In about six weeks, the Army will release its plan to reform its acquisition process.
Retired Army Lt. Gen. Malcolm O’Neill, the Army’s assistant secretary for acquisitions, logistics and technology said Wednesday, that he is mulling over the results of a new study conducted by a former army procurement chief and a former leader of the Army materiel command on the service’s acquisition processes and how to improve them.
Army Vice Chief of Staff Peter Chiarelli, said recently that the system needed a “big bang” to fix inherent problems.
O’Neill, who spoke Wednesday at an event in Arlington, Va. sponsored by the Professional Services Council, said the study represented excellent work and that many of the recommendations were straightforward. He intends to tell Army Secretary John McHugh how he believes the service should act on the proposals by May, and then release both the study and his plans to the public.
This isn’t the only sea change coming. O’Neill said while the Army is moving toward fixed price contracts and price ceilings, and requiring vendors to accept more risk, he has found they are not always appropriate. He said in some cases, no matter how much the government wants contractors to accept additional risk, it doesn’t happen.
“That’s why in some instances I’ve counseled against a fixed-price contract, because I think my people know what a system costs, but contractor A keeps coming in at 120-percent of that,” he said. “Is he accepting risk? No, he’s providing a cushion.”
But O’Neill said part of the Defense Department’s move to being more efficient is accepting more risk.
On the military side, he said program officers often don’t buy the best capabilities they can for fear of overrunning cost or schedule estimates, a trend he said he was trying to fight against.
“It’s the fear of getting the press that this system costs more than it was supposed to cost, it took longer to get to the field, the field is happy with an 80-percent solution,” he said. “So what you do is design for 80-percent and you get 50-percent. That’s the problem.”
O’Neill said that based on his experience as a program manager, projects tend to get designed around cost estimates that are higher than what the manager thinks the actual costs should be, and as a result, those higher cost estimates end up being what the government finally pays. He said the Army is trying to encourage and incentivize its managers to design projects that end up costing less than the price tag assigned through DoD’s independent cost assessment and program evaluations (CAPE).
“One of the efficiencies is if the program manager feels that he can come in at a lower price than the CAPE estimate, that becomes what we call ‘should cost,’ and then he actually manages to that,” he said. “If he can save that money, that becomes something that he can use as an efficiency to buy more of the systems. If he exceeds that, it suggests he doesn’t understand the risk to his program.”
This is part of the way O’Neill wants to end a needlessly adversarial relationship with its vendors over the years – a bad idea given that the military can produce few tangible goods without the help of industry.
O’Neill said he saw plenty of evidence of arms-length relationships between DoD and its vendors while he was chief technology officer at Lockheed Martin in the early 2000s.
“We would interpret winks and looks that we saw at a meeting, go back into our huddle of technical people at Lockheed and say, ‘I say her eyebrow go up about a half an inch when I mentioned directed energy. I think we should spend $20 million on directed energy research,” he said.
O’Neill said he wants to be a lot more up front with them than some of his predecessors were. He said he is meeting with industry daily, and that vendors, who he said he viewed as one of his office’s primary groups of customers, should not hesitate to try to get on the calendars of Army acquisition officials.
He said he would need contractors’ help if the Army is to achieve the efficiency goals set out by Defense Secretary Robert Gates and undersecretary of Defense for acquisition, technology and logistics Ashton Carter.
“The efficiencies apply not just within DoD,” he said. “If you can save us money, we would like to know about it. The promise we got from the (secretary of Defense) and from Dr. Carter is that they would do everything they could to give us back the money we saved through efficiencies so we could do more, without more.”
O’Neill said the efficiency goal for Army acquisition is to provide a two-to-three percent increase in warfighter capability without those same increases in budgetary resources. When it comes to measuring the boosts in capability, he said the service is trying to push the same message to its program managers that secretary Gates gave to the leaders of the military services – namely, that they very well may be entitled to hold onto the savings that they find for use in other areas of their portfolios that they consider to be important.
O’Neill said officials at his level can’t know the intricacies of individual programs well enough to find out exactly where to find the inefficiencies. Program executive officers, program managers and product managers, on the other hand, do.
“If I’m PEO for ground combat systems and I can save money out of GCS, and I decide I want to put it into the M-1 tank, I should have that right,” he said. “The comptroller of the Army, the OSD comptroller, OMB, they can always say no because the President needs that money for something else. But if we can keep even 10 percent of it, 15 percent of it, that’s a lot more than we have right now. And there’s every reason in the world to do our job better, because it’s a pride thing too. If I can do the job of 10 people with eight people just because we’re working together as a team, it makes me feel good. And that’s what we need to do with industry. If we can work together better as a team-industry and the government-we can save at least two percent of our budget. Probably 10 percent.”
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