KENNETH J. OSCAR, PH.D.
ACTING ASSISTANT SECRETARY OF THE ARMY
FOR RESEARCH, DEVELOPMENT, AND ACQUISITION
COMMITTEE ON ARMED SERVICES
SUBCOMMITTEE ON ACQUISITION AND TECHNOLOGY
UNITED STATES SENATE
SECOND SESSION, 105TH CONGRESS
ON ACQUISITION REFORM
MARCH 18, 1998
Mr. Chairman and Members of the Committee, thank you for the opportunity to appear before you today to discuss the U.S. Army’s program of acquisition reform and how it supports our overall modernization program. It is my privilege to represent the Army leadership, the civilian and military members of the Army acquisition workforce, and, most importantly, America’s soldiers.
Throughout history, America’s Army has been the force of choice to fight and win our nation’s wars. This fact has not changed in the 20th Century, and it will not change in the 21st Century. In today’s world, that role has expanded to include defending our nation’s interests on a global scale by conducting missions across the full spectrum of military operations. We are now engaged in more missions in more places than ever before, and all these missions have one thing in common. They require the presence of well-trained, well-led, and well-equipped soldiers on the ground. In today’s world, America’s Army is still the force of choice.
We know that modern equipment provides the technological strengths that give the Army the decisive edge on the battlefield or in operations other than war, but the Army faces tremendous modernization challenges as the 21st Century draws near. During the drawdown, we accepted risk in our modernization program to maintain near-term readiness, endstrength, and quality of life programs. When supplemental funding for the Gulf War is excluded, Fiscal Year 1998 (FY98) was the 13th consecutive year of declining Army resources. During that time, Army procurement declined nearly 73 percent. The decline in available funding has caused the Army to maintain procurement programs at minimum sustaining rates rather than more efficient economic rates. Our FY99 budget request reverses the decline of the past. We are proposing an increase in our procurement account. In FY99, our Research, Development and Acquisition (RDA) budget totals $13 billion--$8.2 billion in procurement and $4.8 billion in Research, Development, Test, and Evaluation (RDT&E). Future readiness levels and maintaining the Army’s technological edge in the 21st Century requires increased emphasis on modernization.
The Army is aggressively pursuing efficiencies and savings by closing and realigning bases, reducing infrastructure through privatization and outsourcing initiatives, reducing personnel, and implementing Department of Defense (DoD) approved acquisition reform initiatives. We are reinvesting a large portion of these savings into modernization. Even with these increased investments, America’s Army must continue to make tough choices in balancing requirements and resources as modernization shortfalls remain.
Successful acquisition reform is a continuing priority for America’s Army. It is absolutely critical to our modernization program and the future readiness of the force. Our goal is to field a technologically superior 21st Century force using a more effective, less expensive, and more responsive acquisition system. America’s Army has been successful at bringing acquisition practices in line with current commercial business practices, primarily because our strategy is straightforward. We empower Army acquisition professionals to continuously find smarter ways of doing business. We enable them to buy better goods and services less expensively and faster.
There are significant advantages to buying more from our nation’s total industrial base, not just from defense-unique industry. One, technology in most areas is now led by commercial industry, not by the government. This is particularly true in electronic components, computer architecture, information systems and software, telecommunications, and automotive technology, all of which are critical in almost every Army system. Two, we can leverage off the research and development base of commercial industry and buy items already developed, thereby devoting more of our RDT&E dollars to unique defense technologies.
We have dedicated ourselves to making the difficult and critical cultural changes that are essential to ensuring that today’s Army remains the preeminent land force in the world. We have eliminated "boiler plate" in the terms and conditions of our Requests for Proposals and contracts, and retained only those that reflect our minimum essential requirements. We reduced substantially our demands for contract data requirements. We have vastly streamlined oversight and adopted a teamwork philosophy using Integrated Product Team management. We continue the shift from lowest priced source selections to real emphasis on best value procurements. We treat cost as an independent variable in conjunction with the requirements generation process and with schedule and performance in program management. And, we emphasize post-award debriefings and alternative dispute resolutions to avoid the costs of formal contract protests. The Army’s use of Partnering and Alternative Dispute Resolution (ADR) techniques has significantly reduced litigation and produced substantial savings in both time and money. The Army Materiel Command’s Protect/ADR was recognized as one of the top 10 Federal Government programs by the Office of Federal Procurement Policy.
Let me review briefly the focus of our Army acquisition team and highlight some of their successes.
Competitive Sourcing. Efficiencies within our operations enable us to reinvest savings—in some cases substantial savings—in modernization and other high priority needs. Competitive sourcing and privatization offer the prospect of lowering costs and improving performance across a wide-range of support activities. Since 1979, the Army has completed 468 cost competitions covering more than 25,000 positions. The results are as follows: in-house operations won 240 competitions and contractors 228; efficiency improvement efforts to develop Most Efficient Organizations (MEOs) in preparation for competition reduced in-house staff by more than 5,000 positions; of the 25,000 positions competed, nearly two-thirds (13,000 civilians and 2,900 military) were converted to contract; and, regardless of who won the competition, total operating costs were reduced on average by 28 percent.
Life-cycle Management and Cost Reduction. A major focus of the Army is to reduce the life-cycle sustainment costs of new and existing systems. Savings in this area are key to increasing our modernization account and accelerating Army efforts to digitize the force. O&S costs can comprise up to 70 percent of a system's total life cycle cost. Therefore, we must continually seek innovative methods to reduce these costs now to avoid significant budget and readiness costs in the future. On new systems, we must pay attention to life cycle costs early in design. Back-end sustainment costs need to receive more up-front design attention. In other words, each technology effort must "buy its way onto our programs" in terms of reducing life cycle costs and program risks. However, given our limited rate of introducing new systems to replace those already in the field, we cannot wait for new weapon systems development to address the growing costs to operate and support existing systems. Our reforms include creating proper incentives to insert new low cost technologies in fielded systems to improve their reliability, maintainability, and sustainability.
Modernization Through Spares. Modernization Through Spares (MTS) is a good example of our efforts to reduce the life-cycle costs of existing systems. MTS means no longer buying spare parts based on outdated specifications and technical data packages, but rather on performance specifications to take advantage of newer designs and manufacturing technologies. With this approach, we enhance the performance and reliability of our weapon systems while using our resources more efficiently. For example, the track life of the Abrams tank increased from an early life expectancy of 1,200 miles to about 2,000 miles. The Abrams Program Office is now examining track life improvements that would provide a track life of 5,000 miles, thereby further reducing O&S costs. The plan is to develop a competitive performance specification for the M1 Follow on Vehicle (FOV) Track System that addresses the durability and performance aspects of the track, roadwheels, sprockets, hubs, support rollers, and idlers as a system. The goal of the specification is to define system operational requirements in performance terms for the competitive procurement of the track system without adverse impact on automotive performance.
Paperless Contracting. The Army is moving aggressively to establish a paperless contracting process from requirements generation to solicitation to award to contract closeout by or before January 1, 2000. An Army Paperless Contracting Integrated Process Team established last November is developing a comprehensive plan for process implementation at the Army and Major Command level and below. The current objective is to replace a redundant, paperwork intensive system with a master plan to eliminate all paper transactions and thereby use our resources—acquisition professionals and dollars—much more efficiently. In the long-term, we will establish an Army Project Office to execute the approved master plan. We intend to leverage the capabilities of DoD’s Standard Procurement System (SPS), identify and fill "gaps" within the current process, and, where necessary, redefine or reengineer the process.
Simulation Based Acquisition. Through Simulation Based Acquisition (SBA), the Army is using modeling and simulation (M&S) to reduce acquisition costs, total ownership costs, and time to initial operating capability, while increasing the military utility and quality of a fielded systems throughout its lifecycle. SBA capitalizes on the experiences of industry in using M&S to conduct design and engineering, testing, and manufacturing during the development of a new system. SBA for the Army takes this concept even further by using M&S to increase efficiency and effectiveness in concept exploration, logistics support, and training.
The RAH-66 Comanche armed reconnaissance helicopter program has used M&S extensively and has proven that it saves time and money. For example, it took 38 draftsmen more than six months to produce drawings for the CH-53S helicopter outside contours, while the same effort for Comanche took one engineer one month. The Crusader field artillery system is another Army flagship program that is leveraging heavily off M&S. Crusader uses M&S for many functions, but more specifically Combat and Engineering Development. Through the System Integration Facility (SIF), PM Crusader can develop and test software, electronic components, and models in a common test environment. Additionally, and most importantly, SIF will facilitate the interchange of models between elements to support the Crusader development process.
Credit Cards. On another front, America’s Army is the greatest user of the International Merchant Purchase Authorization Card (IMPAC) (credit card) in the Federal Government. In FY96, the Army was the first Federal agency to exceed one million credit card transactions for purchases valued at $2,500 or less. We broke that record with 2.4 million transactions in FY97. The dollar value of just over $1 billion ($1.092B) for the Army transactions last year shattered all previous records for the Federal Government. Recognizing success, the Army was asked to represent the entire DoD in the source selection for the new purchase card contract. In December 1997, the Deputy Secretary of Defense asked the Army to lead a Joint Program Management Office that will be responsible for bringing use of the card for the entire DoD up to the 91 percent level by January 1, 2000. The Army has a separate goal. We intend to achieve the 91 percent level in FY98.
Single Process Initiative. The Single Process Initiative (SPI), prototyped by the Army Program Executive Officer for Tactical Missiles with Raytheon Corporation, eliminates costly multiple processes within contractor facilities. The whole idea of doing things one way where possible—whether it’s business processes, quality assurance processes, or manufacturing processes—is working well for America’s Army. The Army is now performing or negotiating SPI contract modifications with 55 contractors, 35 of who are among the top 200 Defense contractors. This SPI activity is the result of contractors proposing 622 acquisition process changes since December 1995. Of the 622 proposals, the Army has accepted 350 and is continuing discussion on an additional 181. After initiating a technical review, and finding the original process improvement was not substantiated, contractors have withdrawn 91 proposals.
Prime Vendor Support Pilot Programs. As fielded systems age, the cost of ownership escalates. The more money we spend on support, the less money is available for modernization and other high priority needs. The Prime Vendor Support (PVS) initiative enjoys support because it holds the potential for significant savings to reinvest in modernization. PVS is an innovative way to reduce overall O&S costs, improve the availability of spare parts, and maintain weapon system readiness rates. The initiative would allow the prime contractor of an Army weapon system to assume complete responsibility for its overall performance in the field.
The Army is currently evaluating a proposal submitted jointly by the Boeing Company and the Lockheed Martin Corporation to implement a PVS arrangement for the Apache. This proposal would transfer responsibility for complete wholesale support to a single accountable corporate entity which would eliminate the need for government personnel and facilities to manage and store spare parts. While the benefits seem to outweigh the risks, the proposal is under careful review.
A second initiative is the M109 Family of Vehicles (FOV) Fleet Management (FM) Pilot Program. The M109 FOV consists of the M109A2/A3, M109A4/A5, and M109A6 Paladin 155mm self-propelled howitzers, as well as the M992A0/A1/A2 Field Artillery Ammunition Support Vehicles (FAASV). Through this pilot program, the Army seeks to validate significant performance improvements and cost savings through contractor logistics life cycle support. A competitively selected, industrial- based Fleet Manager would provide logistics management, maintenance, and modernization of the fleet through spares, and system technical support.
The Acting Secretary of the Army and Army Acquisition Executive has articulated six measures the Army will use in making a final decision on PVS proposals. The criteria are:
Warfighting Rapid Acquisition Program. The Warfighting Rapid Acquisition Program (WRAP) was established in 1996 to accelerate fielding of systems and technologies that emerge successfully from the Army’s Advanced Warfighting Experiments, Battle Labs, Advanced Technology Demonstrations, or Advanced Concept Technology Demonstrations. Candidates for the program are selected based on urgency of need, technical maturity, affordability, and effectiveness. In order to promote program stability, candidates receive Force XXI Initiatives funding for the first two years, which allows time to build them into the overall budget.
Last year, the Army selected 11 candidates, which were subsequently approved by Congress, for acquisition under the WRAP program. These candidates will provide new technologies and capabilities to the field much sooner in the following areas: digitized mortar fire control; light force replacement for field artillery lasing teams; new tracking technologies for supplies and equipment; digital command and control hardware; and additional evaluation for appliqué and the "Tactical Internet," our version of the commercial Internet.
Multi-year Contracting. The Army and McDonnell Douglas signed a multi-year agreement in August 1996 for the production of 232 AH-64 Longbow Apache helicopters over the next five years. The $1.9 billion contract will procure 50 more aircraft compared to five single year acquisitions. We now have multi-year contracts on 26 Acquisition Category (ACAT) I programs; 17 ACAT II programs, and 327 ACAT III programs. We appreciate the support we have received from Congress for multi-year contracting. This is one area where we truly are getting a bigger bang for the buck.
Value Engineering Program. The Value Engineering (VE) program incentivises both government and contractor workforces to suggest ways to improve products, processes, and production methods. The program continues to pay dividends. In FY97, the Army more than doubled its projected goal, saving more than $404 million. Cost saving recommendations submitted by contractors saved the Army and, ultimately, the taxpayer more than $23 million, while recommendations submitted by government personnel contributed to savings of more than $381 million. Let me list a few examples of our success with this program.
Sale and Exchange of Non-Excess Personal Property. DoD granted the Army a waiver to DoD policy until August 1, 1999, to allow sale as well as exchange of old or obsolete non-excess personal property. This allows the Army to receive value by applying the proceeds or exchange credit towards the acquisition of similar items. Under this program, the Army, through the Army Materiel Command’s Product Manager for the Firefinder Radar program, provided two existing AN/TPQ-36 mortar locating radars (valued originally at $1.3 million each) to Raytheon Systems. Raytheon intends to sell the radars to Sri Lanka. In return, the Army will receive two new Q36 antennas (currently valued at $2.8 million each) from Raytheon. The Product Manager will also receive a prototype capability for the Firefinder digitization effort which had been unfunded until FY99. The end result is a $3 million gain for America’s Army.
Army S&T Contributions. The Army Science and Technology (S&T) program is also contributing to improved acquisition in several ways. Our Advanced Concept Technology Demonstrations (ACTDs) are designed to get small quantities of new equipment quickly to our operational forces for a two year period, directly providing a limited go-to-war capability. S&T support of our Advanced Warfighting Experiments is helping the Army evaluate non-developmental and commercial technology solutions. Finally, the "Fast Track Science and Technology Initiative" accelerates the transition of high-value, high-priority technology directly from S&T to Engineering and Manufacturing Development (EMD). Closer coupling with Program Executive Officer organizations and more robust risk reduction within the S&T domain is permitting a combined Milestone I and II for selected programs with a transition directly from S&T to EMD. The elimination of the Demonstration/Validation (DEM/VAL) phase results in significant savings in time and cost. Currently, the Future Scout and Cavalry Vehicle and Guided Multiple Launch Rocket System are pilot programs for the "Fast Track" approach.
Legislation. The Congress has assisted us considerably in our acquisition reform endeavors, notably by passage of the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996 (formerly known as the Federal Acquisition Reform Act of 1996). We have now reached the point where this is viewed as continuous process improvement. The Army acquisition team is working constantly to improve and streamline the acquisition system.
ARMY ACQUISITION WORKFORCE
The Army has made great progress in reengineering the Acquisition Corps with new initiatives to improve the quality and management of our Army acquisition workforce. These efforts have resulted in the elimination of duplicate functions, consolidation of organizations, simplification of procedures, improved professionalism, and increased efficiency throughout the Army. Total reductions from FY89-03 will amount to just over 65 percent (from 157,000 in FY89 to 56,300 in FY03) across the Army’s acquisition organizations. As of September 30, 1997, Army acquisition organizations had an actual endstrength of 4,300 military and 64,979 civilians for a total of 69,279 positions (approximately 13,000 in maintenance depots).
We are making great progress in energizing, educating, and training personnel from our acquisition entities across the nation. The managers and their staffs in the field are where the action really happens, and we are empowering our workforce to do their jobs in the smartest way possible. We have converted from a stifling, total risk avoidance culture to an environment focused on identifying and managing risk. We depend on those who most understand these risks to manage them. Teamwork is the key.
One of our primary vehicles for training and education is the highly successful Total Army Roadshow series. There has been active involvement by all senior leaders in the Army to train the more than 15,000 personnel who have participated in the program during the last six years. These Roadshows combine briefings on current acquisition reform topics with hands-on practical exercises in a workshop environment. Personnel from all disciplines of the acquisition process, i.e., engineering, combat development, small business advocates, logistics, contracting, base operations, finance/accounting, test and evaluation, public works/construction, and project management are involved in the training. With Roadshow VI, we traveled to nine sites throughout the United States with three-day seminar/workshops. We also trained with industry. Roadshow VII will begin this month at Picatinny Arsenal in New Jersey. This year’s program is tailored to focus on "Life Cycle Cost Reduction and Partnering," and is scheduled at nine locations throughout the nation. This series has proved so successful in providing a cultural shift to a new acquisition environment that it has been adopted by our sister Services.
The Army is actively participating in the Acquisition Workforce Personnel Demonstration Project. This project focuses on enhancing the quality, professionalism, and management of the acquisition workforce through improvements in the efficiency and effectiveness of the human resource management system. Your continued support of the Acquisition Workforce Personnel Demonstration Project will assist in realizing our overall objectives.
Today’s modernization is tomorrow’s readiness. We are working hard to achieve a leaner, more efficient Army where more money is spent on soldiers and modernization and less on overhead. We have made good progress, but we have a long way to go. Lasting acquisition reform requires commitment to a continuous process of improving a system that took more than 50 years to build. I call to mind a much used cliché: "Success is a journey, not a destination." To remain efficient and ensure that we continue to improve and adopt new ways to do business, requires continuous process improvement.
Central to our effort is the soldier—America’s sons and daughters in uniform. Our commitment to America’s men and women in uniform is steadfast. Soldiers on the ground are our nation’s strongest signal of resolve and the ultimate express of American will. America’s security and its continued role in maintaining world stability cannot be guaranteed without a first-rate, modern Army.