Army pursues better buying power
March 4, 2011
- Army acquisition professional Frank Kendall provided guidance in obtaining greater efficiency and productivity in defense spending.
- "There is an increase in cost to sustain the force. As equipment gets older, it costs more to maintain."
- "Affordability is going to become a standard part of the process. It should drive requirements."
REDSTONE ARSENAL, Ala. -- The Army's better buying power - the ability to acquire better weapons systems and capabilities at lower prices - starts with the acquisition professionals who sign defense contracts.
In a September 2010 memorandum to the Army's acquisition community, Ashton Carter, the undersecretary of defense for Acquisition, Technology and Logistics, provided guidance in obtaining greater efficiency and productivity in defense spending.
His five major areas for improvements were:
- target affordability and control cost growth
- incentivize productivity and innovation
- promote real competition
- improve tradecraft in the acquisition of services
- reduce nonproductive processes
Frank Kendall, Carter's principal deputy undersecretary, brought that message in person to Redstone Arsenal's acquisition community during a Feb. 23 town hall hosted by the Army Contracting Command-Redstone. Kendall added the presentation to an already planned trip to Huntsville, Ala., to speak at the annual Defense Acquisition Conference. The town hall, held at Bob Jones Auditorium, neared 650 in attendance.
"We are getting new ideas. We are learning as we go and we are going to continue to make adjustments," Kendall said. "It's a long journey that we are on. Basically, there's room for improvement. It is imperative for our community to be better at what we do."
"Doctor Carter wants us to be better at acquiring things and spending taxpayer's money," Kendall continued. "We've got to do a better job of getting things into production."
Although Kendall and Carter don't expect a dramatic decline in defense spending, the two executives do believe there will be a gradual decline combined with the Army's commitment to phase out unproductive programs to spend more money on those that are productive.
"We are finding ways to get more with less money," Kendall said, stressing that the Army must learn to work on a tighter budget while still sustaining and modernizing its force strength.
Referring to his own experience as an Army officer, Kendall said in 1971, when he graduated from West Point, the Army was undergoing a "long, slow decline" in spending, cutting out new programs and suspending modernization of existing programs.
Spending increased dramatically in the 1990s and into the 21st century as the Army played catch-up in fielding systems for battlefield success. But, now, another "long, slow decline" could once again threaten the Army's force structure.
"There is an increase in cost to sustain the force. As equipment gets older, it costs more to maintain," Kendall said. "We will see a big reduction in force or we will see some of the force not modernized at the cost of others."
But the Army's acquisition professionals can have a positive impact on budget constraints by being more efficient and "smart buyers" for DoD.
Kendall, whose military and professional career has spanned the fields of engineering, acquisition and law, presented his audience with an Acquisition Efficiency Guidance Roadmap that outlined Carter's five areas of improvement.
The first area -- target affordability and control cost growth - can be achieved by implementing "should cost" management, eliminating redundancy in the warfighter portfolio, achieving stable and economical production rates, and managing program timelines.
"Affordability is probably the most important area we should consider," Kendall said. "We canceled a lot of programs because they are unaffordable. But, we've already spent a lot of money on them that we shouldn't have. We should have realized they were unaffordable at the beginning.
"The Army has wasted an awful lot of its money for programs that never went into production. We are going to start treating affordability as a requirement. Affordability is going to become a standard part of the process. It should drive requirements. It should drive desire."
The second area -- incentivize productivity and innovation - can be achieved by rewarding contractors for successful supply chain and indirect expense management, increasing use of fixed-price incentive firm contracts, capitalizing on program payment structures, instituting a superior supplier incentive program, and reinvigorating industry and independent research and development.
"We want industry to be leaner," Kendall said. "We want to pay direct costs. We need to attack that. We have to get industry to eliminate indirect costs as much as possible. We want industry in a position where they work hard and they get a reasonable profit."
Promoting real competition, the third area, is accomplished by emphasizing a competitive strategy at each program milestone, removing obstacles to competition, and increasing the small business role and opportunities.
"There are a lot of things you can do to keep that competitive environment," Kendall said, encouraging acquisition professionals to open competition to small businesses.
"Small businesses tend to be lean. Their overhead is low and they are hungry. They are also a good source of a great deal of innovation. Small businesses can bring a lot to the table."
The other areas -- improve tradecraft in the acquisition of services and reduce nonproductive processes - rely on the professionalism of acquisition employees to address internal issues that drive up costs.
"Congress keeps imposing things at the top. But I don't think our problems are at the top. The problems are at the grassroots level with execution," Kendall said.
"At the end of the day, you should do as good a job as you can to drive costs down. You're professionals. We are counting on you to protect the taxpayer's money."