Home' Army Acquisition Logistics and Technology Magazine : Army ALT July-September 2011 Contents 94 Army AL&T Magazine
Director of the Defense Procurement
and Acquisition Policy. "If, in fact, we
can incentivize the contractor to pro-
vide us products that cost us less, and
he makes more doing it, that's okay ...
we're all for a healthy industrial base."
• Using proper contract type for devel-
opment and procurement. "There
were too many examples of 'I'm using
a cost-reimbursable contract on this
type of program because that's what has
worked on similar types of programs
over the years,' as opposed to 'Is this the
right contract type?'" said Crean. The
task force learned that contract type was
an important way of aligning incentives
for the government and the contractor.
The resulting directive was to increase
the use of fixed-price-incentive, firm-
target contracts where appropriate,
using a 50/50 share line and a 120
percent ceiling as a point of departure.
Crean stressed the importance of the
word "appropriate" in the directive.
"The one thing he [Carter] is trying to
avoid is the perception of a mandate.
What he's asking is for people to justify
... their determination for using a par-
ticular type of contract," Crean said.
• Sharing the benefits of cash flow.
Through their research and case anal-
ysis, the task force learned that the
government is an exceptionally reliable
customer in terms of financing---paying
upfront and regularly, sometimes before
products are delivered. DOD finances
most industry investment needed to
prepare products for the defense mar-
ket, enabling the Department to offer
a high cash flow return on invested
capital. The task force concluded that
DOD therefore should use innovative
contract financing methods to incen-
tivize vendors with the time value of
money in exchange for lower prices.
The resulting directive was to adjust prog-
ress payments to reward performance.
• Rewarding excellent suppliers. "The
basis of this [initiative] was, how can
we recognize that we've got some con-
tractors out there that are doing great
jobs?" said Crean. The task force
concentrated on the Navy's Superior
Supplier Incentive Program. All ben-
efits from the program are post-award,
so preference is not given to organiza-
tions to win certain awards.
Carter directed that the Navy con-
tinue to lead the pilot but immediately
include the other services and DOD
components, ultimately transitioning
to a full DOD program.
"It gives stockholders, purchasers an
opportunity to look at that and say, 'Hey,
there's a likelihood that person's going to
be a repeat winner and have an opportu-
nity to grow.'... to show industry what
we care about---publicly," said DAU
President Katrina McFarland, who pre-
viously played a key role in the Better
Buying Power Initiatives under Carter.
• Protecting the technology base. After
the task force learned that DOD reim-
burses industry as an allowable cost
more than $3 billion annually in inde-
pendent research and development
(IRAD), with no insight into how or
where these funds go, Carter directed
DOD to align the purpose of IRAD
to actual practice. He directed that
the Director of Defense Research and
Engineering (DDR&E) engage with
the largest of the performers of IRAD
to collect data on how they have used
these funds in recent years. With this
information, Carter directed DDR&E
to provide a plan for a pilot program,
to improve the return on IRAD invest-
ment for industry and government.
Robert M. Griffin Jr., Assistant Com-
mander for Acquisition, Naval Facilities
Engineering Command, which leads
DOD in competition, headed the Task
Force on Promoting Real Competition.
"What was amazing to me was that we
don't get the level of competition you
would think we would," said Griffin.
"What was more disturbing was when
we went out in a 'competitive' environ-
ment, how often we only got one bid or
Studies have consistently concluded that
competition drives down prices, Griffin
said. Research by the Institute for Defense
Analyses (https://www.ida.org) and others
shows that the savings from true com-
petition range from 5 to 25 percent,
depending on what is being purchased.
Carter's Sept. 14, 2010, memorandum,
Better Buying Power: Guidance for Obtain-
ing Greater Efficiency and Productivity in
Defense Spending, calls on each agency's
competition advocate to develop a plan to
improve, at a minimum, overall compe-
tition by 2 percent per year (by moving
from a sole-source environment to a com-
petitive one); and effective competition
by 10 percent per year (by reducing the
number of single-offer competitions).
"We want to improve competition, the
big number---all the stuff that historically
was sole source under a J&A [justification
and authority], plus all of the stuff that
was 'competitive' but wasn't effectively
competitive because we only got one bid,"
Griffin said. "By improving both, we'll
"Ultimately, PEOs [program executive
officers] and PMs [program managers]
want the right thing," Griffin added.
"If we make it easier for them to get
PATHS TO SUCCESS
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