Focusing on better buying power and value engineering efforts
By Lt. Col. Elliott R. Caggins, Mr. Jason R. Middleton and Maj. Demond J. Merrick
The vast majority of the acquisition workforce has a great understanding of the life-cycle management process, including designing, developing, procuring, producing, fielding and sustaining military equipment. The defense acquisition life-cycle model goes into great detail on the operations and support phase, but it barely covers the cycle’s end—divestiture. In fact, the Defense Acquisition University’s life-cycle management chart simply lists divestiture as “disposal,” even though it’s much more than that.
With its focus on life-cycle phases from design to sustainment, formal acquisition training often neglects disposal, which is always a final option. Disposal is only a part of a larger function: divestiture, the transfer or disposal of interests. Divestiture encompasses a variety of opportunities and the possibility of finding value engineering (VE) and better buying power (BBP) savings normally identified in the operations and support phase, rather than waiting until after a system reaches the end of its useful life after many years, sometimes decades, of use.
The Mine Resistant Ambush Protected (MRAP) vehicle addressed the improvised explosive device threat in both Iraq and Afghanistan. MRAP was a unique, rapid acquisition program that expedited many standard acquisition processes in order to produce more than 27,000 vehicles in fewer than five years for combat operations. Almost 22,000 MRAPs came to the Army. With the current contingency operations winding down and sustainment costs looming, the question remains: “What should be done with the remaining MRAP vehicles and associated equipment located all over the world?”
Recently, the Army validated a plan to keep 8,585 of the most effective MRAP variants while divesting the remaining assets. This Army decision led the product manager for MRAP vehicle systems (PdM MVS) within Program Executive Office Combat Support and Combat Service Support (PEO CS&CSS) to transition much of its focus from the production and deployment phase to operations and support for vehicles to be retained, and disposal and divestiture for the remainder.
THE DOCTRINE OF DISPOSAL
Regulations and doctrine go into great detail on disposal and how to demilitarize various types of equipment. These regulations consistently emphasize cost savings or avoidance through reuse, transfer, donation and sale. This point of emphasis led the MRAP team to focus on divestiture and options for reuse, with the actual disposal becoming an absolute last choice. The reuse of vehicles, parts and equipment can be a creative and innovative way to save money for other programs and projects.
In April 2013, the Hon. Frank Kendall, undersecretary of defense for acquisition, technology and logistics, implemented the BBP 2.0 initiative, which emphasized key acquisition principles, provided guidance on evolving best practices and outlined new approaches to continuous improvement in product and services acquisition.
In addition to BBP principles, the team got up to speed on a public law regarding VE, which mandates savings through analysis and pursuit of areas such as improved performance, reliability, quality, safety and life-cycle costs. The MRAP team determined that the priority for this divestiture would be any and all BBP and VE savings opportunities available.
Recognizing the scope of divestiture, the product office redirected an assistant product manager (APM) team to provide consistent attention to MRAP-wide divestiture activities. This change of mission focused the team on exploring all possible options. The APM divestiture team came to realize that there were essentially five possible outcomes for all assets, including vehicles, parts and equipment. Each of these paths had its own advantages, savings opportunities and unique challenges.
FIVE OUTCOMES FROM DIVESTITURE
1. Internal reuse has proven to be the best way to realize BBP and VE efforts that save and avoid costs to the Army. Our goal was to focus on the remaining parts, kits, vehicles and chassis while harvesting excess equipment for future use. For example, the Caiman program harvested blast mats and transferred them to APM MaxxPro for minor adjustments and reuse, resulting in a VE project of $7.5 million. The RG-33 program reused approximately $24 million in parts (engines, transmissions, fuel tanks and more) across many projects, saving those potential costs as well. Other efforts involved wheels and tires, Objective Gunner Protection Kits, blast seats, armor panels, powertrain and more, resulting in over $50 million of additional savings.
2. External transfer has become a high priority, as it allows for local and domestic agencies to use vehicles that otherwise might go through demilitarization or disposal. The MRAP divestiture team has worked very closely with Defense Logistics Agency Disposition Services (DLA/DS) and its Law Enforcement Support Office (LESO) to help police, fire rescue and response teams in acquire vehicles on long-term loans. The Caiman program, for example, is currently transferring approximately 400 vehicles to DLA/DS LESO through the summer of 2014. This will provide law enforcement agencies with new capabilities and save the government demilitarization or disposal, transportation and potential storage costs. Many parts and kits can be reused through this same process for excess defense articles.
3. Foreign military sales (FMS) are another way to ensure that equipment is put to good use while helping our military allies throughout the world. This process is often very cumbersome and time-intensive, however, and requires interagency approvals. In the case of MRAPs, these assets have been held at depots both within and outside the continental United States while the U.S. Army Security Assistance Command (USASAC) and its Security Assistance Management Directorate focus on processing the transfers.
4. Long-term storage is a viable option in the right situation. FMS or external transfer transactions may take weeks, months or even years to come to fruition. In such cases, the best option is to take inventory, drain fluids or remove hazardous materials, and store the assets at a depot until the transaction can be finalized. The RG-33 vehicle platform went through a screening and review process for potential parts and equipment reuse before sending a large number of vehicles to Sierra Army Depot, California, to await potential FMS opportunities.
5. Demilitarization and disposal is the final available outcome when all other divestiture options have been exhausted and the assets are of no further use to the government. The vehicle or equipment should be disposed of in accordance with DOD 4160.21M, Defense Materiel Disposition Manual. In these cases, vehicles can be reused for range targets, but others will be disposed of at local, approved recycling centers near the original equipment manufacturer to avoid shipping and preparation costs. DLA/DS also has disposal sites across the globe that can assist in this function.
KEYS TO SUCCESS
Over the past year, the MRAP team has learned a considerable amount about the divestiture process. We attribute our success to proactive efforts to coordinate activities across numerous stakeholders who might have an interest in various equipment. There are several systems to provide government screening of items, but interested agencies need to know where to look, when to look and what is available. Reuse can be challenging, but working with the right people can ease much of the learning curve.
It is also very important to understand and acknowledge that every program will be different. Many factors can drive cost, schedule and performance, such as contract actions, plant closures, foreign events and political pressure, all of which can result in unplanned decisions and actions.
Direct, open communication among stakeholders and establishing strong working relationships are vital to the success of a fleet divestiture. In dealing with several MRAP variants, weekly if not daily communication has been a must with organizations such as HQDA, DLA/DS, the Integrated Logistics Support Center fleet management personnel of the U.S. Army TACOM Life Cycle Management Command, FMS and USASAC security offices, and many more. When the name of the game is cost savings or avoidance, the ability to effectively involve the enterprise increases the divestiture options exponentially.
In addition, legal, contracting, security management and public affairs teams must be part of the entire process to ensure that planning and actions are visible and clear. In the case of the Caiman fleet divestiture, the product office communicated with all of these offices during weekly conference calls and daily individual discussions to ensure the successful execution of divestiture processes within schedule constraints.
PdM MVS has identified more than $500 million of reuse and cost savings or avoidance for the MRAP variants that the Army is currently divesting rather than retaining as part of its defined enduring requirement. These efforts were based on BBP and VE initiatives focused on reuse, shipping, storage and vehicle preparation costs.
The takeaway is that the divestiture process is not as simple as just demilitarization and disposal. It is a much more complex and program-specific process focusing on reutilization, reuse, recycling and cost savings or avoidance. Relationships must be established to link the entire organizational enterprise early in the process, as items are declared excess to the government. Working in a broader community drives the ability to focus on divestiture and not simply disposal. Creative, innovative and predictive thought and planning will allow an organization to excel in an atmosphere that most acquisition professionals will never see.
For more information, go to http://www.peocscss.army.mil.[rule type=”basic”]
Lt. Col. Elliott R. Caggins serves as the PdM MVS in the Army Project Office (APO) MRAP at PEO CS&CSS, Warren, MI. He holds an MBA from the University of Louisville and a B.S. in public management from Austin Peay State University. He is Level III certified in program management and is a member of the U.S. Army Acquisition Corps (AAC).
Mr. Jason R. Middleton is the lead systems engineer for APM Divestiture, APO MRAP. He holds a B.S. in mechanical engineering from Kettering University. He is Level III certified in program systems engineering, Level II certified in program management and Level I certified in production, quality and manufacturing, and is a member of the AAC.
Maj. Demond J. Merrick is the APM for MRAP divestiture, APO MRAP. He holds an M.A. in security and organizational business management from Webster University and a B.A. in social work from Southern University at New Orleans. He is Level III certified in program management.
This article was originally published in the July – September 2014 issue of Army AL&T magazine.
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