Improved Pentagon acquisition requires tolerance of risk

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The federal government must get more comfortable with risk if it is to deliver the nimbler and more performance-based acquisition regulations that defense contractors pine for, a panel of industry executives said this week.

Federal contracting officials should move from the "adversarial, risk-intolerant oversight culture we have with procurement to one that incentivizes and encourages innovation and appropriate, smart risk-taking," said Joe Jordan, FedBid's president of public sector, during an April 23 panel discussion hosted by Bloomberg Government.

There is a widespread perception among federal contractors that the government punishes rather than rewards innovation, he added. "If you step out [on] the ledge half an inch, you're worried about the IG report, the GAO report, your boss getting called to the Hill and then you bearing the brunt of the repercussions."

Abandoning that risk-averse approach requires a cultural shift, he added -- something bigger and less tangible than amending the Federal Acquisition Regulation.

A successful defense project requires a program manager who is unafraid, agreed Betsy Schmid, who worked for the Senate Appropriations Committee's Defense Subcommittee and is now a vice president at the Aerospace Industries Association. Pairing a risk-tolerant federal employee with a good industry counterpart would "see programs make changes on a dime that you wouldn't see necessarily when there was a confrontational relationship," she added.

Growing pains have accompanied the move to performance-based contracting under the Obama and the George W. Bush administrations, retired Marine Corps Maj. Gen. Arnold Punaro told the audience. The early stages of that transition were marked by "government contracting officials [who] didn't know how to write the contracts" and defense firms that did not know how to assess risk in those contracts, said Punaro, now CEO of his own consulting firm and chairman of the National Defense Industrial Association.

He added that Frank Kendall, undersecretary of Defense for acquisition, technology and logistics, is trying to quicken the glacial pace at which contracts are approved, but he is up against a formidably inert bureaucracy.

Punaro sees acquisition reform as a national security imperative. "If we don't reverse the adverse trends in acquisition, overhead, and pay and compensation -- particularly deferred compensation -- our warfighting forces are the output of what we get," he said.

At least one panelist offered creative destruction as a means of reforming acquisition. The procurement process should be scrapped altogether, said Raj Sharma, CEO of Censeo Consulting Group.

The slow procurement process "creates a lot of barriers to entry and barriers to innovation" and is discouraging Silicon Valley startups from pursuing federal contracts, he said. He advised agencies to whittle down procurement requirements to a two-page document and engage with industry early in the process.

The Defense Department might have a similar approach in mind. Assistant Secretary of Defense for Acquisition Katrina McFarland said last week that DOD was considering sharing potential procurement requirements with industry even if those draft requirements never take effect.

About the Author

Sean Lyngaas is an FCW staff writer covering defense, cybersecurity and intelligence issues. Prior to joining FCW, he was a reporter and editor at Smart Grid Today, where he covered everything from cyber vulnerabilities in the U.S. electric grid to the national energy policies of Britain and Mexico. His reporting on a range of global issues has appeared in publications such as The Atlantic, The Economist, The Washington Diplomat and The Washington Post.

Lyngaas is an active member of the National Press Club, where he served as chairman of the Young Members Committee. He earned his M.A. in international affairs from The Fletcher School of Law and Diplomacy at Tufts University, and his B.A. in public policy from Duke University.

Click here for previous articles by Lyngaas, or connect with him on Twitter: @snlyngaas.

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Reader comments

Sat, May 3, 2014 Raul Espinosa

Improvement in DOD acquisition also requires that procurement specialists be willing to admit and fix their mistakes or face consequences. The situation is so bad now, that specialist are avoiding communicating with Sellers and and refusing to grant them debriefings!!! Transparency, oversight and punishment are badly needed to make sure the rules that govern procurement vehicles cease such behaviors. Anyone willing to guess which vehicle is nurturing such behavior? Here's a hint. The Office of Advocacy listed it as "one of the ten worst offenders of small businesses" in 2008 and GAO , in 2013, acknowledged that it needs new guidance and rules for its governance!

Tue, Apr 29, 2014 John weiler United States

Risk based decision tools and standards are becoming part of the norm today, providing PMs with the ability to sort out high risk areas in requirements and architectures. DOD needs to move away from a waterfall approach that pushes risk farther down the acquisition lifecycle, increasing the cost of resolution as the program matures. The Architecture Assurance Method (AAM) is one of several emerging risk frameworks proven to be effective in COTS integration efforts that can deliver an 80% solution in months vs years. Unfortunately, the Defense Acquisition bureaucracy has been very adverse to change, a issue raised by a Deputy Director of DIA who observed "bureaucracies will always favor failure over change, as that is what they are comfortable with". Congress has twice directed OSD to stop using a weapon systems acquisition framework for the fast based IT market. Clearly, this will be an opportunity for Robert Work when is confirmation completes.

Mon, Apr 28, 2014 RonW

Having worked both sides of the fence, it is not so much that contractors are afraid of being punished for innovation (although it does happen, even if it is to the benefit of the gov) but it is also that innovation sometimes can cost the company a bit more so if it is not in the contract as such, then do not do it (risk of losing money). There is also no easy mechanism for contract improvements or oversight corrections, you must follow the contract no matter how badly the ignorant contracting specialist (and that is all they are, CONTRACTING specialists, not engineers, scientists, end users, etc.) has changed the requirements from what both of the working sides of the contract know is right, even if it might be no cost to either side. And contract changes cost a lot, in time and money.

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