Defense bill includes numerous provisions to prod DoD toward commercial buying

Last week’s House-Senate agreement on the 2017 Defense Authorization Bill contained about 100 provisions dealing with acquisition — not all of which we’ll even attempt to summarize in this space. But several were built around a common reform theme Congress began in last year’s bill, attempting to reform the acquisition system to suit a world in which leaders of the Defense committees believe that most innovation is happening in the commercial sector.

Besides restructuring and bifurcating the large front office that’s currently responsible for both acquisition and R&D, the bill adds several new authorities that build on last year’s trend of letting DoD sidestep the traditional acquisition system.

“The national security problem starts from the fact that we no longer drive research and development,” Bill Greenwalt, a senior Senate Armed Services Committee staffer, said at an event hosted by the Center for a New American Security last week. “We reformed the system 20 years ago to try to access commercial items, but it’s not as agile as we would like it to be. It’s risk-averse, it’s compliance-oriented, and it’s optimized to win the Cold War against an adversary that thought in five-year plans.”

For starters, Congress wants to reinforce the authority DoD already has to conduct streamlined acquisitions with commercial companies under Part 12 of the Federal Acquisition Regulation and encourage the military to use commercial items wherever possible.

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One provision would try to push the department to abandon military-specific specifications and standards in favor of commercial ones unless doing so is impossible. It applies to new weapons systems, major modifications or upgrades to existing ones and “programs in all acquisition categories, unless no practical [commercial] alternative exists to meet user needs.”

Also, Congress mandated a new pilot program geared specifically toward fostering more commercially-oriented buying. One largely mirrors the work the Defense Innovation Unit-Experimental has been doing with its Commercial Solutions Opening for small research contracts.

The new pilot would let DoD buy “innovative commercial items” for up to $100 million through open calls to industry to solve particular technological problems, rather than the traditional procurement process in which the department defines precise requirements in a formal request for proposals. Any items DoD buys after a peer review of industry proposals would be considered “commercial” for other procurement law purposes, and they’d be deemed to have been acquired in open competition.

The Homeland Security Department, the General Services Administration receives similar “general solicitation” authority under the bill, but their buying authority is capped at $10 million.

The commercial focus doesn’t only pertain to products: Congress also wants DoD to revisit and rewrite the instruction on services acquisition it issued in January — that document itself was the most comprehensive guidance on the acquisition of services the department has ever issued. Lawmakers want the revised instruction to reflect the “changing nature of the technology and professional services markets, particularly the convergence of hardware and services.”

Also, DoD would have to use commercial market contractors for facility services, knowledge-based services, construction, medical and transportation services unless it can show that commercial companies can’t meet a unique military need. To get around the requirement, the contracting officer would have to certify that he or she has conducted market research and found no suitable commercial firms. And for contracts worth more than $10 million, the signoff would need to come from the top acquisition official in a military service or the head of a Defense agency.

Greenwalt said the big push toward commercial buying in this year’s NDAA is based on lawmakers’ conclusion that although DoD has long held the authority to use streamlined buying procedures for commercial items, the department has layered on so many of its own regulations to FAR Part 12 that it’s begun to resemble the more cumbersome procedures intended for major weapons systems.

“Numerous contracting clauses have accreted onto the system, making FAR Part 12 not much better than FAR Part 15 from a non-traditional contractor standpoint,” he said. “So we’re trying to streamline that and get ahold of commercial item procurement and focus on the preference for commercial items. That’ll help in a lot of areas, not just the new innovation and DoD’s Third Offset where they’re probably going to need to go around the system.”

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