Home' Army Acquisition Logistics and Technology Magazine : Army ALT January-March 2011 Contents programs come to me, we're looking
at how the cost varies with KPP [key
performance parameter] value, or
other critical parameters around the
design point, and asking ourselves,
'Are we really willing to pay that
extra increment of cost for that extra
increment of capability?'," he said.
"It's that simple. It will require a lot of
systems engineering on your part."
Carter also discussed the disparity
between what he refers to as "will-cost"
and "should-cost." He explained that
the Weapon Systems Acquisition Reform
Act of 2009 (http://frwebgate.access.
txt.pdf) required acquisition pro-
fessionals to budget programs to
independent cost estimates.
"However, those cost estimates are what
I call 'will-cost' estimates," Carter said.
"They describe what the program will
cost if we keep doing it the way we're
doing it. That is different than 'should-
cost.' What should we be paying for this
capability? Budgeting a program and
managing it to a 'will-cost' estimate is
living a self-fulfilling prophecy, and we
should aspire to do better than that."
The second major area addressed in
Carter's guidance memorandum focuses
on incentivizing productivity and
innovation in industry through several
means, including rewarding contractors
for successful supply chain and indirect
expense management, extending
the U.S. Navy's (USN's) Preferred
Supplier Program to a DOD-wide
pilot, reinvigorating industry's inde-
pendent research and development,
and protecting DOD's technology
base. "We should be rewarding what
we're looking for, which is productivity
growth, and that's what our incentives
should be," Carter explained.
Carter also discussed the Superior
Supplier Incentive Program, modeled
after a USN program. The two main
design criteria for such a program are
how suppliers qualify and what they get
if they qualify, according to Carter.
"Are we selecting in a fair and reason-
able way that is reflective of what we,
as the customers, want?" he asked.
"Is it fair to our suppliers in terms of
what they're doing for us? And are the
rewards we're offering proportional
to the benefit we're getting? These are
the principles that apply to programs
already in progress."
in Services Acquisition
According to Carter, improving
tradecraft in services acquisition is
the biggest area in which greater
efficiency and productivity in DOD
spending can be obtained.
"Two hundred billion dollars, or half
of our contract spend, is for services,
not goods," he said. "That category has
grown more than any other category in
the budget in the last 10 years."
Carter explained that in looking at
how the different military components
spend on services, the way funds are
used can vary greatly. "The state of
play is that we have a wide variety of
practices at work in the acquisition of
services," he said. "Even within certain
categories, [many] of us are doing it dif-
ferently, and that suggests that we could
probably improve our art a bit."
On reducing nonproductive processes
and bureaucracy throughout DOD,
Carter told the audience, "What we
do to ourselves is what we do to you.
What we get in the way of management
information and input isn't really useful.
We have program reviews whose purpose
is to allow you to surface issues you're
having and work through the solutions...
and that's what it's all about---not
grading or checking off boxes."
He stressed that DOD leadership is
striving to improve the quality and
value added of its interactions with
senior civilian and military officials
across the services.
Carter also addressed unproductive
processes and bureaucracies imposed on
industry, which he described as "the ways
we make those we work with less produc-
tive than they could be." Additionally,
he mentioned processes imposed by
Congress, such as the requirement for
700 reports annually from the Office of
the Secretary of Defense.
A Realistic Target
In conclusion, Carter said he believes
that the steps detailed in his memoran-
dum are the keys to delivering savings
mandated by the SECDEF.
"What [Gates] is asking is quite rea-
sonable, a few points per year," Carter
said. "This is a realistic target. We're
very focused on the steps that we can
take. It follows upon a decade of bud-
get growth, so it's fair to say that with
Sitting still, waiting for it to happen, is the way
to broken programs, canceled programs, budget
turbulence, churn, uncertainty, and unpredictability
for industry, ... erosion of taxpayers' confidence in us
and in the quality with which we're spending their money,
and, above all, loss of warfighter capability.
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