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CHIPS Articles: Annual Report Shows Progress in Acquisition

Annual Report Shows Progress in Acquisition
By Cheryl Pellerin, DoD News, Defense Media Activity - October 7, 2015
October 6, 2015 — Data-driven acquisition and procurement policies are creating savings in production and development programs, lowering large-program costs and moving contract costs and management in positive directions, the Defense Department’s acquisition chief said this morning.

Frank Kendall, undersecretary of defense for acquisition, technology and logistics, discussed his third annual Performance of the Defense Acquisition System report during a DoD acquisition event hosted here by Defense One.

“I believe in using data to inform policy, … so what I've been trying to do for the last several years is have a more data-driven set of acquisition policies,” Kendall said in his keynote remarks.

In 2010, Kendall, working with then-acquisition undersecretary Ash Carter, created the first version of Better Buying Power, the implementation of best practices to strengthen the department's buying power and improve industry productivity.

Better Buying Power

From 2009 to 2011, Carter, now defense secretary, was undersecretary of defense for acquisition, technology and logistics with responsibility for DoD’s procurement reform and innovation agenda.

“Together we had put together a cell … [whose work] was responsible for a lot of the data” represented in the report, Kendall said.

“We’ve grown that body of work every year, and I think we've gotten to the point after several years of putting policies in place [and] trying to learn from what we've done that some results are starting to … suggest we're headed in the right direction,” he added.

The acquisition chief also gave credit to the thousands of people in government and industry who are making possible the progress documented in the report.

Acquisition Trenches

Also this year, Kendall’s office is publishing a Compendium of Program Manager Assessments -- individual reports of program managers from major programs -- “to give the community, in Washington in particular, a chance to look at what real life in the trenches of acquisition is like,” Kendall said.

During his remarks, Kendall went through several charts from the report and commented on the department’s progress in several areas. Referring to a chart on production, Kendall called the positive trend a “pretty good estimator of what's actually happening in unit costs in our programs,” and added that the department is better at predicting how production will go than it is at predicting how development will go.

“There's less uncertainty, and you see that reflected in results, which are much better [for production] than they are for development,” he said. Kendall said the focus on development distracts from other things that matter in acquisition. “Production and sustainment are where almost all the money is in defense acquisition,” he added.

‘Should-Cost’ Management

In large part because of a Better Buying Power initiative called “should-cost management,” cost growth on major programs generally is at or better than historical levels, Kendall said.

For example, he added, more programs are showing savings relative to initial baselines than in the past, major program cost growth in two-year increments has a downward trend, and contractors for major programs are doing a better job of meeting their contract cost targets.

Should-cost management is separate from budgeting numbers, Kendall noted.

“The idea is to do better than the budget, and we're seeing some significant improvements here. This is statistically significant data that shows that the fraction of our programs in development showing savings has gone up pretty significantly,” he said, adding that the report shows similar results for production.

Encouraging Trends

“I think that can be attributed, at least in large part, to our change in emphasis throughout the workforce on should-cost and the idea that it's our job to get costs down, not just to stay under our budget or even just to spend the budget,” Kendall said.

Addressing competition, or the percentage of DoD awards that are competitive, Kendall said he’s encouraged by the trend in the last year but “worried about what the budget climate in fiscal year 2016 is going to do to us.”

When budgets get tight and the department is spending less money, there are fewer opportunities to compete contracts, Kendall said. He noted that the Obama administration has emphasized small business, and added that he would like to see more Defense Department contracts go to small businesses.

“In general, I think we're at least holding the line there, and more recently moving in the right direction,” he said.

Related Links
Performance of the Defense Acquisition System, 2015 Annual Report
2015 Compendium of Annual Program Manager Assessments

Frank Kendall, undersecretary of defense for acquisition, technology and logistics
Frank Kendall, undersecretary of defense for acquisition, technology and logistics
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