Contract Management Lessons From the Performance of the Defense Acquisition System 2015 Report Summary: Part One

3-4-2016 | by Dominic Shaw

The 2015 “Performance of Defense Acquisition System” report compiled by the Department of Defense provides a summary of The Department of Defense’s Major Defense Acquisition Programs and their growth between 1997 and 2014.  As one analyzes the data compiled, however, it is important to remember that the data displayed does not represent the effectiveness of subsequent oversight or major program changes that may occur during execution of oversight.  This being said, the exact percentage of growth of the DoDs specific programs may be discussed, but will not be categorically listed in this article.  Also, due to the extensiveness of the original document, this summary will be split into multiple articles, with this article focusing specifically on cost and schedule performance of these programs and their effect on Contract Management.

Cost and Schedule Performance:

The more recent data compiled in this document indicates that Major Defense Acquisition Programs (MDAPs) have shown great improvements on the program and contract level.  While the many external influences that affect these programs raise some serious concerns, funding, price, cost, and schedule control all seem to indicate steady improvement.

One significant area in which improvement seems to be made is the number of Nunn-McCurdy breaches over the years.  The general trend has been of a decrease in these breaches:  2005 had 16 breaches, 2010 had eight breaches, and 2013 and 2014 had a combined total of six breaches (four in 2013 and two in 2014).  These Nunn-McCurdy breaches represent an increase in unit-cost beyond what was originally predicted.  This allows congress to formally reevaluate the various programs, which will force the programs to undergo re-certification.

While the trend is less breaches, there still are certain problems that need to be addressed.  One area that greatly increased the cost of MDAPs was working with vendors.  The introduction of multiple vendors caused a spike integration costs that in turn reduced quantity. As a result, the DoD has enacted initiatives in order to raise the cost consciousness of all branches of the DoD.  These initiatives include extensive training for DoD staff and increased requirements for hopeful recruits.

The DoD also cites one of the most frequent causes of breaches as being poor management. This umbrella statement “poor management” is broken down into four subcategories: system engineering, inadequate incentives, limited situational awareness, and failure to act on pertinent information.  The various solutions used to correct the problems created by these subcategories are not discussed in detail and likewise will be summarized in limited detail here.

In order to combat problems with system engineering, the DoD has put into place policy that will improve their system management practices. The specific policies can be viewed at DoDI 5000.02.  Workforce training and the use of metrics were also used. When studying the effects of incentives, contracts were pointed to as a solution. Formulaic incentives contract types were seen to motivate cost control almost effectively as FFPs are able to ensure that the government gets a low price in negotiations.  In order to address the concerns about both limited knowledge and managers not acting on the knowledge they do possess, the DoD has enacted the same solution: to make more readily available data and their analysis.  The analysis in particular proves effective for helping managers to act in cost-effective ways.


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