Better Buying Power 3.0

On September 19, 2014, Frank Kendall, Under Secretary of Defense Acquisition, Technology, and Logistics released Better Buying Power 3.0, his promise for improvements in defense acquisition, competition, and pricing. In an interview with DefenseNews, Kendall acknowledged, “We’re making progress on some of the things we started in Better Buying Power 1.0 and 2.0, but there’s still plenty of work to be done there.”

A visit to the Better Buying Power website will provide you with an overview and background of the program, a detailed description of the initiatives including related documents, and a number of other resources. This is a clean, easy-to-use, and well-populated website – worth some time spent poking around. Note that 3.0 is not finalized as DoD plans to consult with the acquisition workforce, industry, academia, the Congress, military customers, and other stakeholders to develop implementing instructions and plans. In other words, check back often!

My Analysis of Better Buying Power 3.0

This is Better Buying Power 3.0! New and improved! Better than the first two. We learned from some of our mistakes. (Did you sense any sarcasm?) Maybe this is Step 1 (or Step 3) along the path to 12. DoD certainly admits some of its weaknesses and failures in this document. Now to see how many changes are implemented. I don’t want to sound pessimistic, but we all know the analogy of changing the course of an aircraft – it takes a mile to turn around once you turn the wheel. And, if you turn too far, it takes even longer to get back on course.

The website breaks BBP into 7 categories, while the white paper breaks it into 8. Either way, here is the summary:

1. Achieve Affordable Programs

Continue to set and enforce affordability constraints. Can the Government afford the initial acquisition, repairs, upgrades, and long-term sustainability of the program. I liken this to buying a car. It’s one thing to determine if you can afford the monthly payments. It’s quite another to do a long-term analysis of insurance, gas, tires, brakes, A/C, and other repairs. Or, buying a house. While most new cars come with a good warranty and are not likely to require any expensive repairs in the early years, houses always have hidden costs! There’s nothing like finding wallpaper under 3 layers of paint, broken and leaky gutters, or rotted floor boards when you replace the carpet. All of those long-term maintenance expenses are what cause many homeowners financial strife, and the same is true with military equipment.

2. Control Costs Throughout the Product Lifecycle

Strengthen and expand “should cost” as an important tool for cost management.  Should cost is a continuous effort to lower all costs and ensure that requirements are constrained (avoid scope creep). Here is a memo on Should Cost and Affordability.

Institutionalize stronger D0D level long range research and development (R&D) planning. Better Buying Power 3.0 includes an acknowledgement that the Government has not had DoD level guidance on R&D since the 1970’s. Is it any wonder than the commercial marketplace and our adversaries have caught up to and surpassed the United States Military on the technology front?

3. Incentivize Productivity and Innovation in Industry and Goverment

Two core initiatives of Better Buying Power 3.0 are to “align profitability more tightly with Department goals” and “employ appropriate contract types, but increase the use of incentive-type contracts.” Profit is the reason that firms exist and why they open their doors every day –  industry should expect a reasonable profit for the products and services it provides. Cost cutting measures should not equal profit cutting measures.

I am all for more incentive-type contracts – they drive both parties to meet the goals and both parties are rewarded or penalized for the outcomes of their efforts. Properly structured and negotiated, with an appropriate scope in the SOW, this can be a true win-win situation. However, what I continue to see outside of the incentive contract approach is a list of Government requirements and CDRLs that drive up price (with little or no added value to the Government), and a Government mandate to reduce program costs by x%. Too often I see initial negotiations from the Government start with a flat 25% reduction in proposed price with no reduction in scope, change in schedule, or other change in requirements that would lead to such a drastic reduction in price. This equates to a 25% discount which often eliminates all of a contractor’s profits.

Of note, LPTA (lowest price, technically acceptable) is modified by providing clear “best value” definitions so that industry can propose and DoD can choose wisely. Hopefully, this addresses both the technical aspects of the acquisition as well as the document (CDRL) aspects. Again, I often see a list of data and reporting requirements that are inconsistent with the type of product, size of procurement, or relationship to a most recent similar procurement. Good commercial companies (those with successful quality programs and a track record of surviving competition) often meet or exceed the Government’s requirements, and we should learn to rely upon industry’s best practices.

One initiative is to provide draft technical requirements to industry and involve them in the development process sooner. I believe this can help to better define scope and establish more realistic should cost analysis that leads to more profitable acquisitions for industry, and shorter acquisition processing time for both sides.

4. Eliminate Unproductive Processes and Bureaucracy

Think continuous improvement or lean enterprise (as opposed to lean manufacturing). Many companies in industry have tried following Toyota’s lead in lean manufacturing, only to learn that it is really lean enterprise – lean beyond the manufacturing floor. I suspect that Government will have some of the same conceptual struggles as industry through the years, though the identification of “unproductive bureaucracy” is a step in the right direction. Will they train all acquisition leadership in lean, Six Sigma, or continuous improvement strategies? Will they implement visual management boards and Gemba walks? Will they stop at first defect? All positive movements for the Government and possible partnerships for industry to share best practices.

5. Promote Effective Competition

Competition is the most effective tool we have to control cost. Admittedly, I was hoping to see more about competition and commercial items in this initial release of Better Buying Power 3.0, especially after recent remarks by Assad and Kendall regarding commercial item pricing and affordability. Commercial items have continued to receive additional scrutiny by DoD in recent years. Kendall claims he wants more competition and to engage organizations that otherwise have not done business with the Department in the past. I interpret competition as the entrance of more commercial companies and more commercial items (maybe not necessarily what Assad and Kendall want or foresee), but I believe that is the reality of what will happen. Increased competition means going to the marketplace and the marketplace is full of commercial companies – not government contractors. These commercial companies are going to exact the same requirements on the Government that they exact on their business and consumer customers. This may be a case of, “Be careful what you ask for, you just might get it!”

6. Improve Tradecraft in the Acquisition of Services

Increase small business participation, including more effective use of market research. Does this mean higher goals for small business set-asides at both the prime and subcontract level? DoD currently has Small Business Program Goals that have remained steady in recent years. I would think any significant shift would have to be ramped up and implemented over time.

7. Improve the Professionalism of the Total Acquisition Workforce

Establish stronger professional qualification requirements for all acquisition specialties. I could not agree more – especially after my September 30, run-in with a government acquisition “professional.” I use the term loosely and am thankful they are not a warranted officer. That said, there is no reason why the Government does not have a more unified training program whereby all Agencies (and Offices or programs within Agencies), operate within the same guidelines and to the same standards.

The acquisition workforce includes higher standards for leadership, stronger organic engineering capabilities, and improving leaders’ ability to understand and mitigate technical risk. The improvements are meant to address the level and type of training, and more clearly identify the roles and responsibilities of each group.

Let’s see what the weeks and months ahead deliver.