By Steve Kelman

Blog archive

Buying commercial items is back -- or is it?

There's nothing like a budget crisis to remind people of cost-saving notions that would be good ideas even if budgets weren't so tight.

Those ideas are often easier to ignore when the dollars are flowing fast, but perhaps they should not be. One such idea, featured in a recent article in the New York Times, is the Air Force's purchase of used corporate jets to be retooled as picture-taking spy planes.

The Air Force initially began buying the jets, stripping out the wet bars and flat-screen TVs, and replacing them with surveillance equipment to meet urgent needs because drones couldn't be built fast enough. But the service is doing it now to save money on certain intelligence-gathering uses. Aside from saving the Air Force lots of money, in battlefield situations in which field commanders want to talk with a live person, these small planes are considered superior to drones that send computer output to headquarters.

This harks back to the effort begun in the 1990s to look for opportunities for the government to avoid having something custom-made by a contractor specializing in government work and instead consider the larger range of products developed by industry for a general customer base. In doing so, the government could take advantage of research efforts and production processes whose costs were spread among a large number of customers rather than having all those costs be borne by the government, as is the case for government-unique items.

Some of that push survived the past decade, particularly the effort to move IT away from custom-built software and toward more integration of commercial packages. But it unfortunately lost emphasis and priority. Some thought of it as a one-size-fits-all solution and were taken aback when it sometimes turned out that commercial items were unsuitable for government requirements.

The push was also slowed by debates over the related but not identical movement to reduce government-unique oversight demands and contract terms. Critics were concerned that sole-source items that were highly adapted to government use (most notoriously, the C-130 airplane) were classified as "commercial items" and exempted from cost-disclosure rules, leading to situations in which it was alleged that the government got a bad price.

And some in the government — especially in the heightened oversight and compliance environment of the past few years — were more comfortable dealing with traditional contractors, with their well-developed government-only compliance systems, rather than with commercial companies that thought TINA was the name of a Hollywood starlet rather than a contracting compliance rule. (It stands for the Truth in Negotiations Act.)

It might well be that the government's tight budget situation will prompt officials to consider more seriously how to bring down costs radically by going outside the box of a build-it-from-scratch-for-the-government approach — as the Air Force has — to one that figures out how to make do with what's already out there.

David Van Buren, the Air Force's service acquisition executive, was quoted in the Times article as saying, "For me, this is a precursor of what we’re trying to do across the board.” I hope he's right.

Posted on Sep 08, 2011 at 7:27 PM

Reader Comments

Fri, Sep 9, 2011 KRL

I think the approach to obtain planes on the commercial resale market is a great idea (and I emphasis the phrase, "commercial resale market"). In saying this, I hope that the Senator that is so concerned about spending (being a campaign year and all) would take the time to read FAR 12 to get some idea of all the hoops that the COs already have to jump through to make commercial purchases. I am already very concerned about all the reporting requirements added to FAR 12 under the guise of transparacy because adding all these additional reporting burdens on the commercial sector will result in going full circle back to the late '80s and losing suppliers. Doesn't anyone remember that losing suppliers due to federal requirements is why FAR 12 was created in the first place? Does anyone in Congress remember their Econ 101 and how the market affects pricing? Commercial pricing is determined by market factors in that a price will be what the market will bare. It is not about actual costs such as would be the approach in a cost reimbrusable contract. AGain, a perfect example of Congress getting in the way of the professionals because of their desire for headlines and their ignorance of the facts.

Fri, Sep 9, 2011 Edmond Hennessy United States

This is an interesting article and timely, given the prevailing budget pressures. Although our input is heavily biased towards Commercial technologies (cross-Military lines/cross-platform) - we are reminded of the Perry Initiative - so long ago - and its impact on driving the acquisition pendulum to COTS (Commerical Off-the-Shelf) vs. proprietary designs. The virtues and benefits of COTS (at the time - and it took considerable time and effort) to implement/execute the Perry Initiative, within Industry -are too, broad to outline in this blog response. Is the author - Mr. Kelman - suggesting that the pendulum is now showing signs of swinging in the opposite direction? Or, is this just consistent with some, specific prourements? From a commercial technology standpoint - COTS is here to stay - we see no regression or change in all target segments. In fact if you check the trendline for the Electronics budget - there was a time, when Outsourcing was anemic - now, roughly 76% - 85% of the funding allocation is outsourced. There are many good, reasons to retain proprietary designs - depending on the mission critical requirements, however do not see cost-reduction, as an avenue for justifying proprietary designs. Even for Life-Cycle considerations - that metric just doesn't add-up anymore.COTS is King!

Fri, Sep 9, 2011 SP Mayor Summit Point, WV

One can only hope the Government restarts its earlier efforts to purchase commercial items and services. But before it can do so in a meaningful way it first has to come to terms with a real reality in the commercial arena: while Government is a big buyer it is not bigger than the global marketplace. The Government has never stopped having those '... and in addition' requirements they want to add to a commercial product and at times commercial services. While some of those requirements are truly needed it is not infrequently an indication the Government has failed to perform a meaningful and deeply diligent market survey and analysis. The Government fails to discern when those additional requirements represent the tipping point that take a product from commercial to custom. The Government marketplace is not big enough to justify new production lines and component sourcing stratgies. There is a cost for going beyond the boundaries of what is commercially available and possible - a cost that can only be managed in these times of tight budget constraints by careful consider of what is needed and a willingness to give up what we desire.

Fri, Sep 9, 2011

Deja vu all over again, Steve. WM

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