Game changer: DOD rewrites its book on acquisition strategy

New guidance takes on bureaucracy, business incentives and an overall shift in Pentagon acquisition management

Defense Secretary Robert Gates today released a 23-point memorandum for reforming defense acquisition processes, aiming for increased efficiency and productivity and proclaiming a new era in defense spending and acquisition strategy.

“We are focused on changing the way the Pentagon does business,” Gates said at a Pentagon briefing discussing the new guidelines.

The guidance, a culmination of several months' worth of critical analysis of defense spending, establishes targets and milestones to measure improvement and takes on bureaucracy, business incentives and an overall shift in acquisition from large-scale weapons and systems to services.

In the new Defense rulebook there are five points of focus: setting goals for affordability and control cost growth; incentivizing productivity and innovation in industry; promoting real competition; improving tradecraft in services acquisition; and reducing non-productive processes and bureaucracy.

Gates said that under a new “will cost/should cost” initiative, program managers will now be required to set affordability targets for their projects that cannot be altered without approval from Ashton Carter, undersecretary of Defense for acquisition, technology and logistics.


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“We need to design for affordability,” Gates said. The next-generation ballistic missile submarine, a new Marine Corps presidential helicopter and a new Army ground combat vehicle are examples of programs had been forced back to the drawing board after cost overruns and cancellations, he said.

“Past mismanagement deprived us of incentives to bring down costs,” Gates said as he discussed incentivizing to increase productivity and efficiency.

To do so, Gates said he is expanding the Navy’s preferred buyer program across DOD; the program effectively lists contractors with optimal performance records and gives them preferential status in consideration of new contract awards.

“The way to reduce costs is to incentivize cost reduction. We’re going to make sure we’re giving contractors the right incentives,” Carter said at the briefing, including by improving contract structures and examining sub-contracting fees.

Additionally, the new measures will force contractors to share cost overruns with the government if programs become more expensive than originally planned.

Competitive bidding and contract award practices are also being instituted, with special attention paid to contract opportunities that receive only one bid – which Carter said represents “a substantial number of contract awards.”

“Real competition is the biggest driver of productivity,” said Carter.

At the Pentagon briefing, Gates and Carter both acknowledged the department’s own role in runaway acquisition costs and pledged to make it a priority to eliminate redundant steps and requirements in the acquisition process.

“In some cases our own bureaucratic processes contribute to contractor behavior,” Gates said, noting the elimination of “unneeded” reports and unnecessary requirements and processes imposed on contractors by DOD.

“These bureaucratic processes waste our time and your taxpayer money. We are a contributor to low productivity, and we need to step up,” Carter said.

“Implementation is everything, and we recognize that,” he added, vowing that the department will continue its aggressive pursuit of cost savings that began at the beginning of the summer with basic plans for acquisition reform.

According to Gates, Carter will report to him monthly on progress in meeting designated targets and milestones.

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Reader comments

Fri, Sep 17, 2010

At one point we were providing services to the Navy via a GSA contract. The command we were working with was no longer permitted to purchase via GSA, as that agency was doing nothing for the fees it charged. Also, if you research various vendor contracts you will discover there are a ridiculously wide range of approved rates for the same product or service. The GSA schedule contracts do not necessarily provide a good vehicle for procurement. The GSA site appears to be yet another middle man in the government bureaucracy that adds cost and little or no measurable value. As to the root cause of the problem, this memorandum demonstrates a significant disconnect with reality. There is a demonstrated lack of knowledge of cost structures, the nature of FFP contracts (which has been a directed goal in DoD procurement), the inability of many commands to write a Statement of Work (SOW) that can be competitively bid and performed against without significant changes (and likely cost overruns), and completely ignores the government's labor regulations and own internal labor management practices which have lead to mediocrity (or worse) as a rule rather than an exception. There are many times where a T&M contract would be more beneficial to the government. I manage once FFP contract where it has been administered and billed as if it were a T&M, with excess funds being returned to DoD for other use. I look at these funds as if they are my tax dollars at work for the good of the common defense, and want to see these funds used wisely for that purpose. Sadly, I see too many command elements that waste money on poorly constructed procurements, leaving insufficient funds for areas deserving of attention.

Wed, Sep 15, 2010 M Reston

I agree with the poster who mentioned GSA portals. How many IT Services PMOS are there in DOD? Anyone know? Why are they duplicating each other? Why don't they make better use of GSA emplced infrastructure. They don;t need to use GSA to buy, just the established infrastructure. Look at functions that are duplictaed. Then you can get at systems and organizations that are duplicated. Drop them like hot potatoes.

Wed, Sep 15, 2010 Editor

EDITOR'S NOTE: We will link to the memo as soon as it is available online.

Wed, Sep 15, 2010

Way too many people and offices in DoD are allowed to buy stuff. 'Vanilla' items should be purchased off GSA schedule or GSA website, not via a seperate one-time procurement action. And why do DoD and GSA have seperate purchasing portal web sites, which mostly duplicate each other?

Wed, Sep 15, 2010 John Hampton Roads

America's small businesses are a key to increasing productivity, creativity, and reducing cost! Gates needs to figure out how to get programs like SeaPort-e to do a better job of utilizing it's 8(a) and other small business contractors instead of what seems to be the good ole boy network of the usual contractors (you know who you are).

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