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9/15/2010
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Defense Spending Overhaul Likely To Affect IT

The series of changes announced by defense secretary Robert Gates include efforts to cut costs, improve contractor performance and improve project management.




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As part of a series of wide-ranging steps to help redirect $100 billion in unproductive defense spending to more productive purposes, the Department of Defense announced Tuesday a number of policy changes that will likely have a significant effect on the way the military buys, among other things, IT systems and services.

"Consumers are accustomed to getting more for their money -- a more powerful computer, wider functionality in mobile phones -- every year," defense secretary Robert Gates said in a press conference to announce the changes. "When it comes to the defense sector, however, the taxpayers had to spend significantly more in order to get more. We need to reverse this trend." The military currently spends more than $32 billion annually on IT.

In a 23-point memo, Gates and the military's undersecretary for acquisition, technology and logistics, Ashton carter, laid out a number of policy changes targeted at making defense spending more efficient and effective and acquisitions easier and more competitive. While the policy changes are likely not the end-all for defense acquisition reform, they represent a significant move for the military, which has been seriously considering major acquisition policy changes for more than a year.

For example, as part of the guidance, program managers will have to set new affordability targets that can't be changed without official authorization, set shorter program timelines and manage to those metrics. Cost estimates will also be required to tack to what a program would cost if managed efficiently, not what a program would cost under usual scenarios that build in delays and other cost overruns. "In too many instances, cost estimates that are based on past programs, I might say past mismanagement, have deprived us of incentives to bring down costs," Gates said.

The military will also extend a preferred supplier program currently run by the Navy to a DoD-wide pilot. The program allows contracting authorities to set special, advantageous post-award terms and conditions to recognize suppliers and contractors that have provided superior performance on cost, quality and on-time delivery.

In addition, the memo attempts to promote more competitive bidding, requesting that military branches do things like break out subcontracted work, adopt more commercial products, plan to re-compete in unproductive sole source situations, and remove obstacles to competition by analyzing situations where only one bid comes in for a project and then attempting to mitigate those problems.

Research and development also plays a role in the new policy. The memo says that the military will spend more on independent R&D, as DoD has reduced its technical exchange with industry since the 1990s. DoD will be carrying out several reviews of its R&D policy over the next few months, and will create a pilot program to improve the return on R&D investments.

Other moves that will likely impact the DoD's IT spending include: requiring the military to outline approaches to using open systems architectures for new systems, creating a senior manager in each military branch to oversee services acquisitions, adopting a uniform taxonomy for different types of services in order to understand and analyze the aggregate spending and value of specific types of services being contracted out and requiring more frequent re-competes of knowledge based services.

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