Been There, Done That: Want A High Return?

Invest in more business education for PMs, and reap returns in the short term—good products at an appropriate price—and long—repaired credibility for defense acquisition.

by Robert F. Mortlock, Col., USA (Ret.)

“I don’t care how much it costs, we need it now!”

At the height of the conflicts in Iraq and Afghanistan, getting the warfighter the capabilities they needed as rapidly as possible was always the top priority for the defense acquisition community—and who could argue against it? Delivering effective, suitable warfighting equipment as fast as possible was the focus—often at the long-term expense, literally, of the services’ and DOD’s budgets.

Maintaining the focus on urgent needs was possible because of the availability and amount of overseas contingency operations funding. Speed of delivery was a higher priority than total ownership or life cycle costs, despite the significant impact it had on long-term operation and maintenance accounts. Fast-forward a few years, and the services faced declining base budgets, sequestration and the first of three iterations of the Better Buying Power initiative, emphasizing the importance of making wise financial investments with limits on planned funding.

It was a dual reality: one in which money was no object and one in which money was the overriding concern. You just had to remember in which reality you were operating, or you could find yourself burned. This dilemma of the past decade will continue well into the future for many acquisition program managers (PMs).

The good news is that the training and education of acquisition PMs, and of the Defense Acquisition Workforce in general, has never been better. PMs have gained defense acquisition and procurement acumen based on both education and experience. PMs and program executive officers (PEOs) have defined criteria for education, training and experience, with certification requirements that ensure their pedigree to lead organizations and programs. But just as conditions and priorities change, the demands for acquisition knowledge do, too. There needs to be a continual review of PMs’ education requirements to ensure that they have the tools necessary to lead ever more complex DOD programs in challenging fiscal environments. Today’s emphasis on affordability will only grow more important with the continuing uncertainty of funding, requiring that PMs have formal business education.

In my 17-plus years in this profession, the command climate of every program management office I was part of centered on getting solutions to the warfighter as quickly as possible that would meet their needs affordably and be supportable. The competence and leadership of PMs has been exemplary, yet defense acquisition is in a continual state of “reform” as the result of a relatively small number of very high-profile failed acquisition efforts. One acquisition reform that would pay big dividends without adding bureaucracy or oversight would be to require more fundamental business education for PMs—defense acquisition is, after all, fundamentally a business endeavor. Acquisition attracts mission-driven professionals who want to apply business skills to saving the lives of Soldiers, as the Hon. Heidi Shyu noted when she was the assistant secretary of the Army for acquisition, logistics and technology.

FRAMEWORK FOR SUCCESS—OR NOT
Defense acquisition as an institution—commonly referred to as “big A” acquisition—comprises the three decision support templates used to guide programs: one for generating requirements, known as the Joint Capabilities Integration and Development System; a second for managing program milestones, known as the Defense Acquisition Management System (commonly referred to as “little A”); and a third for allocating resources, as the Planning, Programming, Budgeting and Execution process. The “big A” fails, despite PMs’ best efforts, because of the complexity of the interactions among the requirements, funding and management systems as well as the effects of competing stakeholder priorities.

Within this framework, the specific causes of most program failures are easy to identify: changing requirements, unstable funding, immature technologies, misalignment of requirements and funding, competing political agendas, schedule-driven programs overemphasizing milestone achievement, the rapid pace of change and innovation in technology and the rapidly evolving threat environment against the backdrop of a deliberate acquisition system.

More business-savvy PMs could more easily make financially astute recommendations even with the continuing fiscal challenges and constantly changing environments. Requiring that PMs receive more fundamental business education would simply double down on the professionalism of the acquisition workforce, not add a new layer of government.

Currently, Level III certification in program management, as dictated by the Defense Acquisition Workforce Improvement Act, requires 24 business credit hours—without specifics on the types of required courses. The requirement is an acknowledgment of the importance of formal business education for PMs and is a fundamentally critical step in establishing PMs as acquisition professionals, but DOD should go further: Increase the PM selection requirement to having an accredited business degree (preferably a business master’s degree or MBA with a defense acquisition management concentration and a focus on system engineering and technology management) for all product and program managers at the O-5 and O-6 levels. And don’t limit the increased requirement to acquisition category (ACAT) I PMs (those who manage the biggest programs)—all PMs need a solid base in business and financial education. Promotion to field-grade officer rank above O-4 (corresponding roughly to the time an officer would be seeking Level III PM certification) already requires a graduate degree; therefore, this recommendation doesn’t present the Army with an additional education cost.

A BUSINESS CASE IN POINT
The recent adoption of the Army Physical Fitness Uniform (APFU) offers an excellent example of an effort that required a financially responsible acquisition approach. In early 2012, more than 76,000 Soldiers expressed dissatisfaction with the Army’s physical fitness uniform in an online survey, primarily noting stiff, uncomfortable fabrics and a lack of female sizes. As a result, Army leadership directed PEO Soldier to update the physical fitness uniform with higher-performing fabrics, new sizes and a new design to address Soldier dissatisfaction and the expanded use of the uniform in combat zones.

After prototype testing with Soldiers, a series of town halls across Army installations hosted by the sergeant major of the Army, and another online survey with approximately 190,000 participating Soldiers, Army leadership approved the APFU in April 2013 with more than 30 improvements, from better sizing (including sizes designed for women) to a change to moisture-wicking fabrics. The Army approved a plan to phase the uniform in over four and a half years, allowing Soldiers to wear the APFU beginning in October 2014 with a mandatory possession date of October 2017. The plan took into account user testing with Soldiers in representative climatic conditions at six Army installations; technical testing for durability, colorfastness, laundering, moisture wicking, female sizing and fit; time to subsequently optimize the design; time to put the uniform on contract with multiple vendors; time to build up production inventories, and finally time for Soldiers to transition to the APFU.

Repeatedly, senior-level decision reviews at the Pentagon posed the following questions:

• Why can’t the Army just give Soldiers commercial (for example, Nike or UnderArmour) workout gear?
• Why can’t the transition happen faster (begin sooner and take less than three years)?
• The increase in the price is less than $1—let’s just buy the slightly more expensive one—what’s the big deal?

Answering these questions requires understanding return on investment (ROI)—fundamental principles taught in business education curriculums and then subsequently applied in practice, which results in experience. To start with, providing Soldiers commercial products would require the Army to purchase the technical data rights, at a cost of tens of millions of dollars, or pay a per-unit premium in the form of a 10-20 percent markup per item. Both of these options have bad ROI when the Army could upgrade to similar fabrics and design and avoid the commercial product premium.

The program schedule—how quickly the Army wants to get gear in the hands of Soldiers—also necessitates considering ROI, because project timelines are proportional to required resources. In the APFU case, for the Army to rapidly replace all current fitness uniforms would not only mean an upfront bill for the cost of the new uniforms but also would require that the Army account for the costs of on-hand inventories (quantities of the current physical fitness uniforms bought, stored and ready for Soldier issue when needed) on the order of tens of millions of dollars at any given time. The adoption of a phased implementation strategy, whereby the Army would use on-hand inventory and gradually convert new buys to the APFU, allows the Army to build up APFU inventory for a phased adoption integration by the force, draws down the current inventory and avoids a large residual asset bill (quantities of the current fitness uniforms that the Army no longer needs).

Finally, the price per unit is important: Any seemingly small increase in price is magnified to millions of dollars because of the number of Soldiers, basis of issue (in this case, the number of APFUs allotted to each Soldier) and wear-out time. While the cost of the APFU short-sleeved T-shirt was only $5.55, a $1 increase in a T-shirt equates to a multimillion-dollar bill to Army personnel funding accounts at a time of great pressure on end strength. For example, that $1 increase equates to a nearly $8 million yearly increase in future funding requirements for the personnel account. Thus, any change in the fitness uniform had to be as close to cost-neutral as possible, based on unit price.

CONCLUSION
The Army’s decision to gradually phase in the APFU for the existing uniform using upgraded materials in a cost-conscious way highlights the use of sound business principles and analysis. The approach chosen for APFU acquisition and implementation was successful in part because the PM and key members of the PM team had the proper business education—something provided only by a formal accredited business degree, not just 24 business credit hours.

Furthermore, the number of credit hours is not the important part of PM certification. What’s important is the recognition that business education is a fundamental and essential professional requirement for PMs. To ensure consistent application of this standard across the PM career field, the minimum Level III PM certification requirements should change from 24 business credit hours to an accredited business degree.

The Army’s adoption of the APFU was not an ACAT I program with an acquisition program baseline controlling the PM’s actions from a performance, cost and schedule standpoint. In fact, the APFU program was not a program of record at all—it was just an effort, albeit one with high Soldier interest and oversight from top Army leaders. In this program and hundreds of similar programs, PMs must simply do the right thing without formal approval for Soldiers and the Army—deliver an affordable capability with the required performance within schedule constraints.

Developing and implementing fiscally responsible acquisition approaches builds and cements trust with senior leaders, Congress and the American public: This is a PM’s fiduciary responsibility. Having PMs with the necessary business education, background and experience to carry out this responsibility with consistent success would have a high ROI for DOD. It would pay dividends in the form of even more financially astute, business-savvy, cost-conscious PMs with the acumen required to operate in an environment of budget uncertainty and increased emphasis on improved procurement returns with limited resources.

Over time, the credibility of the acquisition profession could soar—and that is the highest possible ROI for DOD.

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ROBERT F. MORTLOCK, COL, USA (Ret.), managed defense systems development and acquisition efforts for the last 15 of his 27 years in the U.S. Army, culminating in his assignment as the project manager for Soldier protection and individual equipment in Program Executive Office for Soldier. He retired in September 2015 and is now a lecturer for defense acquisition and program management in the Graduate School of Business and Public Policy at the Naval Postgraduate School in Monterey, California. He holds a Ph.D. in chemical engineering from the University of California, Berkeley, an MBA from Webster University, an M.S. in national resource strategy from the Industrial College of the Armed Forces and a B.S. in chemical engineering from Lehigh University. He is also a recent graduate from the Post-Doctoral Bridge Program of the University of Florida’s Hough Graduate School of Business, with a management specialization.

This article is scheduled to be published in the July-September 2017 issue of Army AL&T Magazine.

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