The Nature of the Acquisition Reform Problem
Categories: Governance, Policy, Regulation | Tags: acquisition reform, federal procurement, william greenwalt
As Public Spend Forum strives to bring disparate voices into the mix, today we continue a series of articles by William Greenwalt, a Washington, DC–based consultant and a former deputy undersecretary of defense and Congressional staffer. Over the next few months, Bill will be writing on the various areas of public management that are in need of reform. Read Bill’s previous pieces, on the management gap in the federal government, and the reigning “computer chaos.”
There is a widespread view that the federal acquisition system is broken. This long-standing conclusion has heralded in 50 years of acquisition reform, and yet dissatisfaction with the system is greater than ever within Congress, the executive branch and the industrial base. After hundreds of studies and the enactment of decades of legislation, regulations, policies and rules, it appears Congress is on the cusp of yet another potential new reform effort.
Before the House and Senate Armed Services Committees embark on this endeavor, it may first be helpful to review the historical framework and agree on the nature of the acquisition problem. Given all of the past study, achieving agreement should be relatively straightforward. The reality will be that it is not.
For more than 50 years, critics of the acquisition system have in essence been talking past one another. Advocates for aspects of what they believe constitute successful acquisition have gained the upper hand at various times and added new requirements to the system. Those who emphasize a different aspect of the perceived acquisition problem ,eventually do the same and more additive changes are made without ever fully repealing or changing the results of previous reform efforts. After each reform a new state of equilibrium is eventually reached that is usually more complex and, except for the 1990s commercial item reforms, more costly.
The Pendulum of Reform
In the most simplistic model, some have looked at the acquisition system as a pendulum with an emphasis shifting back and forth between a market-oriented/flexible model and a government-unique/command and control one. The passage of FASA and Clinger-Cohen and the last decade’s movement away from these reforms can be viewed in this light. However, the reality is that acquisition is much more complicated than that.
The acquisition system might be better viewed as a multi-faceted machine with a number of pendulums simultaneously moving back and forth based on different leadership priorities and beliefs. This extremely chaotic structure eventually leads to periods of order emerging before a larger force such as budget cuts or a security crisis causes it to break down again. Today’s budget austerity is upsetting the current acquisition system equilibrium just as 9/11 did to the older, post-FASA one.
Thus the first step in acquisition reform should be to identify the many goals, principles or criteria that have been used to guide the system, define these terms and their metrics, and then determine the degree to which they are valid in today’s environment. How are these goals working together, where are they are at odds with one another, and what criteria are most important?
The Six Goals of an Acquisition System
As a starting point for this discussion, I will propose there are at least six goals or criteria that have been used for evaluating the success of the acquisition system. These are efficiency, effectiveness, innovativeness, competitiveness, fairness, and accountability. Each of these variables has an effect—sometimes positive, sometimes negative—on the others.
Efficiency is the best use of resources with the minimal amount of wasted time, energy or money. In acquisition it is sometimes equated with timeliness, but also relates to productivity and lowering overhead within the government and industry. Acquisition reform efforts in the early 1990s generally leaned toward efficiency particularly as it related to reducing unnecessary steps in the process. Achieving cost and schedule goals have been historical indicators of measuring the efficiency of procurements but these metrics don’t necessarily guarantee the best use of resources.
Effectiveness is the second criteria. If we buy something we want it to work and be useful. This has normally translated into how well an acquisition meets its performance requirements. However, meeting these requirements may or may not be the most efficient way to acquire something and may not result in the most useful solution. Meeting a government-unique requirement in 15 years is not the same thing as accepting an 80% commercial solution that is a quarter of the cost and deployed years earlier.
The desire for innovation and the type of innovation that is pursued can radically impact efficiency and effectiveness goals. Requirements can be limited and evolutionary in nature, or expansive and revolutionary. It is much easier to meet cost and schedule goals if aspirations are modest and requirements are limited to allow the use of existing technology. But oftentimes, particularly in the national security realm, a solution is needed that has never been developed or produced, straining the capabilities of the industrial base, the ability to manage technology transition, and our cost estimating techniques.
Competition is another important goal designed to lead to more innovative solutions and lower costs. The question though that has daunted the acquisition system for decades is how much competition is enough. The Competition in Contracting Act of 1984 with its requirement for “full and open” competition codified a fairness principle into the acquisition system along with a desire for competition on efficiency and innovativeness grounds. Since public procurement is the expenditure of taxpayer dollars it only seems fair that all businesses and Congressional constituents should have an equal opportunity to bid on government contracts. Government unique processes were created to ensure equal bidding opportunities, but they have often led to inefficiencies awarding, executing, and overseeing contracts and a preponderance of non-commercial solutions.
There is a strong strain of social equity concerns running through federal acquisition that have resulted in provisions to address past discrimination or to promote economic development. These fairness measures some based on equal opportunity and others on protectionism give some bidders a greater advantage to win contracts based on business size, race, ethnicity, disability, gender, geographical location, or other social goals. By restricting competition, however, there are potential efficiency, effectiveness and innovativeness costs.
The final criterion is accountability, which attempts to enforce the other goals of the procurement system and to deter fraud and abuse. Accountability is not cheap and each control mechanism has a compliance cost. Finding the right balance is critical. If done right accountability measures can help achieve acquisition goals at a reasonable cost. However, an over-emphasis on compliance can unnecessarily increase costs and negatively impact efficiency, effectiveness, competiveness, and innovation goals.
Any new reform effort will affect the relationships between these acquisition goals. This has already occurred in the last decade as Congress and the executive branch moved towards a more compliance-accountability focus. This has driven up acquisition costs, created new barriers to commercial solutions and increased reliance on government-unique contractors. As budgets are slashed, the cost of this regulatory oversight burden will be increasingly unaffordable.
During the last budget downturn in the 1990s procurement reform efforts focused on efficiency, reducing the oversight burden and harnessing the innovative capacity found in the commercial market. Today’s austere budget environment is very similar to the one faced at the end of the Cold War and current acquisition reform efforts should logically focus on these same priorities. This will likely require the streamlining of accountability and fairness measures and achieving a balance in effectiveness and competitiveness goals that focus on commercial solutions and efficiencies.
Without making the necessary trade-offs between and among conflicting goals, Congress would sentence the government to receive less capability for more resources that it doesn’t have. These are the hard choices that the HASC and SASC will face as they review new options for reform in the coming year, and are at the heart of the acquisition reform problem.