‘SHOULD’ DOES


The more challenging question is why programs do not pursue should-cost initiatives or find success in other phases of the acquisition life cycle and in other target activities.


According to the report, 57 percent of MDAPs in the developmental phase of acquisition and 79 percent of programs in


procurement experienced funding


reductions in the period from 2009 to 2014. Tese results stem, in part, from should-cost management, the report states, as well as from DOD’s efforts to increase the use of stronger, formula-type incentive


contracts—such as cost-plus-


incentive-fee and fixed-price-incentive contracts—that explicitly tie cost-over- target to contractor financial results.


DOD and the Army measure the suc- cess of should-cost management, broadly speaking, by the annual savings from all ongoing contracted activities as they


execute to lower figures than


budgeted. Follow-on iterations of BBP have strengthened and expanded should- cost management throughout an Army acquisition program’s life cycle. BBP 2.0, unveiled by the Hon. Frank Kendall in November 2013, extended the applica- tion of should-cost to all phases of the acquisition life cycle and to the acquisi- tion of related services. In his April 2015 guidance on the implementation of BBP 3.0, Kendall continued to emphasize the importance of making should-cost an enduring best practice in acquisition.


Looking more closely at how program managers are applying should-cost prin- ciples, however, it is clear that the success of should-cost management depends in large part on timing.


BREAKING IT DOWN Te Army fully embraces should-cost as a critical BBP initiative and an out- standing device for helping program managers reduce the costs of their pro- grams. Program executive officers (PEOs) are responsible for ensuring that program managers implement should-cost man- agement by identifying opportunities for savings, known as should-cost initiatives, and developing should-cost estimates for their Acquisition Category (ACAT) I, II and III programs.


For example, the PEO for Missiles and Space successfully implemented a multi- year procurement contract for the TOW (Tube-launched, Optically tracked, Wire- guided) 2 missile system that resulted in annual savings from FY12 to FY16. (See Figure 1.) Te savings represent the lower procurement costs compared with what the program’s will-cost baseline projected.


In FY15, 88 percent of the Army’s acquisition programs had should-cost initiatives in place. Te Office of the Sec- retary of Defense (OSD) and the Army share a goal of 100 percent of all ACAT programs, regardless of where they fall within the acquisition life cycle.


100


Army AL&T Magazine


January-March 2016


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