HASC Signals DOD Acquisition Reform Effort

Yesterday HASC Chairman Rep. Buck McKeon (R-CA) announced that Committee Vice Chairman Rep. Mac Thornberry (R-TX) will lead “a long term DOD reform effort that includes a hard look at acquisition.”  During the HASC hearing Rep. McKeon noted that there are “still significant challenges facing the Defense acquisition system,” and explained that “we cannot afford a costly and ineffective acquisition system, particularly when faced with devastating impacts of repeated budget cuts and sequestration.  The Congress together with the Department of Defense and industry must be willing to do the hard work to find root causes, look past band-aid fixes and parochial interests, and have the courage to implement meaningful, lasting reform.”

One theme that surfaced in the written testimony was the need to streamline the acquisition process.  For example, the Honorable Dov Zakheim (Former Undersecretary of Defense (Comptroller)) implored that “the acquisition rules must be simplified and the contracting system reformed.”  The complexity of the acquisition rules don’t necessarily promote competition favorable to the DOD’s mission because they “scare[] away many firms that could potentially offer DOD important products. On the other hand, companies that know how to navigate the system can win contracts even though their products might not be the most effective for carrying out the Department’s mission.”

Another theme that appeared was the need for more accurate up-front assessments of acquisitions – the lack of accuracy causes issues downstream.  For example, Moshe Schwartz (Specialist in Defense Acquisition Policy, Congressional Research Service) identified issues related to the “strong incentives” contractors and the Government have to  “underestimate program acquisition costs. Contractors use low cost estimates to win the contract; program  representatives use low estimates to argue for approval of the system against competing systems.”  The lack of “reliable cost estimates” must be addressed because it “denies Congress the ability to decide on competing strategic and budget priorities based on realistic cost assumptions and denies DOD the opportunity to develop a well-conceived acquisition plan.”  In addition, Paul Francis (Managing Director, Acquisition and Sourcing Management, U.S. Government Accountability Office) explained that the current “budget process forces funding decisions to be made well in advance of program decisions, which encourages undue optimism about program risks and costs.”  The Government must be able to “identify significant program risks upfront and resource them” in order to adequately assess weapons programs.

Although it is way too early to determine the impact of the HASC’s acquisition reform effort, we believe that change is likely in the future, especially given the current fiscal pressures on the acquisition process.   We will continue to monitor this important development and analyze its impacts on the acquisition process and future opportunities for industry.

Dentons Government Contracts Group

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