Last Friday, I had the opportunity to share a room with over 200 other Washington D.C. area NDIA members to learn some plans and perspectives of the Honorable Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics. Considering the enormous uncertainty in both the federal budget and federal contracting, it was time well spent to hear Kendall’s thoughts on issues important to everyone in the federal – and especially defense – contracting community. There was a lot covered in a short period of time so I’ll hit the highlights.
Sequestration – Kendall believes this will be postponed. I don’t think anyone would disagree on this point. Kendall further stated that whatever budget cuts are made are very unlikely to affect any existing obligations against current contracts. This is undoubtedly one of the reasons why we’re all so busy during this particular end of fiscal year spending season, even beyond the norm.
Don’t fall prey to acquisition fads – Kendall expressed his views on revolutionary vs. evolutionary change. He’s clearly in the camp of evolutionary change. Kendall stated that major and sudden changes rarely end well and even more rarely realize the results promised. This applies to acquisition strategies (more on this later).
Training and professional development – Kendall mentioned several times he wants to improve the “trade craft” in the acquisition community. This isn’t just about the mechanics and strategy behind doing a smart acquisition. It’s about the acquisition professional and their portfolio of expertise. More specifically it isn’t so important for an acquisition professional to focus entirely on the FAR, but the person should be well rounded in terms having relevant technical expertise. Further, get the other operations stakeholders engaged because after all they’re spending taxpayer money, too. It’s a revolutionary thought (oh sorry, evolutionary) but then again common sense isn’t always so common.
Measuring acquisition performance – This seems to be an itch that Kendall would like to scratch. He spent some time explaining his concerns and views about how DoD can better measure how well it does with acquisition. What are the smart metrics? Expect to see a report in the next few months regarding how DoD believes it is doing in terms of acquisition excellence.
Buy what you can afford – Kendall is working to better analyze long-term costs in acquisition. This is in the area of projecting long-term costs (don’t start investing in something you cannot sustain) and more intense scrutiny of cost data submitted by contractors. No doubt every government contractor has had to provide an ever increasing array of cost data. I’m not sure what else DoD will require. Requirements made by DoD have become increasingly onerous so one has to wonder when the procurement pendulum will stop swinging towards more and more requirements. Interestingly enough, Kendall also spoke about reducing administrative requirements of his own and how to do the same for contractors.
Reduce the bureaucracy – Kendall mentioned he is very focused on reducing the number of and time taken with DCAA audits. Kendall mentioned that only a few years ago the backlog of DCAA audits delayed contract awards by several months. Now the backlog of audits has many contract awards delayed by as much as a year or more. Kendall specifically reminded the audience he’s tasked Bob Hale, Undersecretary of Defense (Comptroller) to figure out an answer to the DCAA driven dilemma. Along the thread of reducing the bureaucracy is Kendall’s clear frustration in fulfilling requirements to deliver as many as 160 reports to Congress each year. The underlying question is how they can provide the information required with less report generation.
Best Value vs. LPTA – This is one of the most controversial topics in acquisition today. The trend to use Lowest Price Technically Acceptable (LPTA) in even some of the most complex acquisitions is a source of great disagreement and confusion. Part of the problem is how one defines the TA part of LPTA. If the bar for TA is set too low the end result will be a deceptively low price fraught with risk of performance – namely the contractor has no idea what they’re doing or they’re gambling for contract modifications later. Thinking about the LPTA problem from a capture point-of-view, the challenge is partially to shape an opportunity to have the TA part to where you think it should exist.
The question of when and what is best value was addressed as a real problem for his acquisition community. First the problem is when to use best value. Second and even more complex is how to determine what “best value” is worth paying extra for in the first place? I can remember more than a few captures I was involved in where I had the best solution even as rated by the government, but a lost opportunity came down to price. This issue comes down to how the acquisition community can or will define what it is willing to pay extra to get, if anything at all.
How to use FPIF – Using Fixed Price with Incentive Fees (FPIF) is something Kendall wants to see more of as a way to manage risk and an incentive for good performance. Some of you may have noticed a return in FPIF contracts, but how the incentives have been structured appears to not yet completely make sense. This is both an area of opportunity for contractors and possibly an area for input early in the development of an acquisition. If Kendall’s interest in harnessing FPIF holds true we may see more FPIF in the near future.
Thanks to the Washington DC chapter of NDIA for creating a forum for Mr. Kendall to share his views on some important topics in federal contracting.