Stan Soloway


Acquisition Reform? Who Says?

There is a lot of talk about the next generation of reforms and changes to the regimes of government acquisition policies, practices and culture.

But two stark examples emerged almost simultaneously in recent weeks that highlight just how far we have to go to create a federal acquisition system that is effective, efficient, responsive to the needs of customers, and enables access to the full array of capabilities the private sector can offer.

One example speaks directly to continued cultural challenges and the other to the mindset that drives far too much current policy and practice.

Let’s start with the culture. In a Nov. 7 article in Government Executive magazine, Kimberly McCabe, the CEO of ASI Government and Dan Chenok, the head of the IBM Center for the Business of Government, made a strong, thoughtful, and articulate case for thinking about acquisition in a holistic manner with an eye toward the realities of today and a very different future.

Moreover, their article outlined a new framework designed to describe and help measure organizational acquisition capabilities and maturity. And, perhaps most significantly, recognizing that the pressure for real, sustainable change has to come from within, the framework they outlined was largely the work of a group of federal acquisition and technology practitioners—from rising professionals to senior executives—they had convened.

What struck me most was not the substance of this new framework (full disclosure: I have been a peripheral participant and advisor to the effort), but the rather sharp reaction it generated.

Comments flew almost immediately. Some accurately identified barriers to achieving this new vision (especially the harsh nature of the oversight environment and the increasing politicization of acquisition).

But many other comments were filled with unwarranted vitriol and summary rejection. For these latter commenters, all of whom self-identified as government acquisition personnel, the rejection was founded for the most part in their willing acceptance of a rigid, rules-driven environment and, in many cases what they described as a fundamental distrust and dislike of the private sector.

Make no mistake about it; no one argues that the private sector has all the answers or always behaves appropriately. But fundamental, base dislike or distrust has enormous implications for the government’s willingness, let alone ability, to engage effectively with its private sector partners.

I was also struck by how antithetical many of the comments were to some of the core messages that have been consistently articulated by the government’s top acquisition leaders in both the civilian and defense sectors: think, communicate, and collaborate.

The comments suggest that those messages are neither penetrating nor as welcome within the federal acquisition community as senior leaders are recommending or as one would hope.

This reaction is not a complete surprise. Former federal procurement administrator Dan Gordon once said that he was stunned by the degree to which the federal workforce resisted his “myth busters” memos, in which he urged more open and continual communications.

But it is an especially disturbing reality considering that one goal of this new framework is to free acquisition professionals to use their judgment and critical thinking skills in the pursuit of excellence and innovation; to enable the workforce’s freedom and ability to think, communicate, and collaborate.

The second example is simpler to explain but equally difficult to accept.

On the same day the Government Executive article appeared, the Defense Department held a day-long conference on pricing at the Defense Acquisition University. My takeaway, which has been validated by almost every industry attendee I spoke to, was that the department continues to view the entire private sector through the narrow lens of a “one-size-fits-all” monopsony marketplace within which major weapons systems and all other defense-unique requirements are procured.

Terms like “weighted profit guidelines” were thrown around as if such guidelines were appropriate for, or relevant to, most everything the department buys.

For those unfamiliar with the term, it essentially refers to algorithms that are used within government to determine the margins companies should earn when using contractor facilities (typically for manufacturing) to produce unique defense products.

To suggest that they are relevant to the entirely different, far larger, and hugely competitive marketplace for technology and services is absurd.

Similarly, there was a lot of talk about expanding the use of fixed price incentive contracts as a tool to achieve better cost and program performance. Really? Under a competitively awarded fixed price contract, all risk for performance is already placed on the contractor; that’s all the incentive they need to deliver to the very best of their ability.

Yet, the clear message is that the department wants to share in the benefits companies can drive under such contracts, without also sharing in the risks. Meanwhile, although almost everyone agrees that better training and skills development in business acumen, market insight and research, risk identification and management and the like will do the most to ensure the government gets a fair and reasonable price, they were hardly mentioned.

In short, the conference itself provided another distressing example of how too many elements within DoD continue to view the world through the overly narrow lens of a monopsony buyer and how the development of the department’s new generation of acquisition professionals continues to be founded in history rather than the current or future environment.

Today, there are a wide range of serious acquisition review initiatives underway across various agencies and congressional committees. But for any of them to be successful, for any of them to engender real change, these examples, and what they tell us about the current environment, must be given serious thought and be directly addressed.

That means fundamentally rethinking how the new workforce is trained, supported and rewarded. And it means not only thinking about and acting on process and policy, but also on the culture—which is, after all, the core of it all.

Reader Comments

Wed, Dec 17, 2014 Jaime Gracia Washington, DC

Although the risk to perform is of course transferred to industry under a fixed price contract, a FPI contract does have some utility. It goes to the perception that risk and innovation is the same thing. If a company is innovative and has great solutions, why does it necessarily cost more to the government? Shouldn’t innovation drive costs down, through efficiencies in performance, labor, etc.? Further, the “risk premium” that the government pays for the FFP contract is also mitigated, since the contractor is incentivized to deliver below the negotiated cost point, although the ceiling remains at the FFP point. The government saves money, the contractor still makes profit (albeit perhaps not as much as they like), and quality should remains unchanged. It seems like a win-win.

Tue, Dec 16, 2014 Nice Guy Eddie

A Fixed Price Incentive contract is like the saying about a chicken omelet. That's not breakfast, that's a vendetta.

Thu, Dec 11, 2014 BAH, humbug

There's a lot of truth in the Dec 5 comments, but we could try to look on the brighter side a bit--in keeping with the season and the coming new year. Yes, the industry is in a historic downdraft, but this period has shaken out some things that don't cut it: some whole companies and lines of business; some over-paid executives and staff; some programs that were not good value; and even sent some career Feds packing who could not cope with change. Further, it has lowered costs for those remaining, e.g., Class 1 office buildings are darn cheap in Tysons. For grinches, who are nearer than we'd like, it has allowed some owners-shareholders to vastly cut fringes and retirement plan contributions. For the up and coming strivers, it has cut the vaunted brands of firms that have been thinned, exposed and hollowed out--we're all in the same, mostly commodity business, but some of us were not admitting that. Now, it is inescapable. Finally, some of us have been inspired to think more, get religion, and even pray that we can keep clients and staff. And that works. Happy Holidays.

Fri, Dec 5, 2014

Bright and shiny thoughts, as usual. But is this another self-licking ice cream cone? Look at the trend in dollars competed? Look at the quality of major weapons and IT systems--meet spec? meet ached? how big are the over-runs? And, why are some services contractors' stock prices so high? It is not because of record profits, that is for sure. Both the govt and contractors are complicit in the big failures and the denials that they are failures. That's the kind of collaboration that is a sure thing. The fact is, the government needs most of what it buys, but the sources--most of them in terms of labor and investment in physical things--have no other markets for these services. On that basis, monopsony tends to have some degree of validity. Govt attitudes towards contractors is sour, just as the PSC points out, but that is the way bureaucrats treat failure. They can shove performance and financial risks to the contractors, but they cannot shed the acrid smell of failure. But they can go through the motions of doing that in order to defend against Congressional and other onslaughts. Where are we, really, when we address acquisition reform? Well, the wunderkinds and more senior WH advisers actually run everything, and they don't have the knowledge, and neither does OMB. And history shows there is little political payoff in running acquisition better; in fact, the political benefits accrue more traceably when it it run poorly. It is going to be a cold winter.

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