A New Era Of Acquisition

After high-publicity failures, defense acquisition experts laud the Army for focusing on products and priorities over process, but bureaucracy remains a threat.

by Michael Bold and Margaret C. Roth

The query to General Micro Systems Inc. (GMS) came in a roundabout way, from a prime defense contractor that had worked with the Rancho Cucamonga, California, company before. The Army had an urgent need for a rugged, rack-mounted server. The prime contractor knew about the TITAN server that GMS planned to unveil at the annual Association of the United States Army (AUSA) meeting in Washington in October.

GMS and the contractor (which for proprietary reasons GMS would not identify) discussed what the Army was looking for, and GMS seemed to have what the Army needed. But they didn’t hear back. “We thought, huh, that’s interesting, wonder how that went,” said Chris Ciufo, chief technical officer at GMS. Then the Army “came roaring back to us,” he said, asking for a proposal within two days. The Army specified exactly what it needed in the system, and GMS provided a formal bid. The Army awarded the contract to GMS and said it needed the servers fast—within six months.

The time from first contact to the award of the contract? Two weeks, said Ciufo.

Welcome to the new era of Army acquisition.

In a remarkably short time, the defense acquisition system and especially the Army, long criticized as slow-moving and bogged down in red tape, are getting new capabilities on contract faster than most would have thought possible five years ago. And other-transaction authorities (OTAs) are the main weapon—although not the only one—in the Army’s push to modernize. OTAs make it possible for the services to acquire new capabilities faster and attract more vendors who traditionally have not engaged with DOD because of the bureaucracy involved, driven by the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement.

The National Defense Authorization Act for Fiscal Year 2016 provided a major boost to OTAs, highlighting and encouraging their use. “OTAs give us a greater flexibility in our contracting methodology than a pure FAR-based contract,” Dr. Bruce D. Jette, the Army acquisition executive and assistant secretary of the Army for acquisition, logistics and technology, said in an interview for Army AL&T. “That is a significant value that Congress gave us.”

Organizationally, the creation of U.S. Army Futures Command (AFC), which became fully operational in July, is the single largest development in the effort to speed acquisition, bringing requirements writers, combat developers, scientists and engineers, contracting experts and the testing community together in cross-functional teams early in the process to demonstrably speed the delivery of capabilities to Soldiers.

Together, the increased use of OTAs and the advent of AFC have given rise to a cautious optimism that is more optimism than caution, compared with previous attempts at acquisition reform. Those who have been through, participated in or led earlier efforts see a distinctly brighter future for Army acquisition.

“For probably a decade, I’ve felt like we’re right on the cusp of really significant changes, in the pace of change, and in the way the DOD is going to do work,” said Dan Ward, a former Air Force acquisition officer who specialized in leading high-speed, low-cost technology development programs, wrote two books on innovation and is now a senior principle systems engineer at MITRE Corp. “And I feel like we’ve crested that hill.”

 

OTAS ON THE RISE

Other-transaction agreements let DOD streamline the bureaucracy of traditional procurement by awarding contracts faster for prototyping and production. From 2012 to 2014, DOD averaged a little over $500 million in obligations on OTAs. That number jumped to over $1.5 billion in 2016 and to over $3.5 billion in 2018, according to Govini, a data and analytics firm. An analysis by Bloomberg Government says the number will top $7 billion in 2019.

The Army has driven the growth in OTA use. In 2012, the Army had approximately 40 OTAs worth less than $500 million. In 2018, it had more than 220 worth more than $2.5 billion. “When we look at the data … the Army has definitely made a calculated decision to use OTA and other middle-tier-of-acquisition approaches, for its modernization today,” said Andrew Hunter, a senior fellow at the Center for Strategic and International Studies (CSIS), a Washington think tank.

“The most important thing about the numbers is it’s an indicator that people are getting more comfortable with the application of the OTAs, that they’re finding good applications in those OTAs, and they’re justified in those OTAs,” Jette said in the interview.

While improved, OTAs are not new. Congress first authorized their use in 1958, with the legislation that created NASA. Congress allowed the Defense Advanced Research Projects Agency to use “other transactions” in 1989, and their use was extended to the military services in 1996.

“This extension of the authority didn’t come out of nowhere,” said Stan Soloway, president and CEO of Celero Strategies LLC, a business-growth strategy company working with technology and other firms in the government market. Soloway has also served in government, as deputy undersecretary of defense for acquisition reform and director of the Defense Reform Initiative during the Clinton administration. Efforts to get what is known as production authority began about 20 years ago, Soloway said, as it became clear that limiting OTAs to just the prototype phase of acquisition limited their effectiveness.

Soloway sees the growth in OTAs as a reflection of DOD becoming more customer-focused in a customer-centric world, responding to the frustration of its customers—be they industry, academia or Soldiers—about “an acquisition system that they do not believe has been meeting their needs, in terms of either time or capability.”

 

HOW WE GOT HERE

The impetus for the current wave of change in DOD acquisition started in a big way in 2015, when congressional leaders in military affairs—namely Sen. John McCain, R-Ariz., and Rep. Mac Thornberry, R-Texas, chairmen of the Senate and House Armed Services Committees—began to “really start pushing on the system by not only pushing the new [expedited acquisition] authorities, but also pushing at organizational changes,” said Jon Etherton, president of Etherton and Associates Inc., a defense policy and business strategy consulting firm. Etherton is a veteran of the defense legislative process, having served nearly two decades as a senior Senate staffer.

The result was an unprecedented volume of legislation in Title 8, the acquisition policy portion of the National Defense Authorization Act.

Milestone decision-making on major programs shifted unequivocally from DOD back to the services with the elimination of the undersecretary for acquisition, technology and logistics. “You had the creation of all these new authorities like Section 804 and the expansion of the other transaction agreements,” to which DOD has responded with enthusiasm, said Etherton.

“What I’ve really seen is, with the new administration in particular, they really want to grab onto some of these things,” Etherton said. “… And I think the Army has been right in the middle of this, especially at the front end of the decision-making,” to start much more rapidly getting on contract and getting the actual work started, with Army Futures Command putting the major players together at the beginning of the process rather than waiting for each to do its part sequentially.

As a result, “we can really start to figure out what works, what doesn’t work—reduce risk and get a much more accelerated process going for some of these efforts,” Etherton said.

ADDITION BY SUBTRACTION

As Naval Postgraduate School senior lecturer John T. Dillard sees it, the most significant change in acquisition to emerge from the past few years of legislation was the elimination of the defense undersecretary position. “Whatever drove that decision, it has certainly reduced the amount of preparation and documentation that program managers must go through for milestone decisions to proceed, halt or alter the course of their programs,” Dillard said.

Defense Acquisition Board reviews were mandated, highly costly and work-intensive “off-core activities” for any Acquisition Category ID project, said Dillard, who managed major weapons development efforts for most of his 26-year career in the Army and now teaches in the Naval Postgraduate School’s Systems Engineering Department of the Graduate School of Engineering and Applied Sciences. “They were only the tip of the iceberg with regard to preparatory reviews en route, and were a significant distraction to the [program manager] that pulled them away from their primary functions.” Thus, the decision for investment milestones now rests with the component acquisition executive.

“The operational side still drives requirements and resources, while the secretariat side executes the acquisition of capabilities needed,” Dillard noted, but “emphasis on prototyping and rapid production has increased. … Real-world threats are driving a palpable sense of urgency in the Pentagon to acquire capabilities faster.”

ARMY FUTURES COMMAND’S MISSION

Just as OTAs embrace innovation, the Army Futures Command aims to do the same—culturally, procedurally and institutionally. “We are trying very hard to describe what problems we want to solve, and then let industry innovate in terms of how they can possibly solve that problem,” Gen. John M. “Mike” Murray, AFC commanding general, told an AUSA panel in October.

“This is about winning, and this is about looking and doing things differently in moving the Army into the information age,” he said. “Because we will not be successful if we just continue to do the same things we’ve always done in the past.”

As always, requirements are key.

From the Army acquisition executive’s point of view, “AFC fundamentally has changed the front end of the process, which is requirements generation,” Jette said in the interview. “And based upon the guidance of the senior leaders, particularly the secretary, the idea is to find a more intimate way to connect the requirements to the development of the acquisition strategy.”

The results are telling, observers agree.

“IPTs (integrated product or process teams) were among the first acquisition reforms we pressed for in the ’90s, because we knew they could really facilitate program efficiency and effectiveness,” Soloway said. “AFC is really an IPT on steroids, and that’s truly intriguing.”

“What I have seen AFC accomplish thus far is to redirect some existing programs of record to make them oriented nearer-term, the focus being upon early-as-possible capabilities,” Dillard said. “Hopefully, this is not so shortsighted as to throw off the investments in longer-term advancements. All in all, it is safe to say that AFC has inserted itself into the process of both combat and materiel developments, and with the power to ‘move the needle’ that comes with four-star power.”

 

BEWARE OF BACKSLIDING

Bureaucracy remains an ever-present threat to the Army’s newfound agility, however.

“The folks on the ground tell me that there are several layers between them and our most senior leaders telling us to do things faster,” Dillard said. “Those layers of bureaucrats and processes are still well-entrenched, and I’m not sure we can remove those layers or if things will go any better without them. Institutional knowledge comes at a cost—it often feels like handcuffs to the folks trying to get things done.”

It is noteworthy that there’s a guidebook of only 53 pages on other-transaction authority, whereas the FAR is over 2,000 pages, and the defense supplement almost as large, Dillard said.

In fact, Stuart A. Hazlett, deputy assistant secretary of the Army for procurement, told a panel at AUSA that he feared writing an official policy on OTAs could produce another FAR. “I’ve been reluctant to write policy dealing with OTs in the Army. … What we don’t want to happen is for us to start writing policy and allow this thing to start slipping out of control and, before I know it, I’ve got a FAR-based kind of approach again.”

An acquisition system that in the past has not had much tolerance for cost increases or schedule delays, and which has responded to ambiguities with more time-eating rules and capability requirements, is now being asked to tolerate mistakes and even failures in the interest of trying harder and faster to get state-of-the-art technologies to the warfighter, Etherton said. Right now, the focus is on schedule, but it is inevitable that cost and performance concerns will surface as well at some point, he said.

“I really hope we don’t say, well, now we have to add all these things and make the system the way it used to be,” Etherton said. “We just can’t go back to that. We have to stay the course and really accept the higher risk, accept that there are going to be problems that we will have to address, but that we have to get into some kind of a new model process. … There needs to be a dialogue on how much of this formal certification reporting kind of things do we really need in this process, to satisfy Congress’s oversight concerns but yet not trigger a creation of more bureaucracy.”

 

IN SEARCH OF THE NEW NORM

DOD is in the process of addressing such concerns with a rewrite of its “DOD Instruction 5000.02, Operation of the Defense Acquisition System,” which provides the governing policies and principles. “What they’re trying to do is basically take the new authorities, clarify what that process looks like for OTAs and rapid prototyping, rapid fielding kinds of things, and figure out how to integrate that into a process that effectively captures the result and major capabilities,” Etherton said. “I’m not sure that the new 5000 process that the OSD is currently working on is going to do that right at the get-go.

“What I’m concerned about is that handoff process. What does it look like when we get through this initial, quick, first three, four, five years, and then it gets handed off into a more traditional process where you’re basically acquiring a major capability? … I think that’s where the real work is going to have to happen,” Etherton said.

The fundamental principles of sound acquisition, however it may speed up, still need to include “requirements analysis, a proper amount of testing and having an ironclad contract as the basis for dealing with industry,” Dillard said. “Few shortcuts can be taken in these three areas. Unfortunately, all three of these areas had become over-bureaucratized with their voluminous policies, regulations and instructions. Now the pendulum swings the other way.”

Dillard cautioned that “though we have rapidly leaped aboard the OTA bandwagon, … OTAs are still contracts, and they must be put into place by warranted contracting officers. They serve to free us up from lots of unnecessary statutes and regulations, but are no substitute for our doing what is inherently governmental: defining what we expect as deliverables from rigorous requirements analysis and systems engineering.”

“Fundamentally the engineering process does not change,” warned Hunter of CSIS. “Programs that are new-build, complex platforms still have significant engineering challenges.”

Sustainability is another definite concern, Dillard said. “Sustainment is certainly the area that presents risk when doing things on the quick.” It is well-established that long-term sustainment can be the most costly piece of a system life cycle. “Logistic support must be designed in, and that takes a deliberate, iterative effort for suitability and supportability analysis alongside the development, early on and throughout ‘the invention process,’ ” he said.

“Going from prototypes to production-ready systems is a leap that I think is makeable, but the proof’s in the pudding,” said Hunter. “… Before we get too excited about our success, we have to deliver some systems to the warfighter.” 

JCIDS PROCESS ON WAY OUT?

It is by now a given that people really want to move away from the 5000 defense acquisition machinery and start moving much more quickly. “They want to get out from underneath the JCIDS [Joint Capabilities Integration and Development System] process,” Etherton said. The attractiveness of OTAs and other Section 804 authorities, which to some extent were designed deliberately “to get you out from underneath the JCIDS process, to me, that calls the whole JCIDS process into question,” he said.

“Now we have enough information and enough experience [to conclude] that maybe we don’t need a JCIDS process at all, or we need something that is a different approach for what JCIDS tries to accomplish, in a much more agile form,” Etherton said. “And honestly, I think that was the intent by Congress in creating some of these authorities.”

“I don’t think [JCIDS is] going away, I think it is shifting the default,” said Ward, the former Air Force procurement officer. “One of the guiding principles with a lot of this is there’s more than one way to generate a requirement.”

AFC has a leading role to play in the new balancing act of rigor and agility, Dillard said. While the command’s mission extends well beyond experimentation with acquisition approaches other than traditional JCIDS capability-based assessments, Dillard sees AFC—particularly the cross-functional teams of representatives from all the organizations with a stake in the acquisition—as a major influence in speeding up the process. “AFC now is in the mix for coordination all the way up [the chain of command], and hopefully for integration across combat domains and functional areas,” Dillard said. “If it sounds nebulous and ambiguous, I believe it still very much is.”

CONCLUSION

As attractive as OTAs have become, there is concern that they might become an overused, knee-jerk “easy solution,” like new developments in contracting that have preceded them. OTAs are by no means a perfect solution, but they have proved their value as a way to expedite.

“The good part about the OTA is that you essentially get to write nearly a commercial contract, whatever you want,” Jette said in the interview. “The problem in that is it assumes you know how to write a commercial contract.”

“I think there’s always a danger of overcorrecting,” said Ward. “But I think the danger of overcorrecting is a lower risk than of maintaining the status quo. … This is not a zero-risk proposition. But it is a risk improvement strategy. It’s a risk mitigation strategy.”

And so the learning curve continues to take shape. “Are we going to make mistakes? Are we going to misuse [expedited authorities] or use them in areas where we probably shouldn’t? There’s no question in my mind that that will happen,” said Etherton. “But the real issue is, OK, how do we take that information and move forward?”

OTAs currently focus on smaller-scale acquisitions. But in four or five years, with the OTA language that allows for production as part of the agreement, an OTA could very well give rise to an ACAT I program—once the expedited authority has made it past the learning curve, Etherton said.

The learning curve did not start in just the past few years, Dillard noted. For all the seeming novelty of OTAs, he said, “this agreement authority has actually been around since 1958 and is no panacea in itself. OTAs are not always faster and must still include the needed protections for the DOD that FAR-based contracts provide. Let’s not forget that the infamous Future Combat Systems program began with a $240 million OTA way back in 2002.”

Nonetheless, it is clear, Dillard said, that “this time, acquisition reform is working, at least in terms of realizing results sooner. Now those results may not be the 100 percent solution that was initially required or budgeted for. But the user has a bigger vote than ever these days, and it is doing much to steer a very difficult vessel through the ocean of complexity that is acquisition.”

As Soloway sees it, the jury’s still out on whether the Army and the Pentagon are capable of substantive acquisition reform in the next two years. “This is a question that we have been asking for decades. And the answer remains the same: I don’t know.”

“If we can truly modernize the way we develop and train acquisition professionals to align with the historically fast-paced nature of the marketplace and technology,” Soloway said, “what is now considered ‘expedited’ or ‘alternative’ can become part of the normal course of business.”

“If we don’t try some of these things, we’re never going to find out what works and what doesn’t work,” Etherton said. “I want to see people embrace the agility, embrace the speed, and just not have to pay a price for it later on in the process.

“We don’t have a choice,” he said. “We can’t rely on the old system anymore.”

MICHAEL BOLD provides contract support to the U.S. Army Acquisition Support Center. He is a writer-editor for Network Runners Inc., with more than 30 years of editing experience at newspapers, including the McClatchy Washington Bureau, The Sacramento Bee, the San Jose Mercury News, the Dallas Morning News and the Fort Worth Star-Telegram. He holds a Bachelor of Journalism degree from the University of Missouri.

MARGARET C. ROTH is an editor of Army AL&T magazine. She has more than a decade of experience in writing about the Army and more than three decades’ experience in journalism and public relations. Roth is a Maj. Gen. Keith L. Ware Public Affairs Award winner and a co-author of the book “Operation Just Cause: The Storming of Panama.” She holds a B.A. in Russian language and linguistics from the University of Virginia.

 

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This article is published in the Winter 2020 issue of Army AL&T magazine.

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