the workforce and then we have younger people who have come in,” he said. “I’m working with the service acquisition executives on ways to creatively transfer some of that expertise to the new generation and give people the kind of experience they need so they can grow in their jobs.”
Wide range of experience expected
The Pentagon wants acquisition workers to participate in different parts or phases of the acquisition process, including being part of a source selection committee, do design reviews and work on contracts of different types.
Kendall said DoD will focus on key leadership positions first, including program managers, contracting officers, chief engineers and product support managers. He said those are the people who have a lot of responsibility for success of programs.
“It occurred to me a couple of years ago that the DoD is different than industry. If I was in industry and I had a shortage in my workforce of a certain kind of skill set, I could go out and hire that skill set from someone else,” he said. “[At DoD] we grow our own people. We grow our program managers. We grow our chief engineers. We grow our logistics specialists, our product support people, and we grow our contracting people. And if we have shortfall in that, then we have a very long recovery time to correct it.”
Kendall added it’s become too easy for employees to advance in the acquisition career level, almost a check the box mentality. Instead, he said, the goal is to obtain advanced certification levels that have more meaningful training, and employees must demonstrate the expertise.
The focus on the acquisition workforce is one of two new major focus areas. Better Buying Power 2.0 builds on many of the areas of the first version, which then-DoD Secretary Robert Gates called for in 2010. He instructed the military to figure out how to become more efficient, especially around acquisition and in light of shrinking budgets.
Successes, failures of version 1
Ashton Carter, who held Kendall’s position in 2010 and is now the deputy secretary of defense, created the Better Buying Power, which included 23 initiatives across five major areas.
After two years, Kendall and Carter renewed and updated the initiatives.
“We have built up substantial experience. We’ve conferred among our own executives. We’ve conferred with our partners in industry. We’ve accumulated our experience. We’ve accumulated data. We’ve tried things that have worked. We’ve tried things that haven’t worked. We’ve learned,” Carter said. “And Better Buying Power 2.0 is a natural recognition of the fact that we can and must do more each and every time to get even better buying power and better value for the taxpayer and the warfighter.”
Better Buying Power 2.0 has 36 initiatives across seven major focus areas.
Along with the workforce focus area, DoD added the major area calling for improving how the military controls costs throughout the product lifecycle.
Kendall said about half of the 36 actions are new, including:
Enforcing affordability caps
Controlling costs through cost performance measurement
Stronger partnerships with the people who develop contract requirements
Thinking about and designing in the ability for products to be exported to other countries at the front end of the design phase instead of after the fact.
Version 2 also builds upon the idea of “should cost,” which requires program managers to set targets below industry estimates and figure out how best to reach them.
Part of the “should cost” expansion is the enforcement of cost caps. Kendall said DoD always had the requirement to establish total spending on each phase of the project but rarely enforced it.
“We set a preliminary cap at Milestone A as we enter technology demonstration. We set a final cap at Milestone B when we enter engineering, manufacturing and development,” he said. “The way these are set is the services are asked to look long term at its lifecycle cost for this product and other products in the same portfolio, and what kind of budgets it can expect to have out in 30 or 40 years. Based on that, it will derive a unit cost it thinks it can afford. Now we can’t predict exactly what future budgets will look like, but it’s better to make an estimate and use that to drive an affordability cap than to just assume you can meet whatever requirements you write down.”
Kendall also includes the caps in the acquisition decision memorandums he signs at each of the milestones.
Finding the right incentives for vendors
Version 2 also will try to fix some instances in which acquisition workers went too far under version 1, such as in using firm fixed price contracts.
Kendall said DoD also again will attempt to fix some areas where they fell short in version 1 such as the use of incentives for vendors to come in under cost.
“I’m a big believer in effective incentives. And I’m also a big believer that we haven’t been as effective with incentives as we could be in the department,” he said. “There are a number of things to try to motivate industry to perform more in line with what the government wants.”
Vendors expressed concern when DoD rolled out version 1 that it was trying to cut profits. Kendall said that was never their goal.
“What is our intent is to pay profits for better performance and higher profits for better performance,” he said. “The idea here is to do a more effective job of aligning the incentives we provide industry with the performance we want on the government’s side.”
DoD also will try to restart a superior supplier program. Kendall said they started off as a DoDwide effort, but they struggled to define what a superior supplier is.
Under version 2, the Navy is leading a pilot on how to address rewards and incentives for its better performing contractors.
Kendall said the next steps for Better Buying Power 2.0 is to get comments from the DoD workforce, from industry and from Congress. Kendall said DoD will finalize guidance that will detail how to implement these 36 areas in early 2013.