Air Armament Center Emily Jay AAC/PK 850-882-0150 [email protected] War-Winning...
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Transcript of Air Armament Center Emily Jay AAC/PK 850-882-0150 [email protected] War-Winning...
Air Armament CenterAir Armament Center
Emily JayAAC/[email protected]
War-Winning Capabilities…On Time, On Cost
Fixed Price Development Fixed Price Development
and Other Acquisition and Other Acquisition
InitiativesInitiatives4 March 104 March 10
War-winning Capabilities…On Time, On Cost
Agenda
• Why Fixed Price Development?• Weapons Systems Acquisition Reform Act
(WSARA)• DoD Major Reforms• Did They Mean It?• Government Trends• Conclusion
War-winning Capabilities…On Time, On Cost
• Dec 2005 – GAO report – “Power of monetary
incentives to motivate excellent contractor performance is diluted by the way DOD structures and implements incentives.”
Program Comanche F/A-22 F-35 SBIRS
R&D Cost increase
Over baseline
$3.7B
41.2%
$10.2B
47.3%
$10.1B
30.1%
$3.7B
99.5%
Cycle Time Increase Over Baseline
33 months
14.8%
27 months
13.3%
11 months
5.9%
>12 Months
% and Total Award Fee Paid
85%
$202.5M through
2005
91%
$848.7M
100%
$494M
74%
160.4M
Why Fixed Price Development? GAO Report on Contract Incentives
War-winning Capabilities…On Time, On Cost
Why Fixed Price Development Contracts?
• FY07 Authorization Act – PL 109-364, sec 818• DFARS Case 2006-D053
– MS B – MDA, with advice of the Contracting Officer, selects contract type for development program
– Basis for Contract Type Documented in Acq Strategy• Include explanation of level of risk• If high risk, steps taken to taken to reduce program risk and
reasons for proceeding despite the high level of program risk – Cost Type Contract Requires a Written Determination
• Program is so complex and technically challenging…not practicable to reduce program risk to a level permitting FP contract”
• Complexity and technical challenge is not a result of failure to meet 10USC2366a
– DFARS Case – Public Comments Received 24 Mar 08, Public Comments Reviewed and Staffed
War-winning Capabilities…On Time, On Cost
Why Fixed Price Development?MDA Certification
• National Defense Authorization Act for 2006• Implemented in USD/ATL letter dated 2 May 06
– Prior to MSB approval, MDA must certify
• Technology has been demonstrated in a relevant environment
• Program demonstrates high likelihood of accomplishing its mission
• Program is affordable when considering the per unit cost and total acquisition cost
• AoA has been conducted
• Program is affordable when considering alternative systems
• JROC has completed review, including analysis of reqts
• Program complies with all policies, regs, directives
War-winning Capabilities…On Time, On Cost
Why Fixed Price Development? Analysis of DOD Major Defense Acquisition Program Portfolio
Portfolio Status FY 2007 Portfolio
Number of Programs 95
Change to Total R&D Costs from First Estimate (FE)
40 percent
Change in Total Acquisition Cost from First Estimate
25 percent
Estimated Total Acquisition Cost Growth from FE
$295B
Share of programs with 25 percent or more increase in program acquisition unit cost
44 percent
Average Schedule Delay in Achieving Initial Operation Capabilities
21 months
Source of Data: GAO Analysis of DoD Data
War-winning Capabilities…On Time, On Cost
Why Fixed Price Contracts? Memo for Heads of Executive Departments and Agencies
“Cost-reimbursement contracts shall be used only when circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract. Moreover, the Federal Government shall ensure that taxpayer dollars are not spent on contracts that are wasteful, inefficient, subject to misuse, or otherwise not well designed to serve the Federal Government's needs and to manage the risk associated with the goods and services being procured.”
President Barack Obama, 4 March 09
War-winning Capabilities…On Time, On Cost
Weapons Systems Acquisition Reform Act (WSARA) of 2009
• Basic Provisions of WSARA– New approvals required to prevent cost overruns– Termination of costly programs– Life Cycle Competition– Additional OCI provisions– New Acquisition Personnel Positions
“A dollar of wasted defense spending is a dollar not spent on supporting US troops, preparing for future threats or protecting the American people.”
President Obama/SecDef Gates
War-winning Capabilities…On Time, On Cost
DoD Major Reforms• Increasing acquisition work force by 20,000 positions
– to ensure we have a strong workforce with the skills necessary to manage major systems
• Rely on independent cost estimates at the start and bring more discipline to the process– to reduce the risk that costs will spiral out of control
• Competitive Prototyping before choosing the best, most affordable ones to produce– to better harness the creative and economic power of competition
• Use more fixed-price development contracts and institute new mechanisms to prevent endless requirements creep– To prevent programs from ballooning in cost and schedule
• Be prepared to reform or cancel programs that are not on track to provide warfighters what they need when they need it DepSecDef Lynn, Jun 09, Washington Times
War-winning Capabilities…On Time, On Cost
Did They Mean It?
• Increase workforce – AAC received 118 new positions in FY09, 203 in FY10– AAC/PK received 28 new positions in FY 2009 and 4 new positions in
2010.
• Rely on independent cost estimates– Establishment of Director of Cost Assessment and Evaluation
• Competitive Prototyping– AAC continues to lead in widespread use of competitive prototypes
• Increased use of fixed price development contracts– Changed Acquisition Strategies for Small Diameter Bomb II, QF-16, Harm Control
Section Modification, TAMS—all Fixed Price, CRIIS ?
• Reform or cancel programs– Reshaped Army’s Future Combat System– Cancelled $19B Transformational Satellite Program– Cancelled the $13B presidential helicopter, VH-71
War-winning Capabilities…On Time, On Cost
Government Trends - Contract Type
• More disciplined use of contract types• Contract type is a fundamental building block for
incentivizing cost, schedule, and performance outcomes– Development efforts: FPIF or CPIF – Production: FPIF or FFP– Small award fees above incentives based on objective events– A CPFF contract type with back loaded performance incentives
payable only if cost, schedule, and performance outcomes are achieved is preferable to CPAF contracts
– Steep share lines– Time and materiel contracts - least preferred contract type to be
used as a last resort for limited requirements
War-winning Capabilities…On Time, On Cost
How Do We Change a Culture?
• Develop firm requirements• Lower Risk
– Work within the realm of the possible– Manage risk using Technology/Production Maturity
entrance and exit criteria
• Compete whenever possible– Transparent Processes– Shorter Duration Contracts
War-winning Capabilities…On Time, On Cost
Example of Implemented Trends
War-winning Capabilities…On Time, On CostAFPEO/CM Programs at AAC
14
PROGRAM VALUE AAC AFMC AFPEO/CM
Eglin Range O&M II, AAC Test Complex
$884M X
Technical Engineering and Acquisition Support V
$621MX
Software Engineering Support Contract
$459MX
Technical Acquisition and Management Support 3
$160MX
War-winning Capabilities…On Time, On Cost
AAC Services Contracts Update AF/AFMC Implementation
• Expectation Management Agreement (EMA), Between AFPEO/CM and AFMC, 1 Aug 08 – AFMC receives Probationary Silver level
delegation• Responsibility to oversee source selections
between $100M-$500M– Outlines roles & responsibilities for AFPEO/CM
& AFMC to collectively manage & oversee services
– Names AFMC Services Advocate as Dr. Butler, AFMC/CA
15
War-winning Capabilities…On Time, On Cost
16
Delegation Decision AnalysisCriteria Low Risk Moderate Risk High Risk Comments
Acquisition $ Value <$200M $200M > $400M >$400M
Source Selection Process LPTA PPT Full Trade-Off
Follow-on AcquisitionFollow-on to
successful acquisition
Follow-on to acquisition that had sustained protest
First time
Proposed Contract Type Fixed Price Multiple types CPAF/T&M
Proposed Period of Performance < 3 to 5 years 5 to 7 years > 7 years
Political Sensitivity/Special Interest None Low Moderate
Center's track record on protests in the last 24 months
<10% sustained or corrective action
taken
10% < 25% sustained or corrective action
taken
>25% sustained or corrective action
taken
Acquisition Team Resources
Resource availability Adequate Moderate constraintsSignificant resource
contraints
Resource experience levelExperienced
members
Some acquisition/source
selection experience
Little acquisition/source
selection experienceResource familiarity with product/service High level Moderate level Low level
Proposed delegee's qualifications (roll up to one rating) Note: EMA restricts delegation to GO/SES
--APDP level
Level III in Program Management, Contracting, or
Logistics
Level II in Program Management, Contracting or
Logisitics, or Level III in other related field
Level I or does not meet the other two.
--# years Acquisition Experience >10 8 to 10 < 8 --#Source Selections in Leadership role (i.e., PCO, SSET chair, SSAC chair, or SSA)
> 3 2 or 3 1 or less
Small Business Strategy 100% SB Set-AsideCompanion Contract,
Partial Set-AsideFull and Open
Competition, Minimal Subcontracting Small
Current Program Status (if follow-on effort) No issuesModerate issues
currently exist (do not affect mission)
Major issues exist in cost, schedule or
performance
Center's Senior Acquisition Oversight and Involvement
Consistent, repeatable processes
established (proactive)
Ad hoc reviews
Minimal senior acquisition
involvement (reactive)
Criteria to be Considered for Delegation Decisions
War-winning Capabilities…On Time, On Cost
17
Delegation Decision AnalysisProposed Contract Type Fixed Price Multiple types CPAF/T&M
Proposed Period of Performance < 3 to 5 years 5 to 7 years > 7 years
Political Sensitivity/Special Interest None Low Moderate
Center's track record on protests in the last 24 months
<10% sustained or corrective action
taken
10% < 25% sustained or
corrective action
>25% sustained or corrective action
taken
Acquisition Team Resources
Resource availability Adequate Moderate constraintsSignificant resource
contraints
Resource experience levelExperienced
members
Some acquisition/source
selection experience
Little acquisition/source
selection experience
Resource familiarity with product/service High level Moderate level Low level
Proposed delegee's qualifications (roll up to one rating) Note: EMA restricts delegation to GO/SES
--APDP level
Level III in Program Management, Contracting, or
Logistics
Level II in Program Management, Contracting or
Logisitics, or Level III in other related field
Level I or does not meet the other two.
--# years Acquisition Experience >10 8 to 10 < 8 --#Source Selections in Leadership role (i.e., PCO, SSET chair, SSAC chair, or SSA)
> 3 2 or 3 1 or less
Small Business Strategy 100% SB Set-AsideCompanion Contract,
Partial Set-AsideFull and Open
Competition, Minimal Subcontracting Small
Current Program Status (if follow-on effort) No issuesModerate issues
currently exist (do not affect mission)
Major issues exist in cost, schedule or
performance
Center's Senior Acquisition Oversight and Involvement
Consistent, repeatable processes
established (proactive)
Ad hoc reviewsMinimal senior
acquisition involvement (reactive)
Instructions:
B. Determine which column most of your highlighted cells fall in.C. Analyze the impact/possible mitigation of each highlighted block outside of that most-popular column. E.g., if the team does not have a lot of source selection experience, but the local ACE is well-qualified and available, then the risk may be lower.
A. Using the "fill" button, highlight in green/yellow/red the applicable block that best fits your acquisition, for each criteria
War-winning Capabilities…On Time, On Cost
Contract Type Balance between Risk and Innovation
“The acquisition of the Wright flyer is a story of our own time, how commercial activity, when properly channeled with the appropriate incentives, can spur extraordinary technical innovation and battlefield success”
DepSecDef William Lynn, 2 Dec 09, Aerospace and Defense Finance Conference
War-winning Capabilities…On Time, On Cost
The Wright Flyer---Political Perspective on Balance Between Risk and Innovation
• US Gov’t invested $50K in technology development of aerodrome with Smithsonian Institute Secretary Samuel Langley– No significant capability resulted from contract
• Army Signal Corps issued solicitation for Flying Machine – $25K for demonstrated performance, $5k incentive for
meeting objective vs threshold performance (40 mph)
– 41 prospective bidders, three actual bidders, Wright brothers are the only bidders who made it to flight trials
– Significant Congressional oversight-Senate watched the demonstration
– Resulted in Army fielding first aviation squadron
War-winning Capabilities…On Time, On Cost
Conclusion
“There is broad agreement on the need for acquisition and contracting reform in the Department of Defense. There have been enough studies. Enough hand-wringing. Enough rhetoric. Now is the time for action.”
Secretary Gates
War-winning Capabilities…On Time, On Cost
Back Up
• Other Government/Contractor Trends
War-winning Capabilities…On Time, On Cost
Government Trends • Extremely limited use of Undefinitized Contractual Actions
(UCAs) – Acquisition Planning should consider time for proposal, audit,
negotiation prior to award
• Enhance Competition/Transparency– Shorter Contract Lengths, Fewer class J&As, Publishing J&As in
Fedbizops
• Become more efficient with Taxpayer Dollars– Increased use of LPTA and PPT source selections
• HCSM-LTPA, TAMS-PPT– More oversight/scrutiny of the business deal
• OSD Peer Reviews/AF MIRTS – 2 Peer Reviews/27 Mirts• Historical costs, qualification/production break costs, proposal
prep cost, profit/fee
War-winning Capabilities…On Time, On Cost
Contractor Trends
• Sole Source– Proposals are not timely– Proposals are incomplete, not sufficient for audit– Increasing budget dollars not going to product
• Proposal Preparation Costs• Production Breaks, Additional Qual tests to build in quality
• Source Selection– Proposals Reflect DRFP vs. RFP– Conflicting information within proposals– Math errors, mismatch in unit vs. total item pricing– Not Following Instructions: Page count, font size– “Fill-Ins” left blank– No basis for rates
War-winning Capabilities…On Time, On Cost
Proposal Tips
• Sole Source– Establish a proposal planning meeting with program
office, DCMA, and DCAA to establish timelines and common expectations
– Meet your timelines, communicate risk areas– Use proposal checklist
• Source Selection– Perform a quality check of your proposal to ensure:
• Current version of RFP used in proposal prep• Consistency of approach throughout proposal• Error free pricing• Completely responsive to RFP
War-winning Capabilities…On Time, On Cost
How Does This Affect You?
• New people• Changing paradigm• Help us help you
– Give us realistic costs and schedules in proposals– Plan for definitized contracts in your schedules– Give us well documented, auditable proposals first
submission – Use proposal checklist– Work with us to reduce requirements
creep/proposal churn– Keep the communication flowing both ways
Common Objective: Re-establish Congressional Confidence.Together, We Can Meet Warfighter Needs—On Cost, On Schedule!
War-winning Capabilities…On Time, On Cost
Call to Action
“American taxpayers and our men and women in uniform are understandably skeptical when they hear promises to reform the Defense Department’s sprawling acquisition system, which often delivers major weapons systems to our troops years behind schedule and billions of dollars over budget. Like Mark Twain’s famous observation about the weather, it seems everybody talks about it, but nobody does anything about it.
In President Obama, we have a commander in chief who has made acquisition reform a priority. With our troops engaged in two wars and with the country facing record deficits and an economic crisis, the president understands, as we all do, that wasting billions of dollars on weapons ill-suited for today’s conflicts is an affront to our warfighters and taxpayers alike. So he has spoken clearly to those of us charged with fixing these problems. ‘No more excuses, no more delays.’ ”
DepSecDef William Lynn III