Good morning everyone, and welcome. I want to thank you for
participating in the Department of Defense's Acquisition Reform
Day. ...
Today, across the entire department, thousands of
acquisition personnel are ceasing their normal operations and
joining in a departmentwide discussion of institutionalizing our
acquisition reform initiatives.
Throughout the acquisition community, commanders and
managers are meeting with their team members to discuss the
implementation of acquisition reform and to emphasize their
commitment to getting best value for the warfighter.
Here in the Pentagon, we are also taking a day to put down
our phones and push away from our desks and our in boxes so we
can focus on acquisition reform -- its past, its present and its
future.
We are at a point in our acquisition reform program that is
not too much different than the situation faced by Winston
Churchill during World War II when the U.S. entered the war. He
observed that "This is not the end, or even the beginning of the
end, but it is, I believe, the end of the beginning." When you
think about it, this is exactly where we are in our program of
acquisition reform and the reason why I've selected "The End of
the Beginning" as today's theme.
The department has begun to make substantial progress in
improving the way it procures equipment and services. Our success
is real and visible. Many programs are experiencing cost
avoidances and savings in the hundreds of millions [of dollars] -
- a few in the billions of dollars. We are stripping away the
onerous nonvalue-added documentation and procedures and now have
a foundation in place to move to 21st century business practices.
This is good news, but I have gotten the sense that due to
the pressures of our daily work schedules and the sheer
difficulty of communicating effectively across a broad and
diverse organization, we need to do a better job of communicating
and gaining a common vision of what we as a team can do to
accelerate implementation of our acquisition reforms across our
entire acquisition system -- from C-17s to socks, from major
defense acquisition programs to base procurement.
We need to be sure that the word is getting out to every
single member of our team. The message is too important not to be
heard. That's why Emmett Paige, the assistant secretary of
defense for C3I [command, control, communications and
intelligence], and I called for the acquisition community to
observe today as Acquisition Reform Day. Our departmentwide
discussion today will be along three distinct but related
communication paths.
The first communication path is top-down. The goal is to
have the department's acquisition leadership publicize the policy
changes and many important acquisition reform initiatives now
under way. Executives, commanders and managers throughout the
acquisition community must take responsibility to ensure that
their personnel are aware of the acquisition reform initiatives
and their part in implementing them. It is important to
communicate that we mean what we say and then back that up with
out actions -- to not only talk the talk, but walk the walk.
The second path is horizontal. The goal here is to have our
program managers, contracting officers, logisticians, financial
analysts and other career professionals share with each other
their lessons learned, best practices and front line wisdom.
There have been many truly significant accomplishments. I ask you
to crow a little to your peers -- share what has worked and
recognize outstanding performers on your team in the presence of
peers.
And the third path is bottom-up. The goal here is to have
the department's acquisition work force -- the practitioners in
the field -- communicate new ideas up the chain of command. We
need feedback from you and all of our people on what's working,
what's not and what needs improvement. We also need to know what
barriers to effective implementation still exist and what your
recommendations are to overcome these barriers.
I want everyone to use both their internal management chains
and the Defense Acquisition University's Acquisition Reform
Communications Center to provide us feedback. We have provided
feedback forms in your information packages. I want to support
you, to empower you to do your job better -- but I need your
ideas to do so.
Today, the department's acquisition community joins together
to take stock of its collective efforts to improve its processes
and procedures. You need to realize that each of you can make a
difference.
I am very proud of your accomplishments thus far in
acquisition reform. The energy, dedication and commitment that
everyone in the department has brought to acquisition reform is a
real tribute to the professionalism of our acquisition community.
It also shows what we can do when we work together as a team
dedicated to a common goal.
Indeed, one of the key factors in our success has been our
ability to work together in teams. Process action teams have been
the foundation of our efforts. Our PATs have worked as integrated
teams representing important interests across the department and
industry to develop solutions that aren't just smart but are also
achievable.
We have teamed with the Congress to enact landmark statutory
reforms. With the passage of the Federal Acquisition Streamlining
Act of 1994, the Federal Acquisition Reform Act of 1996 and the
Information Technology Act of 1996, the department has been able
to take three huge steps toward becoming a world-class buyer.
Now, working with the Office of Federal Procurement Policy, the
department is fully implementing these groundbreaking statutes.
Some of the key statutory reforms include:
- Providing greater opportunities for streamlining by setting the simplified acquisition threshold at $100,000;
- Giving the department greater flexibility in implementing the Truth in Negotiations Act so that we can use our judgment in
deciding where it is really necessary to obtain cost or pricing
data;
- Expanding the definition of commercial items and making it easier to buy commercial items; and
- Repealing the Brooks Act, which will significantly streamline the acquisition of automated information systems.
The Congress and the Department of Defense have been talking
about acquisition reform for a very long time. More importantly,
we are together now doing something about implementing real
reforms -- as a team.
But there is still a lot more to do.
We need to provide additional Title 10 statutory waivers for
the defense acquisition pilot programs -- eventually we need to
change the statutes and make the reforms permanent. We need
relief from provisions restricting defense contractors from
supporting operational tests. We need a dual-use applications
program -- one that is whole and viable -- to help the department
leverage commercial technologies.
The reprogramming thresholds have not changed in over 20
years. We need to restore the original balance by doubling the $4
million and $10 million thresholds for reprogrammings within
RDT&E [research, development, testing and evaluation] and
procurement accounts respectively. And we need additional
flexibility to manage our financial affairs -- why not give
program managers some relief from the existing "color of money"
restrictions between appropriations?
The Congress is continuing to provide the department with
additional flexibility. Both the House and Senate authorizing
committees, for example, are giving favorable consideration to
extending the Section 845 "Other Transactions" authority for the
Defense [Advanced] Research Projects Agency to 1999 and providing
this authority to the secretaries of the military departments as
well.
Together, the Congress and our team can continue to step up
and do something real for the American taxpayer and our
warfighters -- equip U.S. forces with affordable tanks, ships and
planes that are second to none.
Reform of military specifications and standards is another
landmark achievement. We have literally turned the entire milspec
[military specifications] world on its head. In the past, program
managers had to seek waivers to use commercial specifications.
Today, the shoe is on the other foot -- anyone who wants to use a
military specification must obtain a waiver.
Another important reform is the Single Process Initiative.
Today, in many of our contractor's facilities, the contractor
will have one manufacturing process for its commercial customers
and perhaps several different ones imposed by various DoD
programs. The Single Process Initiative deals with this problem
by reducing the number of different processes and relying on
commercial practices as much as possible. Our objectives are one,
save money; two, obtain a better product; and three, foster a
more competitive industry.
So far, we have received over 100 concept papers from 41
contractors proposing to modify 177 processes. We have modified
34 processes at four different contractors. In one single block
change with Raytheon, we affected 884 contracts at 16 separate
facilities!
Another important initiative is our effort to streamline and
simplify acquisition oversight procedures. Historically, the
department's oversight processes have been very burdensome, with
the result that many of our program managers have spent more time
dealing with the administrative hassles of the oversight process
than actually managing their programs.
Today, we have instituted a new approach, based on
integrated product teams. This approach facilitates identifying
and resolving issues in a more timely manner. The key change is a
move from after-the-fact oversight to early-and-continuous
insight.
Yes, this insight approach is still relatively new, but we
are starting to see results. For example, we have dramatically
reduced the time from the day of the Defense Acquisition Board
meeting to the signing of the acquisition decision memorandum,
which averaged about 23 days in 1994, to about two days.
Also, because our early-and-continuous insight process is
helping resolve major issues, I have been able to cancel numerous
formal Defense Acquisition Board meetings. Since there were no
issues, there was no need for a formal meeting. Last year, 26 DAB
meetings were scheduled to occur, but I only had to convene eight
of them.
The rewrite of the department's 5000-series acquisition
regulations is an excellent example of what integrated teams can
achieve. On March 15, 1996, the secretary of defense approved the
new policy and procedures, which are contained in DoD Directive
5000.1 and DoD Regulation 5000.2-R. The new regulations implement
changes in the way the Pentagon has traditionally done business,
including:
- Commercial practices and products are given special emphasis;
- Cost is treated as an independent -- not a dependent -- variable;
- Program managers and other acquisition personnel are empowered to use their professional judgment;
- Over 30 separate policy memos and report formats are canceled; and
- The new policy documents themselves are almost 90 percent shorter than the old ones.
I have read the new regulations. I must admit that I tried
many times to read the old 5000 documents without much success.
These new documents are key to institutionalizing fundamental
change in the defense acquisition process and are a visible
symbol of the department's acquisition reform efforts. It is
important that each of you are aware of this new institutional
foundation -- a foundation of policy documents and available
training and support materials.
Now that we have an institutional base in place, we are
beginning to see the benefits of acquisition reforms. The
evidence is still mostly anecdotal, but we are seeing savings on
major programs like the Joint Direct Attack Munition, the C-17
and the SMART-T [Secure, Mobile, Anti-jam Reliable Terminal], and
on thousands of small purchases of items like T-shirts and socks.
The Joint Direct Attack Munition, or JDAM, program provides
a good illustration of the savings possible by switching from the
old ways to the new ways of doing business. A couple of years
ago, the department set out to convert tens of thousands of
"dumb" gravity bombs into "smart" bombs that could be accurately
guided. The key to doing this was to build a kit for each bomb
that could receive navigation signals from existing global
positioning system satellites. We started the program the old way
and estimated in 1993 that we could get the cost of each JDAM
modification kit down to about $40,000 by the time we converted
our 40,000th unit.
Without the benefit of these reforms, we started the program
by sending out a request for proposal that contained a 137-page
work statement and 87 military specifications. Last year, we sent
out a new request for proposal. This time, we sent out a two-page
performance specification -- two pages about what we wanted the
system to do, not how the contractor should go about doing it.
And this time, we had no requirement for any military-unique
specifications or standards.
As a result, we signed a contract early this year for JDAM
kits that cost $18,000 each -- starting with the first unit, not
the 40,000th. When you are buying over 80,000 such kits, that
amounts to a major savings -- approximately $2.9 billion, or
about 50 percent of the original program cost. Those savings have
now been applied to the department's pressing modernization
priorities in the president's fiscal year 1997 budget request.
The department has been able to put tangible procurement
reform into play on major programs like JDAM and on thousands of
smaller purchases like T-shirts, socks and Navy Chukka shoes. By
scrapping the military specification for T-shirts and socks, the
Defense Logistics Agency is now buying brand-name commercial
undershirts and socks for military clothing sales stores --
offering superior quality at 10 to 20 percent discounts.
I want to conclude by thanking all of you again for your
dedication and asking for your commitment to acquisition reform.
...
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Information Service, a field activity of the Office of the
Assistant Secretary of Defense (Public Affairs), Washington, D.C.
Parenthetical entries are speaker/author notes; bracketed entries
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