**[Report of the Blue Ribbon Panel]{.smallcaps}**

**[on FAA Acquisition Reform]{.smallcaps}**

# BACKGROUND

In recent years, the performance of the Federal Aviation Administration
(FAA) has come under intense scrutiny and criticism by the aviation
industry, independent evaluation panels, the General Accounting Office
(GAO), the National Transportation Safety Board (NTSB), Congress, the
news media, and most importantly the U.S. traveling public. In many
instances, attention has been focused on the National Airspace System
(NAS) infrastructure and the long time periods required for the FAA to
field major systems needed to modernize the nation's air traffic control
system. It is clear that the FAA's acquisition management system
requires a major overhaul to support the FAA's mission of maintaining a
safe, effective, and efficient civil aviation system and to support a
competitive aviation industry.

The Department of Transportation (DOT) 1996 Appropriations Act (signed
into law by the President on November 15, 1995) provides the FAA with
the opportunity for major reforms in both the acquisition and personnel
management arenas. The legislation exempts the FAA from many of the
existing Federal procurement laws and regulations including the Federal
Acquisition Regulations (FAR). It also clearly indicates that Congress
expects the FAA to reform its entire acquisition management system. The
FAA's new acquisition management system is mandated to take effect on
April 1, 1996.

# THE BLUE RIBBON PANEL

The Appropriations Act also makes it clear that the FAA should take
maximum advantage of outside expertise in reforming its acquisition
management system. Accordingly, the FAA established a Blue Ribbon Panel,
including 13 outside experts in acquisition reform drawn from industry,
academia, and other government agencies. Appendix A provides a complete
listing and brief biographical summaries of the external Blue Ribbon
Panel members.

The Blue Ribbon Panel's role in FAA's acquisition reform effort was
two-fold. First, the panel met regularly with the acquisition reform
working group during the design of the new acquisition management system
to provide input, assist the FAA in obtaining lessons learned and
benchmarking data, and critique the concepts developed by the FAA.
Second, the panel was asked to prepare a final, independent report
assessing the new proposed acquisition management system.

# STRUCTURE OF THE REPORT

This document represents the Blue Ribbon Panel's assessment report. The
report begins with a brief overview of the Blue Ribbon Panel's
perspective on the three goals and context against which the FAA
acquisition reform effort must be viewed. The next section of the report
describes five key elements that will determine the ultimate success or
failure of acquisition reform at the FAA. The report concludes with the
panel's overall assessment of the FAA acquisition reform effort and
recommendations for actions that must be taken by the FAA and Congress
to ensure continued success in the reform effort.

# FAA ACQUISITION REFORM: THE BIG PICTURE

Ultimately, the FAA's acquisition management system must be judged in
terms of its impact on the ability of FAA to successfully accomplish its
mission. More specifically, the new FAA acquisition management system
must be evaluated in terms of whether or not it accomplishes three goals
that underlie the reform effort:

-   Increasing the speed with which the FAA acquires new technology,
    systems, and services;

-   Acquiring high quality products and services to support the FAA's
    safety mission and improvement in services provided to internal
    users and external customers; and

-   Making major system acquisitions and operations more affordable for
    the government, suppliers, and ultimate users (e.g., airlines,
    flying public, etc.) of the civil aviation system managed by the
    FAA.

The changes required to accomplish the goals listed above involve much
more than simply taking advantage of relief from external procurement
regulations provided by the 1996 Appropriations Act. While procurement
reform alone will have a positive impact, the full benefits of
acquisition reform can only be achieved with corresponding reforms in
the FAA's personnel and financial management systems. The productivity
of the acquisition work force must be enhanced if the FAA is to meet the
goal of increasing service while decreasing costs. The current
acquisition management work force lacks the necessary competencies,
organizational culture, and performance incentives needed to fully
realize the potential gains to be reaped from an acquisition management
system emulating the best commercial and government business practices.
Likewise, the FAA will be unable to acquire new technology more rapidly
or achieve significant cost savings if acquisition reform is not
accompanied by financial reforms. These reforms must result in more
stable multi-year funding and provide the FAA with greater budget
flexibility to take advantage of technological opportunities and
incentivize its work force. The agency must be able to allocate or
reallocate funds according to priorities defined in its strategic
planning process.

In evaluating the FAA's progress toward accomplishment of the three
goals described above, the Blue Ribbon Panel identified five elements
essential to successful acquisition reform. The following five key areas
were used to organize the panel's recommendations and to guide its
assessment of the FAA's acquisition reform effort:

-   Overall acquisition management policy and process;

-   Procurement policy and process;

-   Personnel reform and the acquisition work force;

-   Financial reform and budget issues; and

-   Implementation and sustainment of acquisition reform in the FAA.

The next section presents the panel's view of what is required in each
of the five key elements in order for acquisition reform to be
successful at the FAA. The description of requirements for each element
is followed by the panel's assessment of the progress the FAA has made
in meeting these requirements in the new acquisition management system
to be implemented beginning April 1, 1996.

# FIVE KEY ELEMENTS FOR SUCCESSFUL ACQUISITION REFORM

## Element 1: Overall Acquisition Management Policy and Process

### Requirements for Success

The Blue Ribbon Panel believes that the FAA's new acquisition management
policy must address the full range of acquisition-related decisions that
occur throughout the life-cycle of major high technology systems. The
new FAA acquisition cycle (as shown in Figure 1) must be a continuous
one, wherein new mission needs are constantly being satisfied and new
technological opportunities to improve services or reduce life-cycle
costs are being inserted. Because major elements of the FAA
infrastructure are information-intensive, and since the technology in
this area is evolving very rapidly, it is no longer practical, or
desirable, to think of systems that are developed and then put in place
for decades. Rather, one must conceptualize a process in which new
systems are developed and deployed in only a few years and then
continuously upgraded, taking full advantage of the improvements offered
as the technology rapidly evolves. The mind-set, then, is one of
[continuous mission improvement]{.underline}---albeit providing for the
insertion of advanced technology only after it has been thoroughly
proven.

The corresponding FAA acquisition approach for major systems should be
modular in nature. The modules should be structured to allow early
technology insertion and upgrades in system capability as the
acquisition progresses from one module to the next. To the maximum
extent possible, the approach should make use of commercial products and
services. The outcome is an acquisition system that yields maximum
fielded performance in the shortest possible time and at the lowest cost
and risk.

![](media/image1.emf){width="5.7in" height="4.275in"}

**Mission Analyses.** The first key element in an acquisition process is
the decision as to which investments to make. This decision should be
driven by four considerations:

-   [New mission needs]{.underline} that develop as a result of
    experience, input from external customers (e.g., airlines, general
    aviation, DOD, etc.), and/or anticipated changing environments
    (e.g., dramatically increased air traffic);

-   [New technological opportunities]{.underline} that are often based
    on non-traditional approaches that offer a significant improvement
    in system performance and/or in reduced system costs (e.g., the
    shift to a GPS-based air traffic control system);

-   The desirability of incremental [product improvements]{.underline}
    in current systems as technology evolves (such as the ability to
    greatly improve the reliability and/or maintainability of deployed
    systems); and

-   The short- and long-term [constraints on resources]{.underline}
    available to the FAA for acquiring, operating, and maintaining its
    systems.

As shown in Figure 1, the FAA must create an organization that includes
participation by external customers/users, operators, maintainers, and
developers. The organization must be staffed with analysts who are
capable of performing detailed mission analyses and tradeoffs among the
various alternative ways to satisfy new mission needs and/or to take
advantage of new technological opportunities (which may enable
development of entirely new operational concepts). These analyses must
be conducted taking into consideration short- and long-term resource
constraints. The analyses must consider a wide variety of alternative
solutions ranging from those associated with different operating and
maintenance approaches to those that arise from purely technological
alternatives. Prioritization among the various needs and opportunities
can only be done when first order estimates of cost, performance, and
schedule are made for each of the solution alternatives. These first
order estimates must address the total life-cycle costs of the
alternatives, not just initial investment costs. There is a relative
priority among the mission needs that must be established by the
system's internal users and external customers, and this must be a key
part of the overall mission analysis activity.

Additionally, because there is always a natural tendency on the part of
current system users and operators to limit their considerations of new
systems to only those with which they have had extensive experience, it
is necessary for the FAA to establish (within the overall acquisition
organization) both the investment resources and management organization
needed to contract for the demonstration of non-traditional solution
opportunities. This organization must function as a high level advocate
for non-traditional solutions within the FAA (e.g. similar to the
Advanced Research Projects Agency \[ARPA\]). The organization would take
Òdemonstration systems,Ó developed with strong user involvement, up to
the point at which they could be entered for consideration of
significant corporate investments as part of the overall mission
analyses.

**Investment Decision.** The Òinvestment decisionÓ is the single most
critical milestone for many new FAA systems, and must be a Òcorporate
decisionÓ made by all key stakeholders (e.g., the internal and external
users, operators, maintainers, and government acquirers). The
"investment decision" is a commitment and prioritization of resources
adequate to support the total lifecycle costs of the chosen system. From
that point on, the implementation of the acquisition process begins. In
some cases, this will simply be the purchase of commercial equipment; in
other cases, it will require special-purpose development of a new
system. These systems should be based primarily on
commercially-available and reusable subsystems and software. Because
systems will be frequently upgraded, FAA should maximize the use of
commercially-accepted interface standards and open architecture design
in its acquisitions to facilitate upgrades. The new acquisition
management process should be aimed at rapid development and deployment.
The individual acquisition cycles should be tailored to the specific
system under development and/or procurement. Additionally, to create
incentives for achieving high-performance at low cost, it is desirable
to maintain competing options as long into the acquisition process as
possible (based on well defined return-on-investment and cost/benefit
analyses). Similarly, to assure that the total life-cycle cost of the
systems is considered, greater emphasis must be placed throughout the
acquisition process on the production and subsequent operating and
support costs of the new system.

A key element of the management of the new acquisition process is the
ÒpartneringÓ relationship that must be developed among the government
acquisition community, operators, maintainers, external customers/users,
and industrial suppliers. This partnership may be developed through the
use of Integrated Product Teams (IPTs) that include members from all of
these communities. The partnership must be maintained throughout the
entire acquisition cycle. As the new system evolves, there will be
continuous need for trade-offs among performance, cost, and schedule
based on the rigorous, predetermined baseline. Therefore, the major
parties must all be intimately involved on an on-going basis.

**Solution Implementation.** The solution implementation phase that
occurs after contract award is also a critical area that must be
addressed in the acquisition management policy. A number of the FAA's
most notable problems in major system acquisitions have occurred after
contract award. While the changes in early phases of the acquisition
cycle recommended above will reduce the risk of some of these problems,
the acquisition and contract management policy of the FAA must
strengthen the FAA's formal change control process to minimize
requirements growth resulting in schedule delays and increased costs.
Incentives must exist to encourage both contractors and the acquisition
work force to deliver quality products within the performance, schedule,
and cost baselines established at the time of the investment decision.
The IPTs must be staffed with competent, well-trained individuals who
are capable of accepting the empowerment offered by the new acquisition
management policy. Finally, an appropriate level of awareness and
oversight by senior FAA management must be retained in the system.

**In-service Decision.** The second key corporate decision point (as
shown in Figure 1) is the decision to place the system in service. At
this point, a reevaluation of the continuing, priority need for the
system must be made, as well as its affordability and its effectiveness.
Again, all stakeholders (internal and external customers and government
acquirers) must take part in this Òcorporate decision.Ó It is
particularly important to realize that once the in-service decision has
been made, the management of the system does not stop; rather, at this
point the IPT (in conjunction with the system sponsor and users) begins
to evaluate the systemÕs performance in service, and to consider its
evolution toward lower operating costs and performance enhancements.

### Assessment of FAA Progress

The overall acquisition management policy and process proposed by the
FAA is similar to that recommended by the Blue Ribbon Panel. The IPTs
recently established by the FAA are also a step in the right direction.
The primary concern of the panel members is the FAA's ability to strike
the appropriate balance between assessment of operational needs and
identification of technological opportunities [within the context of the
resource constrained environment they will experience over the next
decade.]{.underline}

The Blue Ribbon Panel has great concerns about mission needs coming
solely from the operating organization where incremental improvements
are the only changes that may be envisioned. While incremental changes
through pre-planned product improvements are often desirable, the FAA
must ensure that it is open to technological opportunities leading to
major paradigm shifts in its operations.

The FAA has suggested that there will be a reduction in the number of
new program starts in the future, and the FAA's research and development
(R&D) budget is already declining sharply. Both of these trends will
drive the FAA toward a focus on meeting operational needs at the expense
of exploring technological opportunities. A narrowed operational focus
must be balanced by some mechanism that enables the FAA to identify
future technological opportunities that could significantly improve
service or decrease costs.

Adequate R&D funding and the appropriate organizational structure are
needed to ensure that the FAA takes advantage of future technological
opportunities. They are essential in view of the rapid changes in
information technology and the potential for dramatic performance
enhancements and/or cost reductions that will be offered by such
potential, non-traditional solutions to FAA needs. The new R&D alliance
with NASA Ames represents one creative example of how the FAA might
leverage R&D resources.

It must also be emphasized that the appropriate organization and skill
mix required for performing the on-going, complex mission analyses and
resource tradeoffs described above does not exist within the FAA today.
The creation of this organization (with a mix of in-house and contractor
support) must be a high-priority initiative if future investment
decisions are to be made effectively.

Finally, the FAA's new acquisition management policy must clearly define
the roles and responsibilities of FAA organizations involved in key
decision points throughout the acquisition process. The lines of
authority in early drafts of the new process are often not clear. For
example, the current policy does not clearly indicate who has
responsibility for the in-service decision.

## Element 2: Procurement Policy and Process

### Requirements for Success

The FAA's new procurement process must be judged against the best
practices currently used by large private sector enterprises in the
business of developing or operating large, complex, high technology
systems and government agencies that have undergone significant
acquisition reform, such as the Air Force. These best practices include:

-   A highly trained and motivated acquisition management team;

-   Flexibility to tailor procurements to the unique needs of each
    acquisition;

-   Competition that attracts the most highly qualified and efficient
    suppliers;

-   Frequent and on-going communication and constructive engagement with
    potential suppliers;

-   Innovative techniques that minimize proposal development and
    evaluation costs for both buyers and sellers; and

-   Contract management practices that incentivize suppliers to save
    costs and deliver high quality products and services as well as
    rewarding competent contractors by establishing long-term, mutually
    beneficial relationships.

### Assessment of FAA Progress

The FAA has structured the new procurement process to give the IPTs that
manage major FAA acquisitions considerable flexibility in the way
specific procurements are conducted. This should allow the IPTs to be
highly innovative if they are well-staffed and operate as a team. The
procurement policy could promote this by more clearly stating that the
responsibility for critical procurement decisions reside within the IPT.
The policy should make it clear that the IPTs are self-contained
organizations, empowered to make these decisions with a minimum of
external review processes. For example, if IPTs are to be held
accountable for meeting aggressive schedules, their progress should not
be hampered by lengthy legal review processes.

The accountability for making decisions must also be reinforced in the
policy. This must be done in two ways. First, the policy must clearly
indicate which individuals have the responsibility for
procurement-related decisions. It is not sufficient to attribute
decisionmaking responsibility to "the team." The IPT leader, the
contracting officer, or another responsible individual must be
identified as the decision maker with accountability. Second, the policy
must stress the need to define critical success factors for each major
acquisition and note that performance rewards and penalties will be
specified for both the team and the individuals with decisionmaking
authority.

One of the major elements of the new source selection process is
increased communication between the parties during the procurement. This
increased communication is a result of removing the artificial barriers
created by constrained discussions. This is a significant improvement
which should lead to better understanding of the agency's requirements
and to better contracts.

Another major element of the new source selection process is the use of
streamlined competitive approaches modeled on commercial practices
including pre-qualified supplier lists, down-select procedures, and a
simplified approach for buying commercial items. These are useful tools
which can be highly effective. The procurement policy must make it clear
that these special techniques are only tools, not mandatory
requirements, and that each IPT is expected to exercise sound business
judgment in selecting the most effective process and selection criteria
for its procurement. The Blue Ribbon Panel strongly believes that
competition is the most effective way to acquire new technology at the
best value, and that sole source contracting is to be used only when
absolutely necessary. The more effective and efficient competitive
process embodied in the new policy should eliminate the need for most
sole source procurements.

The FAA has a laudable goal of reducing its acquisition lifecycle time
by 50 percent. However, to achieve this goal and go beyond, the FAA must
continually streamline its procurement processes and train its
acquisition personnel. The FAA should also build a highly competent
pricing staff that will determine price reasonableness through price and
market analysis and move away from the use of cost analysis.

The FAA's new acquisition policy should more strongly encourage contract
management practices that incentivize suppliers to reduce cost and
deliver high quality products and services. Chief among these practices
is the use of performance-based contracting techniques and the inclusion
of past performance as a major evaluation criteria in contract award. In
addition, the policy should encourage the use of value engineering as a
technique to achieve or exceed acquisition goals.

In the inevitable situations where varying degrees of management and
technical contractor labor will be required to support major FAA
programs but cannot be defined with any reasonable precision, task order
contracts may provide a responsive vehicle. The FAA should develop
guidelines to help instruct its personnel as to when these vehicles are
appropriate, and how to design a task order contract to permit access to
the appropriate skill levels, disciplinary expertise, and working
conditions which can be foreseen before the fact.

The new procurement policy presents the FAA's planned approach for a new
small business utilization program to replace the requirements existing
in the Small Business Act. The Blue Ribbon Panel strongly encourages the
FAA to continue its excellent record in contracting with small
businesses and small businesses owned and controlled by socially and
economically disadvantaged individuals. The panel is encouraged by the
FAA's emphasis on competitive contracting for procurements set-aside for
both of these business communities. However, the panel raised some
concerns about the the clarity of the guidance provided for determining
when procurements should be set-aside, the appropriateness of the high
threshold values set forth in the policy, and the definitions used for
the new classification of "very small business." It is clear that the
FAA must continue to evolve this section of the policy and develop more
detailed guidance on how the policy will be implemented.

In view of the short time available, the FAA has made an excellent start
in developing its new procurement policies. However, the procurement
policies proposed for April 1, 1996, should be viewed as an interim
step. Continuing work over the next few years can lead to a thoroughly
modern procurement policy that gives the FAA access to the best firms in
a timely manner.

The Blue Ribbon Panel's conclusions and recommendations are not based on
a review of the entire system proposed by the FAA, since several major
sections of the new procurement policy were still under development at
the time this report was prepared.

## Element 3: Personnel Reform and the Acquisition Work Force

### Requirements for Success

The FAA's mission demands the highest level of excellence in
organizational performance in the acquisition, development, and
management of complex, high technology systems. This extraordinary
performance imperative is on par with such government missions as manned
space exploration, nuclear weapons, and cancer research in terms of the
requirement for an acquisition work force comprised of highly qualified,
high performance individuals with the infrastructure, organizational
culture, and tools to assure success.

Successful transformation of the FAA's acquisition work force into such
a high performance organization will require considerable changes in the
existing culture and the personnel management system. The personnel
management system must support the infusion of new talent at all levels
within the organization. The system must stress a new approach to
hiring, promoting, compensating, and rewarding the acquisition work
force. This system should be built on the recognition that there need
not be a life-time guarantee for employment and, in fact, should stress
that employees could move in and out of the FAA system during their
careers. However, the FAA must attract and retain a cadre of employees
with critical acquisition management competencies, and for a
mission-critical system acquisition, the employees should agree to
remain on the team for a major portion of the life of the project.

For example, when a new program is initiated, the FAA might enter into
personnel contracts (based on expected performance objectives linked
specifically to the program success) with a limited number of key
acquisition personnel. Their compensation would be based on that
contract and their rewards or penalties would be contingent on achieving
or exceeding the agreed-to goals (incentivized as the FAA tries to
incentivize contractors). At the end of a successful deployment of the
program their contracts would be fulfilled and they would leave or have
to renegotiate new contracts for new programs. This would allow FAA to
attract well-qualified, leadership-oriented, risk takers who have a
track record of delivering---and to compensate and reward them based on
their successes.

At the same time the system is infusing new talent into the acquisition
work force, it must also support the transition of the current work
force into this higher performance environment. This work force contains
a significant number of capable employees with the potential to become
high performers once they are provided with the opportunities and
incentives of the new system. These employees will likely welcome the
characteristics of the new personnel system described above.

Other segments of the work force who are not entrepreneurial or who
choose to remain as functional experts at a fixed level of
responsibility must also undergo development in order to contribute to a
more professional acquisition corps characterized by individual and
organizational excellence. For these employees, the system would stress
development and learning---essentially opportunities which allow the
current employee to achieve a defined set of capabilities needed in the
new acquisition management system. These individuals must also be
recognized as valuable members of the work force whose skills must also
be continually refreshed and broadened through opportunities for
continued education and developmental job rotations. There will be
instances, however, when employees are not continuing to perform or
develop and must leave rather than reduce the effectiveness of the team.

Personal development is a shared responsibility: the agency must provide
opportunities (such as tuition reimbursement), but ultimately
individuals must be responsible for their own development. All
development cannot be done during working hours and at agency expense.
The FAA should also support and reward those employees who choose to
temporarily leave the FAA and gain knowledge and experience elsewhere
and then apply it to key FAA programs.

The transformation of the FAA's acquisition work force into a high
performance organization can draw upon the lessons learned in other
model government organizations that have been created through innovative
approaches to human capital, public-private partnerships, and liberation
from bureaucratic constraints. Some of the more salient sample programs
and strategies used to create organizations characterized by exceptional
high performance include:

-   **[DOD PL 313 Program]{.underline}** - A strategy to attract and
    motivate high level scientific talent through special compensation
    and job definition flexibility;

-   **[Rickover Program]{.underline}** - A strategy to recruit the
    brightest and the best in the field of nuclear propulsion R&D
    through imposition of extremely rigorous employee screening and
    intelligence and accomplishment standards; all employees were given
    difficult assignments and held accountable for *exceeding* their
    goals;

-   **[Air Force Acquisition "Corps"]{.underline}** - A strategy to
    achieve excellence in weapons systems acquisition through rigorous
    entry standards, structured career paths and professional
    development, and a distinctive culture and traditions; and

-   **[NASA Manned Space Program (Mercury and Apollo)]{.underline}** - A
    strategy to create technical and management excellence through
    targeted recruiting of intermediate and upper level professionals
    from the private sector.

### Assessment of FAA Progress

The FAA's acquisition reform working group has identified a number of
personnel management system changes required for successful
implementation of the new acquisition management system. The Blue Ribbon
Panel believes that transformation of the acquisition work force into a
high performance work force characterized by elevated standards of
excellence is the most important factor in the long-term success of FAA
acquisition reform.

While the FAA has provided information on a new learning system that
will meet many of the training or development requirements identified by
the Blue Ribbon Panel, additional personnel management system changes in
the areas of hiring, performance management, and incentive-based
compensation will be required. The information provided to the Blue
Ribbon Panel indicates that the FAA's personnel reform effort will
provide ARA with the necessary personnel management system flexibility
to support acquisition reform. However, the timetable for FAA-wide
implementation of personnel reform is unacceptable. The ARA line of
business must be given permission to immediately pilot innovative
personnel practices in hiring, performance management, compensation,
incentive awards, etc. In addition, artificial constraints such as FTE
ceilings must be eliminated to allow ARA to manage its personnel based
on workload and available funding.

Assuming that ARA is given the authority to pilot the necessary
personnel reform initiatives, the Blue Ribbon Panel has two primary
concerns related to the FAA's ability to create a culture of excellence
in the acquisition work force. The first concern relates to the
availability of resources needed to establish the learning system
infrastructure and jump start the recruitment, hiring, and training
needed to rapidly infuse the necessary capabilities into the acquisition
work force. The Blue Ribbon Panel believes that funds must be
specifically earmarked and dedicated to transforming the acquisition
work force into a high performance organization. To support this effort,
the FAA should also consider a near term alliance with NASA and/or the
DOD as a potential source for providing this type of trained, effective
talent.

The second Blue Ribbon Panel concern is the lack of a well-defined model
or strategy for achieving the infusion of new talent into the
organization. The absence of this conceptual approach for transformation
of the acquisition work force represents an impediment to successful
realization of the objectives of the acquisition reform effort.

## Element 4: Financial Reform and Budget Issues

An overriding theme that emerged in the Blue Ribbon Panel's
participation in the FAA acquisition reform effort is the need for
budgetary reform. This reform includes changes to the FAA's internal
budget planning and allocation process as well as financial reform
provisions requiring Congressional approval. The investment decisions
made during the acquisition planning process must influence and be
reflected in the agency's "topline" budget. This reformed budget process
must be perceived as credible, analytic, tough, well‑informed, etc., so
that the outcomes have credibility with other elements of the
Administration and Congress. Factors important to successful achievement
of this end are described below.

A credible process must simultaneously address topline cost and
affordability issues as well as the capabilities "required" of the FAA
over time. Acquisition programs designed to meet estimated required
capabilities must compete with all other options (including
non‑material) that could meet the capability on the basis of
effectiveness and cost (affordability). This competition must take place
at every stage in the planning, programming, and budgeting process, from
the construction of the FAA's strategic vision down to the final budget
revision before the President's Budget is submitted.

Pure efficiency (cost‑saving) program options must also be allowed to
compete for resources in the resource allocation process. Up‑front
investments can often yield substantial downstream savings but are
seldom made because cost‑saving programs do not always receive the same
attention in the budget process. However, these efficiency‑oriented
programs must compete in a very integrated fashion. For example, if
outsourcing of functions can yield major cost savings, the
implementation of outsourcing may have fundamental implications for
other FAA operations, and these must be considered with the outsourcing
decision.

Details of budgets should be put together on a multi‑year basis and
should be programmatically structured. Program planning should cover at
least 10 years, with less granularity required in the out-years.
Artificial constraints on budget flexibility should be removed so that
substitution among resources to achieve the most efficient program
outcomes can be accomplished. This funding flexibility must be matched
with increased visibility and accountability in FAA's capital program to
ensure that the FAA responsibly manages public resources to deliver
results. Other items that naturally fall into this kind of programmatic
thinking include all the elements of human capital development such as
training, use of interns, etc. Programs that provide for the
infrastructure of trained and experienced personnel need to be
integrated with technical programs so that provisions are made for
interns, explicit on-the-job training, etc. The FAA should use its
available budget flexibility to provide needed funding for
transformation of the acquisition work force.

Likewise, the distinction between Facilities and Equipment (F&E) and
Research, Engineering and Development (R,E&D) appropriations should be
eliminated to provide the FAA with greater flexibility to invest in
up-front analysis of applied technologies and related non-traditional
solutions. Thus, considerations of program content and execution will
require serious consideration of both physical and human capital and
budgets.

### Assessment of FAA Progress

The acquisition working group has provided substantial evidence of the
need for financial and budgetary reform to support successful
implementation of the new acquisition management system. While evidence
of need has been clearly demonstrated, this is the area in which the
Blue Ribbon Panel has been provided with the least evidence of progress
by the FAA. It is clear that some of the budget planning and resource
allocation issues may be addressed through internal FAA actions;
however, other aspects of the necessary financial reform will require
action by the Administration and Congress.

The Blue Ribbon Panel believes there are two major areas of
financial/budgetary reform needed to support the FAA's acquisition
reform effort. The FAA must have an adequate and stable funding stream
to support major system acquisition programs that span multiple years.
It is imperative that the agency, the Administration, and Congress
achieve a mutually agreeable compact based on multi-year commitments to
dramatically improve the long-term safety and reliability of the air
traffic control system. Constantly changing plans and resource levels
every fiscal year must become a thing of the past.

In addition, the Administration and Congress should provide the agency
with the flexibility to manage its funds without the constraints imposed
by line item program allocations and barriers related to different
appropriation codes. In turn, there must be increased visibility and
accountability in FAA's capital program to ensure that the FAA
responsibly manages public resources to deliver results. The FAA must
aggressively work with the Administration and Congress to enact the
necessary legislative reforms in this area.

## Element 5: Implementing and Sustaining Acquisition Reform in FAA

[Requirements for Success]{.underline}

Implementation will be the greatest challenge facing the FAA in its
acquisition reform effort. To ensure that acquisition reform becomes a
permanent part of the FAA culture, the Blue Ribbon Panel believes that
fundamental changes must be made in the agency to ensure the momentum is
sustained. Currently the agency has approximately 600 personnel in the
procurement specialist job series out of a total population of almost
50,000 in the agency. Several hundred more employees support acquisition
programs through participation or support of the integrated product
teams. The bulk of the agency's work force is focused on its operational
mission and few individuals have had extensive training in all aspects
of acquisition management.

The panel believes that two organizational enhancements are required to
sustain acquisition reform and give it the focus and impetus it needs to
take root within the agency. In formulating these organizational
suggestions, the panel reviewed other Executive Branch agencies engaged
in acquisition reform to determine the root causes of their successes or
failures and to assess how they could be incorporated into the agency's
proposed new system. Set forth below are additions to the FAA's proposed
system that the panel believes are needed to sustain acquisition reform.

An ARPA-like organization should be established within the Research and
Acquisition organization to examine leap frog technologies that could be
folded into future solutions as a part of the mission analysis tradeoff
process. Currently, the agency is so focused on the immediate needs of
its customers, it has not been able to focus on how its mission could be
fulfilled by either development or application of a variety of solutions
considered "non-traditional" for the agency. A good example is the DOD's
Global Positioning System that is now widely used in the civil and
defense world. The FAA was approached in the 1970's and given an
opportunity to participate in the development of this technology, but
declined to do so because the agency could see no need for the system.
It is essential that this new organization be given funding to invest in
analysis of advanced technologies and nontraditional solutions, and that
it focus on the agency's future needs and potential requirements. The
organization must identify technologies that will ensure the agency
remains the leader in civil aviation. In addition, this group should
participate in the FAA's mission analysis process, offering up both
needs as well as potential applications of technologies to solutions
being examined in these analyses.

The Associate Administrator for Research and Acquisition must focus all
of the organization's talent and efforts on implementing basic agency
reform over the next three year period. The most significant challenge
the agency will face internally is whether or not acquisition reform is
a passing whim or a permanent way of doing business. A similar situation
existed within the DOD in the late 1980's and into 1993. Acquisition
reform was something that was not taken very seriously until a new
office was created in 1993. The total focus and purpose of this small
office was to turn acquisition reform into a reality and to make it a
permanent part of the defense culture. This new defense office, titled
the Deputy Under Secretary of Defense for Acquisition Reform, reports
directly to the Secretary of Defense and the Under Secretary of Defense
(Acquisition and Technology) and is organizationally independent from
the established acquisition bureaucracy. The focus of this DOD office is
to develop and implement the statutory changes needed to turn
acquisition reform into reality, to develop and oversee acquisition
reform in "pilot programs," and to oversee training in the agency. The
purpose of pilot programs is to test new acquisition concepts and
processes to determine if they should become a permanent part of the new
processes being developed.

The panel firmly believes that a similar small FAA organization
reporting directly to the FAA Administrator must be established to serve
as a catalyst for continuous acquisition reform. The office should focus
specifically on reform issues and should not become involved in
acquisition program decisions. A major focus of this new office should
be changing the culture and defining the next steps required in the
reform effort. This organization can baseline the agency's acquisition
documents and develop on-line tools to facilitate reform. The
organization should also oversee the acquisition pilot programs and
monitor the on-going assessment of the acquisition reform effort using
metrics that provide objective evidence of progress being made. It is
important that this office constantly benchmark best practices to ensure
continual reform, and that it work with users and customers of the
acquisition process as it conducts its evaluation.

The creation of such an FAA organization ensures that acquisition reform
is not personality-dependent and that it can be directly tied to the
mandate from Congress and the FAA Administrator. The panel believes that
this organization should include fresh talent from outside the FAA and
should be established soon after April 1, 1996. The charter for the
group should have a sunset provision so that it can be disbanded once
reform is a permanent part of the FAA culture.

The FAA's assessment of the impact of acquisition reform must include
metrics designed to measure long-term changes in mission performance.
These metrics must have relevance to the services provided to internal
users and external customers, include cost savings for external
customers and suppliers working with the FAA, and provide information on
FAA field operations. The metrics must allow comparison of results
achieved on dimensions such as safety, cycle time, development costs,
procurement costs, operating and support costs, system performance, etc.
The measurement of continuous improvement in mission performance is the
ultimate test of the acquisition management system's effectiveness. The
Blue Ribbon Panel recommends that FAA establish initial baseline data on
key metrics at the start of implementation in April 1996.

Finally, the Blue Ribbon Panel believes that a subset of the existing
panel should continue beyond April 1, 1996, to provide input and advice
to the FAA and to provide an objective assessment of implementation
progress. This panel should meet with the FAA quarterly during the first
year of implementation and less frequently thereafter.

### Assessment of FAA Progress 

The FAA's policy represents an excellent first step. However, successful
acquisition reform will require an aggressive implementation program
that will propel the FAA toward even greater changes in the future.
While the agency is proposing to begin implementation of these initial
acquisition reforms with three to five pilot programs, the panel
believes that the FAA should supplement these efforts with several pilot
programs using full commercial style contracting procedures as tests
with appropriate metrics to determine the potential overall benefits to
the agency in terms of cost, schedule, and technical solutions. The
National Aeronautics and Space Administration and the ARPA organization
are already authorized to experiment with such commercial style
contracts. The Unmanned Aerial Vehicle contracts recently awarded by
ARPA are excellent examples of commercial contracts that facilitated the
simultaneous development and deployment of critical assets needed by
DOD. These commercial contracts saved time and valuable resources, and
allowed contractors to propose innovative solutions. Clearly the
creation of an acquisition reform organization as discussed in this
paper will support the development and testing of new innovative
processes and additional reform initiatives.

The FAA has included a three-year, on-going assessment of the new
acquisition management system as part of its implementation plan. The
FAA's evaluation plan includes an independent evaluation by an external
group as well as continuous improvement feedback during the
implementation. The ongoing evaluation effort must provide the data
needed to modify pilot programs over the three year period. While the
metrics to be used in this assessment will provide some indication of
the improvement in the functioning of the acquisition and procurement
processes themselves, it is not clear that the FAA's assessment places
adequate focus on more long-term, outcome-oriented measurement that
would capture changes in overall mission performance.

# BLUE RIBBON PANEL CONCLUSIONS AND RECOMMENDATIONS

The new acquisition management system proposed by the FAA represents an
excellent start toward the needed reforms. The new acquisition
management system should assist the FAA in meeting the goals of the
reform effort. The increased flexibility and streamlining in both the
overall acquisition policy and the new procurement process should assist
the FAA in acquiring quality systems in a more timely manner. The focus
on life-cycle management, continued development of integrated product
teams, and increased emphasis on customer and supplier input throughout
the entire acquisition phase should contribute to the acquisition and
development of higher quality products and services. Finally, the
reduction in documentation and curtailment of requirements for cost data
and detailed cost analyses should reduce the costs of acquisitions to
both the government and industry.

However, the acquisition management and procurement policies and
processes that go into effect on April 1, 1996, must be viewed as only
an initial version of a system that must continue to evolve over a
period of several years. The agency must "think out of the box" if they
are to develop and implement an acquisition management system that fully
emulates world-class, commercial acquisition/procurement practices. More
importantly, the agency's leadership must embrace this goal and strive
toward its achievement as aggressively as possible.

All members of the Blue Ribbon Panel concur that the acquisition reform
effort at the FAA must be continuous if the FAA is to achieve its goals
of faster acquisition of technology and equipment needed to maintain
safety, improve services, and decrease costs. In order to continue this
reform effort, the FAA and Congress must take the actions delineated in
the paragraphs below.

To continue the acquisition reform effort beyond April 1, 1996, the FAA
must:

-   Aggressively implement and continue evolving the new acquisition
    management system over the next three years. This implementation
    should include the establishment of an office focused exclusively on
    the implementation of acquisition reform and three to five pilot
    programs that are provided with increasing latitude to move toward
    emulation of commercial acquisition practices;

-   Jump start its efforts to increase the skills and professionalism of
    its acquisition work force by investing in the infrastructure needed
    to establish the new learning system. This will likely include
    contracting for development of cases studies, simulations, and other
    learning system components;

-   Establish ARA as a pilot for innovative personnel practices. This
    will enable infusion of new personnel with extremely high levels of
    the most needed competencies at all levels throughout the
    acquisition work force while assisting the existing work force to
    increase its level of competence and ability to operate in a
    flexible work environment;

-   Invest in long-term R&D and establish an ARPA-like organization to
    ensure a focus on identification of long-term technological
    opportunities as a balance to its current focus on immediate
    operational needs;

-   Resolve quickly any remaining organizational issues related to
    authority and responsibility for key decisions at various points in
    the life-cycle acquisition management process;

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-   Pursue internal and external budgetary reform and legislative action
    as needed to capitalize on the potential gains offered by its new
    acquisition management system; and

-   Appoint a subset of the Blue Ribbon Panel to provide input and
    advice to the FAA as the acquisition management system matures.

In order to support the FAA's continued success in reforming its
acquisition management system, the Congress must:

-   Continue legislative support of the FAA acquisition reform effort;

-   Ensure that the FAA sufficiently funds the infrastructure
    investments needed to jump start the transformation of the
    acquisition work force;

-   Enact necessary financial/budgetary reforms to increase the FAA's
    flexibility in use of all of its funds and its ability to establish
    stable, multi-year budgets for major system acquisition programs.
    This funding flexibility must be matched with increased visibility
    and accountability in FAA's capital program to ensure that the FAA
    responsibly manages public resources to deliver results;

-   Support the establishment of an ARPA-like organization and increased
    investment in up-front analysis of non-traditional solutions within
    the FAA; and

-   Resist enacting future constraints if mistakes occur during the
    FAA's transition to the new acquisition management system. While the
    FAA and its personnel must be held accountable for ensuring the
    integrity, fairness, and protection of public trust in its new
    system, implementation of new restrictive regulations will kill the
    chance for the acquisition reform effort to ultimately succeed.

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