C A R EER DE V ELOPMENT UPDAT E
ARMY AL&T
Objectives
• Deliver the warfighting capability we need for the dollars we have • Get better buying power for warfighter and taxpayer • Restore affordability to defense goods and services • Improve defense industry productivity
• Remove government impediments to leanness • Avoid program turbulence • Maintain a vibrant
vibrant and financially healthy defense industry
Obtain 2-3% net annual growth in warfighting capabilities without commensurate budget increase by identifying and eliminating unproductive or low-value-added overhead and transfer savings to warfighting capabilities. Do more without more.
Providing Incentives for Greater Efficiency in Industryin
• LEVERAGING REAL COMPETITION: Avoid directed buys and other substitutes for real competition. Use technical data packages and open systems architectures to support a continuous competitive environment.
• USING PROPER CONTRACT TYPE FOR DEVELOPMENT AND PROCUREMENT: Phase out award-fee contracts and favor fixed-price or cost-type incentive contracts in which government and industry share equally in overruns and underruns, and overruns have analytically- based caps. Use cost-reimbursement contracts only when either government requirements or industry processes cannot be adequately specified to support pricing. Adjust sole-source fixed-price contracts over time to reflect realized costs. Work down undefinitized contract actions. Seek authority for multi-year contracts where significant savings are possible.
• USING PROPER ONTRACT
USING PROPER CONTRACT TYPE FOR SERVICES: Phase out Time and Material and sole-source ID/IQID/IQ contracts wherever Utilize fixed-price performance-based contracts when requirements are firm and can be measured, with payments tied to performance. Utilize fixed-price level of effort or cost-plus-fixed-fee contracts (with profit/fee tied to weighted guidelines) when requirements are still being defined. Award fees should be used only by exception. Maximize the use of multiple-source, continuously competitive contracts.
FOR SERVICES: wherever possible.
• ALIGNING POLICY ON PROFIT AND FEE TO CIRCUMSTANCE: Align opportunity to earn profits/fees to both value to the taxpayer and risk to the contractor. Apply weighted guidelines to profit/fee levels. Reward higp innovation.
gher productivity with higher profits. Incentivize investment in
• SHARING THE BENEFITS OF CASH FLOW: Ensure that taxpayers receive adequate consideration (price reductions) for improved cash flows. Progress payments must reflect performance but can be increased above customary levels in return for consideration by the contractor. Reduce over time the gap between proposed and actual rates in forward price rate agreements.
• TARGETING NON-VALUE-ADDED COSTS: Identify and eliminate non-value-added overhead and G&A charged to contracts. Limit fees for subcontractor management to reflect actual value provided (risk assumed by prime and continuous subcontractor risk reduction). Limit B&P allowable costs in sole source contracts and encourage effective use of IRAD.
• INVOLVING DYNAMIC SMALL BUSINESS IN DEFENSE: When establishing multiple award contracts for services, make every effort to provide for small business participation. If at least two small businesses are deemed capable of performing on such a contract, consider setting aside that work for competition among them.
• REWARDING EXCELLENT SUPPLIERS: Emulate the Navy’s pilot program to provide special benefits to consistently excellent industrial performers.
59 OCTOBER –DECEMBER 2010
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