The Pentagon is aiming to making its acquisition reform initiative even better.
The Defense Department’s Better Buying Power program, first implemented in 2010, is expected to make the jump from its latest iteration to version 3.0 later this year. The initiative is a set of best practices and contract standards and serves as the Pentagon’s attempt to rein in cost overruns and inefficiencies that have plagued the agency for decades, at times benefiting defense contractors.
The Pentagon credits the initiative for savings that amounted to $150 billion in 2012, $60 billion in 2013 and $35 billion for fiscal 2014, which began last October. In announcing next year’s $496 billion budget request, the Defense Department said it will “aggressively pursue its Better Buying Power initiatives aimed at increasing acquisition efficiency.”
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Part of that effort includes having more fixed-price incentive contracts, which require the contractor to assume a greater portion of cost risks in return for the opportunity to increase profits.
Perhaps one of the most cost-effective approaches employed by the Defense Department is the use of multiyear contracts, which are often five-year agreements that allow both sides to capitalize on economies of scale. The specter of sequestration, however, could hinder some of those gains, as evidenced by the Navy’s plan to cancel part of a multiyear contract signed in 2012, a move spurred by forthcoming budget cuts that could cost the Pentagon $250 million in termination fees.
“Why is it that so many smart people have focused on this problem and tried to reform it over the last several decades and ended up with a system that’s more complicated, more expensive and doesn’t deliver the results that everyone wants?” William C. Greenwalt, a visiting fellow at the American Enterprise Institute, told Federal News Radio. “The answer, I think, is that we’re all using different criteria.”
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For example, he said that while the Pentagon says it supports innovation, the agency “needs to look at where innovation is being driven today, and it’s not being driven by the Department of Defense – it’s being driven by the commercial marketplace.” Instead of trying to conjure up devices that it can use, procurement officials should tailor existing innovation to meet its needs, said the former deputy under secretary of defense for industrial policy.
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Better Buying Power 2.0, introduced last year, raised standards for contracting officials at the Pentagon and required more reviews during the life cycle of a contract. If version 3.0 is unveiled later this year, defense contractors seeking about $90 billion in procurement spending for fiscal 2015 will be the first firms subject to any tweaks to the initiative.
So how have these changes been received in the defense contracting community?
“A lot of the unhappiness with Better Buying Power in industry simply reflects it is on the other side of the bargaining table from a demanding customer,” Loren B. Thompson, chief operating officer of the Lexington Institute and former deputy director of the security studies program at Georgetown University, told Breaking Defense last week. “If industry was really happy with the Pentagon buying process, that wouldn’t be good news for taxpayers.”
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