PATHS TO SUCCESS
B
y now, the Acquisition, Logis- tics, and Technology (AL&T) community is well aware of the detailed guidance from
Dr. Ashton B. Carter, Under Secretary of Defense for Acquisition, Technol- ogy, and Logistics (USD(AT&L)), on providing incentives for greater efficien- cy, starting with in his June 28, 2010, Memorandum for Acquisition Profes- sionals Better Buying Power: Mandate for Restoring Affordability and Productivity in Defense Spending.
At the Defense Acquisition University (DAU) Acquisition Community Sym- posium on April 12, practitioners of AL&T had an opportunity to better understand the genesis for Carter’s guid- ance, and resulting steps taken, in five areas of action—targeting affordability and controlling cost growth; incentiv- izing productivity and innovation in industry; promoting real competition; improving tradecraft in services acqui- sition; and reducing nonproductive processes and bureaucracy.
Following is a detailed look at each of the five areas, as presented at the DAU symposium.
TARGETING AFFORDABILITY AND CONTROLLING COST GROWTH Affordability is a straightforward concept, said David G. Ahern, Deputy Assistant Secretary of Defense, Portfolio Systems Acquisition. The difficulty lies in estab- lishing the necessary discipline to achieve it in every program, so that DOD can develop budgets with a “steady, sustain- able, and predictable rate of growth” and live within those budgets.
Ahern addressed five steps in Carter’s guidance on affordability and controlling cost growth:
92 Army AL&T Magazine
• Mandate affordability as a require- ment. DOD is looking at affordability holistically, Ahern said. “We don’t want to nail it down as a KPP [key perfor- mance parameter], as a JCIDS [Joint Capabilities Integration and Develop- ment System] sort of thing, but as an acquisition target.” Beyond the range of individual cost factors, “we’re look- ing for how that [cost] profile fits into the overall resources,” specifically within that area of acquisition, be it ships, tanks, trucks, or aircraft, he said.
“It is not only the unit [cost], but look- ing at how many units are going to be bought annually, how much RDT&E [research, development, test, and evalu- ation] is required, and how that fits into the ongoing TOA [Total Obligation Authority] of the service.”
• Drive productivity growth through will-cost/should-cost management. Of the various program cost estimates to be considered, the will-cost figure is likely to be in line with the service’s esti- mate or the independent cost estimate, if applicable, of the Director of Cost Assessment and Program Evaluation (CAPE) in the Office of the Secretary of Defense (OSD), Ahern said.
The will-cost estimate is “in the absence of some focused attention to do it better,” he noted. In contrast, “What is required of the program managers to come up with a should-cost is not to say, ‘If the will-cost is this profile, I’ll just take 5 percent off, or 10 percent off it … and I’ll figure out how to do it.’ … To get the job done, we need specific opportunities in competi- tion, in changing the configuration, in challenging requirements, in introducing subcontractor competition—some com- bination of those kinds of activities, with a rifle not a shotgun, to fill up a funnel of opportunities to reduce cost” in develop- ment, production, and/or sustainment.
The should-cost estimate will be the number against which the program is tracked, Ahern said. “There should be a delta in outyears between that should- cost and the will-cost. It can be quite significant in some years, and in some years it won’t be that significant.”
So what’s going to happen to the sav- ings? “We’re going to have to figure out collaboratively, in the enterprise, what’s the best approach to using that money,” said Ahern, who is of the opinion that
“it really belongs to the taxpayers,” not the program manager or even the service. Making a program or product more affordable “is a worthwhile objective regardless” of where the money saved is spent, Ahern said. It may be used to buy more of the item, or be moved to another portfolio, or to the service or OSD to pay other bills. Who makes that decision will depend on how much money is involved and whether it falls in the current year or an outyear, he said.
• Eliminate redundancy within warfighter portfolios. Capability portfolio reviews, such as the Army has adopted, have proved to be a very useful tool by iden- tifying overlaps, he said.
• Make production rates economical and hold them stable. With every pro- duction decision, particularly but not exclusively initial production, DOD has taken “a harder look at not the minimum sustaining rate, but the right rate of production,” Ahern said. “There is a value to having the production line open for some period of time. But on the other hand, … I don’t think a 20-year production makes much sense for almost anything,” especially given rapidly evolving technology.
• Set shorter program timelines and man- age to them. “The longer a program
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